Sunday, November 28, 2010

Capitalism Is NOT Why the US Will Fail

Cappy Cap readers should be really appreciative of me. Not because of the awesome economic commentary I make. Not because of the super awesome economic foresight I have. But rather because I screen out the most inane and idiotic comments that would shorten your life expectancy with high blood pressure if you did indeed read them.

Of all of them, however, there is one no more blood boiling than this one;

"CAPITALISM is what is going to destroy the US."


"The US will fail because of capitalism."

This is, without a doubt, the most ignorant, intellectually dishonest and patently wrong comment I receive.

Now, I'd like to go into detail in my typical arrogant prose, but since this post is very important, I am instead going to be brief and succinct in the hopes of keeping most people's attention. It really is just too important not to read. The reason why is that when the US economy DOES ultimately collapse, I want it recorded here exactly what kind of economic system was in place before knee-jerk college students just regurgitate what their aging hippie professors tell them.

First, we are no longer a "capitalist" economy. We are a mixed or socialist economy (please don't make posts on technicalities and nuances in the terms - they will be ignored). We have the same public sector spending as Norway (the left's favorite nation - and probably more thanks to BO).

Second, we have the world's second highest corporate tax rates at roughly 40%. An effective rate of 32.5% (I'll give a shinny nickel to a liberal who can explain the difference between the two, instead of just relying on this fact as a talking point when talking about corporate taxes).

You throw in dividend taxes and you're roughly at a 50% overall tax rate.

Third, understand the US economy and people's standards of living were growing fastest when tax rates (as measured by government spending as a percent of GDP) were the lowest. Standards of living have gone down as the US economy has become socialist;

(*I get a lot of confusion on this chart. The rolling 20 year includes 20 years worth of data. The data point I place in the middle, which is why it seems there is 10 years of data missing on the start and end of the blue line)

Fourth, understand the majority of government spending is NOT for governance, but rather income transfers, which is the epitome and definition of socialism.

Fifth, understand that it is these income transfers and entitlements into the future that are the primary reasons for our current and future projected deficits and is the primary reason we are facing bankruptcy as a nation. These are DISTINCTLY socialist policies. NOT CAPITALIST.

Now there are more statistics, but the above is enough. I cannot make it any clearer and I don't have to because it's not a matter of opinion. It's a fact. It is SOCIALISM that is destroying the United States. NOT capitalism.

Therefore, please, I beg of you idiots who just regurgitate the above inane comment, since you have the right to vote, stop being ignorant and start getting educated on economics. This isn't a "choice." This isn't a "fun little game we're playing." And this isn't some "crusade" where you try to impress the hippie grunge chick at the coffee bar by extolling socialist tripe as you try to pass it on as "virtues." You future is at stake. Your current state of unemployment is a direct result of your own ignorance. And if you'd want any kind of future for your children, let alone yourselves, knock it off with the childish "ranting" and "protesting" and grow up. The country depends on it.


S. Harvey said...


capitalism (separate from free market governance) is not a 'system', its the way of the world we as humans have created. Stemming from our very nature, the desire to create more for ourselves and our clan and the desire for risk/reward. These don't stem from reading books or voting red or blue, it comes out from the summation of millions of people acting on hundreds of thousands of years of evolution.

Anything beyond capitalism is a system, attempting to distort this basis for some deluded ideal. The ideal that people should be forced into charity (welfare), the ideal that people should be forced into funding the desires of others (most government programs) and the ideal that somehow an elected few along with an unelected mass can know better than the masses and make the world some how better.

Anonymous said...

Great posting! I hear this all the time. They blame Bush`s "capitalism" for the recession. Bush made a massive increase in federal spending, during his term in office.
These same people always mention, how terrible the natural boom and bust cycle of capitalism harms everyone. They feel government is needed to smooth out the cycle. Recessions are a natural process, that cleans out the excesses of the previous boom period. There were no economic boom and bust cycles in the former Soviet Union or North Korea. They just lived in a constant state of government managed poverty.
Hats off to the Captain, that was a good article!

Wolf Larsen said...

Hi Captain,

I think a big part of the problem is the lack of visibility as to how govt spends the money. The public has no easy way of seeing how much is spent where, and their judgement is based on special interest hyperbole (who cries the loudest as to more funding), as opposed to numbers. I was thinking of sth like a set of pie graphs, starting with total State spending, and when you click on one sector it gives you a more detailed allocation, and you click further to as much detail as possible.

Does such a thing exist? If not I would be interested in forming a collaborative project to collate such data.

Anonymous said...

Many european countries seem to have lower taxes bearing only the corporate taxes in mind. The problem is that there are many other taxes and some of them are hidden very well - e.g. claimed to be insurence but serving as a tax.
So a typical employee is taxed more than 50-70 % of his gross income and this calculation does not include VAT (usually about 20%) he has to pay for goods and services.
And still states are drowning in debts due to the same reasons as the USA.

S. Harvey said...

Anonymous (13:31);
It's really simple, you can't tax your way out of a spending problem.

Just like you can't inflate your way out forever.

Escapist said...

When talking with people that blame capitalism, you may want to compare the US situation to Singapore's: Singapore has much lower taxes and a more favorable business environment than the US, as well as more sensible immigration policies. Singapore is the top economy in the world so far this year, with outstanding wages/living standards (particularly given their very limited space/natural resources)

Anonymous said...

Most of the morons who blame capitalism don't even know what it is, or much of anything else concerning economics for that matter. The funniest thing I've ever read/heard is some moron blaming capitalism for anything to do with the bailouts.

Rick Caird said...

I occasionally engage in the foolish effort of trying to explain to a lefty that neither the health care market nor the mortgage market are examples of capitalism gone awry. They are both examples of government interference gone awry.

But, of course, the lefty thinks the whole problem could be solved by more regulations.