Recently, I have been making the argument that the U.S. should be defined more by government intervention than by truly free market capitalism. Since Reagan in the 1980s, in spite of the propaganda to the contrary, we have seen a consistent and significant increase in deficit spending and in the government’s share of GDP (i.e., more, not less, government participation in the economy). Thus, it seems completely absurd to hear Republicans suddenly complain that the Obama administration is somehow bringing back “big government”.
Maybe Obama’s promise to provide universal health care significantly alters the rhetoric of the role of government in society. Some conservatives may call that type of government intervention — spending tax payer dollars on services that go to tax payers — socialism, but then how would they describe the previous thirty years of government intervention? The government intervention in Iraq, equaling the cost of the stimulus; defense spending disproportionate to that of the rest of the world, without a convincing military victory since World War II; deregulation of financial services, health care, and industry that does not benefit the consumer or the free market but only the banks, HMOs, and oil companies; and policies that subsidize and perpetuate mega farms and uncompetitive mining and automobile companies at the environmental and health expense of citizens. When the government, be it at the helm of Bush or Obama, passes bailouts and stimulus packages that protect the mismanaged from the free market, that is not socialism. It is more like national corporatism, a.k.a. fascism.
Even the moral hazard argument has been applied with a clear bias. When people have been unable to meet their mortgages, there has been a tendency to say tough luck, caveat emptor. You were stupid and the government’s role isn’t to help the stupid. But when Wall Street can’t meet its obligations, it is still considered highly qualified, sophisticated, and its livelihood essential. Simon Johnson describes the banking industry as an oligarchy comparable to those in emerging markets. Ironically, the U.S. is bailing out the oligarchy with the exact opposite remedy we have always proscribed to failing economies. So then where do these bailouts and stimuli leave the U.S. on the political spectrum? Closer to socialism or fascism?