The White House Says Socialism Is a Threat. It’s Right.
(Bloomberg Opinion) -- Who would have thought that an attack on socialism would be so controversial? But these days it is. The White House’s Council of Economic Advisers issued a report called “The Opportunity Costs of Socialism” to a scathing reception on social media: “dreck,” said the economist Justin Wolfers, while Paul Krugman referred to it as “amazingly dishonest.”
I’m here to tell you that I have read the entire report, and many of the sources it cites, and most of it is correct.
You might accuse the council of irrelevance in attacking a creed so antiquated as socialism. But a recent Gallup poll found that Democrats have greater faith in socialism than capitalism. You don’t have to think of those people as card-carrying Maoists to wish them some edification in both history and economics, if only to prevent the opposition to President Donald Trump from falling into its own excesses.
Nor is an endorsement of actual socialism so far removed from the history of the economics profession. Paul Samuelson, recent Nobel Laureate William Nordhaus and John Kenneth Galbraith, among others, expressed their admiration for the economic growth performance of the Soviet economic system. (The report notes this detail on Page 20.)
The legislation would eliminate cost sharing, prevent private insurance plans from competing, and prevent private markets from supplementing government coverage (outside of, say, cosmetic surgery). The House version would even prohibit health-care providers from earning profits. These provisions are far more extreme than what is found in most Western European health-care systems. The analogies with traditional socialism are indeed apt — the bill is much worse than anything the Trump administration has proposed to date.
Many of the criticisms of the report have been directed at the section on health-care economics. The critics tend to proclaim their own moderate views and favorably compare some of the Western European health-care systems to that of the U.S. The goal is apparently to smash the report for associating those well-functioning health-care systems with Lenin and Mao. Yet I haven’t seen any of the report’s critics acknowledge the extreme nature of the current Democratic proposal, or that it might need rebuttal, and that such a rebuttal is inevitably going to sound somewhat over the top.
I do blame the report’s authors for at least one thing: You have to read to Page 40 of the report to grasp the extreme nature of their health-care target, and in today’s polarized, tweet-first-read-later environment, hardly anyone does that.
The report also points out that drug-price controls would probably lead to the deaths of large numbers of people, by limiting the future supply of pharmaceutical drugs. Trump, who in the past has expressed support for such price controls, could stand to learn that lesson himself.
And though some critics have mocked the point, the idea that, all things considered, consolidated government control is cheaper than a market-based system does in fact come from socialist and communist thinkers. What’s more, implementing that view is likely to stymie innovation for the same reasons that socialism does more broadly. Arguably well-functioning mixed systems produce the greatest innovation, as illustrated by the connections between the military and Silicon Valley, or for that matter the National Institutes of Health. The health-care bills under consideration move much too far in the direction of government control.
To be sure, the report is heavy-handed and probably ineffective in citing Lenin and Mao and Venezuela so often. And part of the reason the report induced so much rapid emotional opposition is that setting up communists as the target is a longstanding tactic of the fascist movement, and many of Trump’s critics associate him with fascism. The report also commits the now-unpardonable and immediately punished sin of supporting a doctrine of “false equivalence” — namely, that these days many Democratic ideas are as unacceptable as those associated with Trump.
I also have significant criticisms of the report. For instance, even if does not contain a direct falsehood on the matter, it fails to acknowledge that America already has a big form of health-care socialism — Medicare. In fact the report is utterly conflicted about Medicare, sometimes advocating the need to protect and preserve it and sometimes suggesting that Medicare-like programs cannot work very well. This tension reflects larger problems with the policy stances of the Republican Party.
The truly sad feature of the report is that it is not intended for the president, who probably couldn’t care less about the recommendations of professional economists. That, too, is a dangerous path to socialism.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include “The Complacent Class: The Self-Defeating Quest for the American Dream.”
©2018 Bloomberg L.P.