Soviet Socialism Was a Bad Joke; Sanders/Biden Democratic Socialism is a Comical Tragedy

The Soviet era joke “we pretend to work and they pretend to pay us” has been replaced by the Biden joke “they pay us more not to work so we don’t.” Democrats’ complete denial that the refusal to accept job openings is in any way related to their pay to stay home policies is comical. To admit such spending is not only unnecessary but counterproductive represents an existential threat to their Party’s agenda, but to ignore their denial that incentives matter will end in tragedy.

 

Democratic Socialism isn’t Socialism, It’s a Rent-Seeking Extortion Racket

Socialists promised “to each…” but repressed consumer demand with queues lasting years and often decades. Democratic socialists aren’t socialists in that they don’t promise to work or produce anything. Sopranos’ aficionados recall the high paying “no-show” and the “no-work” union jobs – sitting at the construction site in lawn chairs smoking, drinking and playing cards while laughing at the actual exhausted workers. Since incentives don’t matter, democratic socialists believe they can provide higher paying jobs just like the mafia with no loss of production. And, like the  mafia’s benevolent political acts such as delivering Thanksgiving turkeys, capitalists will still deliver the goods for them.

Rent-seeking (living off the work of others, generally payback for political bribery and protection) appeared free to the young Bernie Sanders for a few weeks, until his commune threw him out. What do democratic socialists propose in place of a hundred million deaths from Stalin’s Soviet Gulag and Mao’s Great Leap Forward and the scenes of mafia beatings, sometimes fatal, to extort business? They promise to squeeze “big business” with taxes, regulation and threats to match socialist demand with capitalist supply.

 

The Party’s “Democracy” Isn’t Greek “Demos”, It’s Crony Capitalist

About 2.5 millennia ago when the city state Athens first experimented with “democracy,” the City was 40% slaves, 40% immigrants, about 12% female (the men were killed in wars)  the middle aged (>18) male voters could all simultaneously fit in the stadium and be heard before heading off to the state owned brothels. Politicians were held accountable (just ask Socrates).

When adopted by nation states, virtually all democracies devolved into faux democratic crony capitalism: the more powerful the state the more crony corrupt: hence the easy transition for recent dictatorships, e.g., Russia and China. Adopting the mafia’s model of protection rackets, they create false risks and magnify real ones.

Founded as and still de jure the first representative republic built upon the foundation of a competitive market system where capitalist greed counter-intuitively served the public interest, the US maintains the pretense of American exceptionalism. But Crony capitalism in the US ballooned during the Wars, particularly the Cold War as Soviet military strength and ambitions were elevated to a “crisis” giving rise to the military-industrial-congressional complex (Ike’s original uncensored version). That led to the election of President Kennedy on the false claim of a “missile gap,” But the big bonanza for US crony capitalism was LBJ’s Great Society, extending the sphere of socialist state distribution to healthcare, education, food (the Dept of HEW) and housing (the Dept of HUD – not to be confused with the earlier Paul Newman movie).

The public interest – if any – provides camouflage for the distribution of money to politicians and political constituencies: the crony capitalists who finance elections and the protected constituencies that deliver the necessary votes (one way or another). Hence the “bang for the buck” public interest objective is replaced by the incentive to maximize politically targeted spending while avoiding accountability for the consequences. Accountability for the financing is deflected with (usually false) promises to tax only the rich, debt, and inflation. Following the Soviet and mafia model, money is collected by the center and distributed down, cutting the connection between cost and accountability to the voters. Any damage due to incentive distortions is brushed off as an “unintended consequence.”

 

The Democratic Party’s Coalition of Rent-Seekers and Crony Capitalists

Progressive government promises protection from personal “crises” related to sex, race, employment, environment, equity, health and education (but not crime). All the recipients of public protection and largess, unionized and all public employees, the education establishment, welfare state dependents, etc. support it, as does the media to signal its virtue. “Wall Street” primarily supports Democrats and progressive causes because the rhetoric raises more in campaign contributions than taxes, their lobbyists extracting protection and other special favors at the expense of smaller and foreign firms, taxpayers and consumers. That’s why hammers cost taxpayers $500.

