The Facts and Fallacies of Democratic Socialism

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Bernie Sanders is a vocal proponent of democratic socialism. Image courtesy of the U.S. Senate

Socialism states that you owe me something simply because I exist. Capitalism, by contrast, results in a sort of reality-forced altruism — Ben Shapiro

If not for the outrageous statements of Republican candidate Donald Trump, the story of the 2016 presidential campaign might very well be Vermont senator, Bernie Sanders.

Ultimately, it still could be.

The Rise of Bernie Sanders

A self-described “democratic socialist,” Senator Sanders has garnered support during his run for the Democratic presidential nomination by railing against perceived inequities of the current economic system and of the need for ‘guaranteed economic rights’ for all Americans.  He believes that wealthy Americans receive the most benefits from the present economy, one in which many Americans  have been losing ground for decades.

Sanders has called for a ‘political revolution’ and has proposed a massive expansion of government with an emphasis on lowering or even eliminating costs currently born by the working class.

What is Democratic Socialism?

To understand the term, one must start with the definition of socialism itself. Per Investopedia:

An economic and political system based on public or collective ownership of the means of production. Socialism emphasizes equality rather than achievement, and values workers by the amount of time they put in rather than by the amount of value they produce. It also makes individuals dependent on the state for everything from food to health care. China, Vietnam and Cuba are examples of modern-day socialist societies. Twentieth-century socialist governments were overthrown in Czechoslovakia, East Germany and the U.S.S.R.

Democratic socialism is a system featuring a non-centralized government practicing the general economic tenets of socialism. Per Boundless:

Democratic socialism combines the political philosophy of democracy with the economic philosophy of socialism. The term can refer to a range of political and economic organizational schemes.

Like most politicians, Sanders paints with broad-brush strokes. His vision is that of “a government which represents all people, rather than just the wealthiest people.”

With that said, why does his message resonate so loudly with liberal Millennials?

Sanders’ Appeal to Millennials

Despite being the oldest candidate, Sanders has managed to tap into the hearts and minds of progressive Millennials.

According to a recent survey conducted by Harvard University’s Institute of Politics, 41% of likely Democratic voters in that age group support Sanders, versus just 35% for Hillary Clinton. By contrast, Clinton has led Sanders among all Democratic voters by more than 20 points since mid-October.

Why does Sanders appeal to younger voters? In short, Millennials feel the current system is not only unfair, but rigged. Unlike with older voters, the term “socialism” does not evoke a negative reaction. In fact, due to existing governmental bureaucracies such as social security, health care and corporate subsidies, they believe it is already here.

Denmark, Sweden and Norway

Like other Scandinavian countries, Sweden has a huge social safety net. Image: NordNordWest

Proponents cite Scandinavian countries and their greater dependence upon socialistic principles as models for the U.S. to follow. Bernie Sanders said as much during a Democratic debate last October:  “I think we should look to countries like Denmark, like Sweden and Norway, and learn from what they have accomplished for their working people.”

As of June, 2014, median income in the United States was $53,891, with unemployment sitting at 6.1% and a poverty rate (2010 est.) of 15.1%. The following are the same statistics for the three Scandinavian countries:

  • Demark’s per capita income was $37,900, with unemployment at 7.1% and a poverty rate of  13%
  • Sweden’s per capita income was $41,188, with unemployment at 8.0%  and a poverty rate of 7%
  • Norway’s per capita income was $54,947, with unemployment at 3.5%  and a poverty rate of 6%

Although poverty levels are significantly lower, median incomes are either equal to (Norway) or below those of the U.S., with unemployment higher in both Denmark and Sweden.

Secondly, the World Economic Forum’s Global Competitiveness Report ranks countries by various metrics in order to quantify productivity and prosperity. Per the 2014-15 edition:

The Global Competitiveness Report 2014-2015 assesses the competitiveness landscape of 144 economies, providing insight into the drivers of their productivity and prosperity. The report remains the most comprehensive assessment of national competitiveness worldwide, providing a platform for dialogue between government, business and civil society about the actions required to improve economic prosperity. Competitiveness is defined as the set of institutions, policies and factors that determine the level of productivity of a country. The level of productivity, in turn, sets the level of prosperity that can be earned by an economy.

This past year, the U.S. ranked third overall, just behind Switzerland and Singapore. Neither Denmark, Sweden nor Norway made the top ten. The U.S. ranked well ahead of all three in education, training and innovation.

Democratic socialism would mean big changes for the U.S. Economy. Copyright image by Decoded Science, all rights reserved.

The Costs of Democratic Socialism

Although lower poverty levels, less income inequality and freebies like college education and health care are obvious benefits of democratic socialism, nothing is truly free.

The massive social safety nets put in place by the three Scandinavian countries carry a substantial price tag, both in direct and indirect costs.

Taxes: While the U.S. has a top marginal tax rate of 39.6%, Denmark’s is 55.6%, Norway’s is 39% and Sweden’s is 56.9%. More importantly, taxes collected represent 26.9% of GDP in the United States, 49% in Denmark, 43.6% in Norway and 45.8% in Sweden.

Taxes and fees would have to be raised in the United States for such a system to be implemented, either across the board or — as proponents suggest — mostly on wealthier Americans. No matter who pays the bill, the Wall Street Journal says Bernie Sanders’ economic plan would cost up to $18 trillion — the largest peacetime expansion of government in U.S. history.

Wealth: The lower one’s take-home pay is, the lower their wealth will be.

Incentive: A system that does not incentivize excellence economically is less likely to see individuals strive to excel.

Productivity:  Higher taxes and less incentive equates to lower productivity. As mentioned above, the U.S. presently enjoys one of the most productive economies in the world.

Innovation: As productivity goes, so goes innovation.

The American Dream

James Truslow coined the term “American Dream” in  his 1931 book The American Epic. Investopedia defines the term as follows:

The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version of success in a society where upward mobility is possible for everyone. The American dream is achieved through sacrifice, risk-taking and hard work, not by chance. Both native-born Americans and American immigrants pursue and can achieve the American dream. In contrast to other political and economic systems, such as communist dictatorships, America’s free-enterprise system makes possible the circumstances that allow individuals to go beyond meeting their basic needs to achieve self-actualization and personal fulfillment.

Democratic socialism, if enacted in the U.S., would no doubt reduce poverty and income inequality. It could quite possibly kill the American Dream along the way. That would be the final, most brutal cost of all.

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