Wednesday, April 8, 2009

Socialism for the Wealthy?

The lazy misuse of the term "socialism" is something I have railed against, and I will do it here when it has been done in the other direction. This week The Economist characterized the implicit subsidies of loose monetary policy, deregulation, tax loopholes, and explicit subsidization of credit markets "socialism for the wealthy." This is a false, and irresponsible, characterization of what amounts to simple redistributive politics.

It does, however, point out a key point about the biases about Republicans and Democrats as "conservatives" and "liberals" or "pro-market" and "pro-government," respectively. The reality is that the "pro-market" label for Republicans has not been earned, just asserted. A market has two parts: Households and firms. Republicans tend to favor the firm side of the market by subsidizing investment through the tax structure and other policies. Democrats tend to favor households through transfer programs and consumption subsidies. 

Income redistribution is income redistribution and both parties' approach to it distorts markets. Republican initiatives for "incentives" are nothing more than subsidies to firms. Hence the term "Corporate Welfare," which is an apt analogy. Calling it "socialism for the wealthy" is inaccurate, incendiary, counter-productive.

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