Over expanding rent seeking and hence over taxing the productive sector is the primary reason why nations fail, a lesson previously learned by the mafia. Yet after announcing “the days of big government are over” President Clinton doubled down, promising at least five million owner-occupied houses to people who couldn’t afford them. With an unaffordable budget price tag of trillions of dollars he resorted to “off balance sheet financing,” a euphemism for using the carrot and stick tools of extortionists – tax and regulatory incentive distortions and legal threats and favors to get “government sponsored” – i.e., implicitly or explicitly insured and/or guaranteed commercial banks and mortgage agencies – to provide “affordable” mortgages. This socialist demand without socialist supply inflated the bubble in house prices to five times the prior record with no net additional houses. When it burst many lost their homes and much of the US and international financial industry became technically insolvent, the subsequent opaque “Wall Street Bailout” costing taxpayers trillions of dollars and global society tens of trillions with continuing reverberations.

Soon after this fiasco Democrat President Obama toyed with nationalizing the US healthcare system, but in the face of political opposition followed the same approach in healthcare: tax and incentive distortions  to meet socialist demand with private market supply. Healthcare supply didn’t change much but costs skyrocketed as a result of the ironically named “Affordable Care Act.” Insurance coverage expanded due not only to the typical carrots and sticks but the seemingly unconstitutional guarantee of an explicit insurer bailout.

These programs failed in different ways for the same reason: politicians promise something for nothing.  For failures as big as a global financial crisis, it takes more than the control of the administrative state and captive anti-capitalist media to cover up: it takes a political commission with a majority, chairmanship and control of the $10’s of millions to distribute to erudite academics ignorant of the deeply embedded political distortions of the incentive system to provide an aura of credibility. Following a long tradition, the “market failure” conclusion (and in this case the legislation supposedly implementing the Financial Crisis Inquiry Commission final Report recommendations) were written by the primary political perpetrators in advance.

 

The Sanders/Biden Legacy Plan: Go Big, Go for Broke, Go Broke

Tony Soprano’s childhood friend couldn’t raise money commercially for his successful sporting goods store because he was addicted to gambling. Tony lent him the money, knowing he would gamble and keep doubling down until by night’s end Tony owned the store (and the car and college fund). Watching the looting and liquidation of his life’s work, he asked Tony “You are my friend. You knew what I would do. Why did you lend me the money?” Tony responded: “You knew that’s what I do.”

The Sanders/Biden Plan is to go big, proposing to spend $6-$7 trillion. It’s still subject to ongoing negotiations, but as a benchmark it includes a $1.9 trillion Rescue Plan, $2.3 trillion Jobs Plan and a $1.8 trillion Families Plan according to the NYTimes. Taking into account the direct costs and indirect costs due to market distortions, the total cost of financing the Plan is by one estimate over $17 trillion. If hyperinflation results, the funding costs would be much greater. They are clearly going for broke, promising “investment returns” many times their historical norm.

Infrastructure, $1.3 trillion: Some of it is needed, politically popular and historically where government had the most bank for the buck. Approximately $50 billion is for repairing existing roads and bridges, $10 billion on transit projects for high-poverty areas, $20 billion in rural broadband and infrastructure and $100 billion to modernize the school system, among other proposals.

But the proposed approach is guaranteed to fail. Only about 2% of all infrastructure is federal, 13% of all public infrastructure. At best the federal bang for the buck is conservatively 50% or less relative to comparable countries for federal infrastructure. The Soviet Union had a savings and investment rate multiples that of the US, as does China today. The US historical comparative advantage was the market discipline imposed on investment decisions reflecting the productivity of capital. Adopting the Soviet/Chinese system of federal funding for state and local or private projects squanders this comparative advantage, further undermined by the Democrats’ demand for earmarks.

The most visible evidence of Obama/Biden stimulus were the nationally posted signs touting their program. The California bullet train to nowhere starting construction with Obama/Biden stimulus funds is the model for proposed High Speed Rail as the Federal train to nowhere. These white elephants are why the Trump Plan proposed 85%-90% private funding (without earmarks).

However problematic, this “infrastructure” plan is intended as public interest camouflage for the (mostly counterproductive) social, racial and environmental agenda:

  • Climate change, $2 trillion: The good news is that it is only a down payment on the $100 trillion Green New Deal.
  • Another $1.9 trillion in pandemic relief: Those currently working may well decide not to.
  • Higher Education, $750 billion: The baby boom need peaked a half century ago. In spite of dramatically lower requirements, only 6 in 10 graduate in 6 years. This top-heavy system should have been retrenching in favor of (non-government) employer skills decades ago.
  • Child and Eldercare, $775 billion: This is essentially the forced unionization of family caregivers that Progressives have pushed at the state level.
  • Healthcare, $750 billion: Obamacare was supposed to make this affordable without a massive expansion? This further undercuts incentive for rational healthcare choices.
  • Buy American, $700 billion: What happened to the benefits of free trade?
  • Housing, $600 Billion: Tax credits to first time buyers will go to the middle and upper middle class. Low income renters don’t pay tax. Lobbyists will steer most to new construction, two to four times as costly as housing vouchers that give renters more freedom of choice.
  • Racial equality, $30 billion: This sounds cheap relative to other promises, but will likely widen the economic divide and deepen racial animosity.

When asked “how did you go broke,” Hemingway replied: “slowly at first, then all at once.” That’s a safe bet.

Kevin Villani

—-

Kevin Villani, Chief Economist at Freddie Mac from 1982 to 1985, has held senior government positions, has been affiliated with ten universities, and served as CFO and director of several companies. He recently published Occupy Pennsylvania Avenue on the political origins of the sub-prime lending bubble and aftermath.

 

 

20 thoughts on “Soviet Socialism Was a Bad Joke; Sanders/Biden Democratic Socialism is a Comical Tragedy”

  1. Let’s call “Crony Capitalism” by its true name — Fascism. Capital refers to deferred consumption — the dedication of part of current production to investments which may return their costs plus a margin in the future. Everyone does Capital — whether they call themselves Communists, Socialists, or Capitalists; the only difference is who decides where to invest the capital. Reality is that North America, Europe, Russia, China started from different places but have all converged on Fascism — an incestuous relationship between politicians and businesses where private ownership is permitted subject to political control.

    While rightly spanking Sanders and the White House Resident, let’s not forget the abysmal performance of the Institutional Republicrats. In 2017/18, they had a genuine Republican President and control of both chambers of Congress, and they did — what?

    But let’s not get too worried about things. Someday, the Chinese Communist Party will decide to stop sending the US real goods in exchange for dubious IOUs. and the whole current structure will collapse. Let’s hope we do better next time.

  2. It seems to me that the aim of the Democrats’ policies is to divide the American people into two class, the clerisy to use an old term, and peasants who live on a sort of Dole. I see no place in this for small business. Or private enterprise. The corporate oligarchy are content with a sort of Fascism. I practiced Medicine for 30 years when it was largely the role of small business people, mostly men 40 years ago. Obamacare changed that considerably by providing powerful incentives for doctors to sell out to corporate masters, usually hospital chains. Most of the incentive was the Electronic Health Record, which was expensive and carried a 3% Medicare penalty if not adopted. I had purchased an EMR system because I had 279 contracts with various medical entities, HMOs and PPOs and other payers, all of which had different rules. For example, I was once penalized $500. for sending a patient to the “wrong” laboratory for a $16. wound culture. The system, relatively primitive, cost about $40,000. It allowed my staff to call up the contract terms for each patient.

    The University of Arizona was once well known as the best provider of care between Houston TX and Los Angeles. It was simply called “UMC” by the resident of Arizona. About five years ago, the hospital system invested excessively in a very expensive EHR to satisfy Medicare. They got in over their heads and eventually sold the medical center to a for profit company called “Banner.” The consequences can be seen here.

    Fewer than 10 percent of hospitals in the U.S. are designated magnet hospitals by the American Nurses Credentialing Center, which says meeting the requirements improves both patient experience and nursing burnout.

    There are 10 remaining magnet hospitals Arizona, including three other facilities owned by Banner Health.

    Banner-University Medical Center Tucson, which was then called University Medical Center, was the first hospital in Arizona to gain magnet status from the American Nurses Credentialing Center, in 2003, following an extensive application and three-year evaluation process.

    That was then. Now, we see this.

    University of Arizona President Robert Robbins gave a $875,000-a-year job to a longtime friend last year despite warnings from a UA cabinet member that the candidate wasn’t suited for the position, a legal document filed with Robbins’ employer claims.

    The notice of legal claim, a precursor to a lawsuit, says Robbins hired Dr. Michael Dake to oversee the UA’s medical schools although search committee co-chair told Robbins the hire would be a grave mistake that “could very likely cost you your presidency.”

    The claim, dated May 9, was filed earlier this year with the Arizona Board of Regents on behalf of former UA health-care executive Anthony DeFranceso. The Arizona Daily Star recently obtained a copy through a public-records request.

    I recently sought medical care with a retina specialist in Tucson who told me he relocated to Tucson to join the staff of UMC. After the Banner purchase he changed his mind.

    My former hospital, profiled here in the past, hired a Pepsicola executive to be CEO a few years after the transition. He had no healthcare experience and hired his brother-in-law, a chiropractor, to supervise the surgery department.

    The oligarchs seem less interested in the quality of performance than on Power and Political influence.

  3. The ‘Woke’ people, for the most part, do not seem to have any real vision of a projected future society, other than it’s different from this one–and as someone at the Ace blog noted the other day, the movement hasn’t produced anything that could be called art…although I did see a meme with an image of how beautiful and peaceable the world would be if there weren’t any humans in it! There is a large component of nihilism in this movement, with aligns with the nihilism that Peter Drucker saw in European Fascism in his 1939 book.

    Some-many–of the supporters of Wokeism are just basically mafia types, as the post suggests, they’re in it for what they can get. Other are bitter and resentful about their situations, and seek an outlet for their bitterness. Some will go along with what the dominant political theology, for fear of career, social, or even political retaliation. And there are some, we mustn’t forget, who are mentally healthy and well-meaning people, who we haven’t been yet able to persuade of the errors of their thinking. The almost absolute ‘Woke’ takeover of most media, and the blockade of dissenting opinions, is a major factor in this.

  4. Here is someone who seems to agree with me.

    He also seems to agree with a book by Michael Lotus and James Bennett called America 3.0, which seemed at the time an unlikely solution but which looks more practical as we add “Sanctuary Cities” that are not about illegal aliens.

    The precedent of even one county, in any state, freeing itself of its distant solons would likely inspire many more attempts. Western Maryland joining West Virginia; downstate Illinois joining Iowa, Indiana, or Missouri; upstate New York joining Pennsylvania; eastern California joining Nevada—the possibilities are endless.

    Why not ? Assuming the 2022 election is not fixed like 2020.

  5. }}} $2.3 trillion Jobs Plan

    There’s a meme floating around about this, asking how it is we need to spend 2.3 **trillion** dollars to “create jobs”, when only 18 months ago we had one of, if not THE most robust job market in recorded history, and it didn’t cost a dime?

    Maybe we just need a different president to create jobs?

    Just think, you could save 30-50% just by changing back to Trump® brand presidency…

  6. The problem of various rural regions wanting to leave their current states is the natural outcome of “one person one vote” which the Supreme Court imposed by fiat on the states and obliterated the political power of those areas.

    I disagree with the title of the post–the US government right now is a complete and total joke. Its authority and legitimacy is gone–remember a couple months ago when we were told to wear two masks, and if we did so we might be able to get together with a couple people for the 4th of July? We all need to carry on in total disregard to anything it says.

  7. Between inflation and high unemployment benefits, it’s a backdoor way to implement a higher minimum wage.

  8. And yet China manages to double its GDP every 8 years. This is a Communist government, that according to western thought, will not be able to manage a useful state. So they raised a billion people from poverty, and have been doubling their GDP every 8 years, for 25 years or so, and look to be continuing this into the future.

    Yeah Communism sucks so badly. ;)

  9. The troll continues to swallow the CCP line, hook and sinker.

    My daughter was in Shanghai visiting friends. They went out for breakfast. Her friends warned her not to eat the fluffy looking muffins. The Chinese bakers used detergent to make them fluffy. Those friends, one a Chinese girl who took the English class from the American friend, came back to the states. I interviewed over 100 Chinese kids joining to the US Army to get citizenship. Why are they eager to leave ? Monterey Park in LA County is almost 100% Chinese immigrants. Why are they leaving ?

  10. Mike K: “I interviewed over 100 Chinese kids joining to the US Army to get citizenship.”

    Well, our Best & Brightest outsourced the manufacture of critical components of weapons systems etc to China. Why not outsource critical elements of Army personnel to the Chinese Communist Party?

    For sure, lots of those fit intelligent Chinese young men wanting to join the US Army are genuinely trying to escape from the CCP. But that group certainly provides excellent cover for sleeper agents.

    Reportedly, during WWII, many Americans of Japanese ancestry joined the Army — but they were sent to the European theater and not to the Pacific theater, for obvious reasons. Our Best & Brightest used to be Better & Brighter than today’s Bidenites.

  11. I hope Gavin’s “Reportedly, during WWII,” is a facetious comment.

    442nd Infantry Regiment, and that’s just the famous unit. German-descended Americans such as my father (both parents born and grew up in Germany) fought everywhere, and to my knowledge their loyalties were not questioned the way Nisei loyalties were.

    Cousin Eddie

  12. Lets put it this way Mike. I have learned that American propaganda is far more advanced as a science, than the Chinese efforts. ;)

    Finally we have some permanence to our user stuff. It was not me, but I like the result of the hack. Better looking pages as well, but I do like it simple myself.

  13. How can this not be a joke:
    https://thehill.com/homenews/administration/555670-biden-to-propose-6t-budget
    “President Biden is set to propose a budget totaling $6 trillion in the coming days, The New York Times reported early Thursday, about a third higher than pre-pandemic spending levels.”

    Like I’ve said before, I’m not even mad anymore. It is what it is. I say encourage the GOPe to vote yes on this. Then we replace the current trash officeholders with people who will come in and use the massive government to give us stuff, and punish our enemies. No more “limited government” hand-wringing from our side. Make it rain on small towns, and crush big cities, universities, big businesses, etc.

  14. Trolls gotta troll.

    For sure, lots of those fit intelligent Chinese young men wanting to join the US Army are genuinely trying to escape from the CCP. But that group certainly provides excellent cover for sleeper agents.

    Those enlisting under this visa program were required to volunteer for Airborne and entered as Privates. Even trolls should recognize there is small hazard of espionage from buck privates. Plus the background checks took a long time. I interviewed a couple of Chinese volunteers with CPAs who had to reapply as the checks took over two years.

    My Chinese medical student was a good source of background info on China. She came to the US because, as she told me, there was no pension program even though her mother was professor at Beijing U. Her father was a Physicist but worked as an auto mechanic because he was Christian.

  15. Mike K — It is too easy for some people to casually dismiss anything that does not fit into their fixed world view as “trolling”. I thought you were better than that. It looks like I need to adjust my world view.

  16. Mike K foolishly wrote: “Even trolls should recognize there is small hazard of espionage from buck privates.”

    And even Mike K’s should recognize that those who start as buck privates can later get promoted to very senior positions — especially if they are hard working & intelligent, as any sleeper agent would be.

    But it is easier for some people to close their minds to the obvious. Sad!

  17. I thought you were better than that.

    Sorry, the only troll around here is Pen Gun and he has maintained that record for years.

    As far as Chinese privates who enlist to get US citizenship, I think they are more trustworthy than the generals running things now. Again “Trust no one over O-6.”

  18. One of my veteran friends had been a rifleman in Carter’s army in Germany in the late ’70s
    (i.e. the early All-Volunteer Army).

    He said a lot of his buddies got mail and magazines from outfits like World Socialist League and Young Workers International u.s.w. . . . He never did determine whether or not they were actually reds or whether the mailings were red agitprop to make the GIs suspicious of one another.

    Probably some of both, IMO.

    The US is a world-spanning system and if not enough US youngsters join up, the recruiting pool will be widened. Not ideal, and potentially dangerous, but it’s where we are.

    Cousin Eddie

  19. }}} The US is a world-spanning system and if not enough US youngsters join up, the recruiting pool will be widened.

    Well, we’ve made it harder to get into the USA, so all that is really happening, one might suspect, is that the inductions which occurred in new immigrants are now being done outside the nation by possible immigrants, as a way to improve their chances notably.

    A guess, no direct evidence to support it.

    And Gavin, I assumed Mike was referring to Pengun right from the start…

    His bloviation was Mike’s first reply, and, while he took up some of your comments in tow, I think he was simply disputing them with his own observations. ;-)

  20. Citizenship for foreign-born soldiers and sailors is an old American tradition–in fact, it parallels in ancient Athenian and Roman practices. The latter of course becoming too much of a good thing by the 4th C a.d. or so.

    Cousin Eddie

Leave a Comment