I read the first link you pointed to (if Medium did not record that reading, then I have no idea why) and I looked up a review of the book you suggested (perhaps the book has been reprinted), both your article and the book do not reflect the reality of any advanced economy in the world today.
I asked you to name an advanced economy that follows a “pure” capitalism model without any entitlements. They don’t exist. That raises the issue of why advanced economies reject pure capitalism. I will leave you to wrestle with that issue, I am simply focusing on the reality that they do. So knowing that they do, what is the difference between “sustainable socialism” and socialism that is not sustainable and leads to economic collapse.
The graph below makes crystal clear that this country has since 1945 been willing to support government taking between 15–20% of GDP and spend it on Federally funded activities including entitlement programs. What it should be is not the point, what matters is what the American people think it should be as reflected in the government’s tax revenues.
The graph is pretty clear. When tax revenues approach 20% of GDP, we elect “tax reformers” to reduce taxes. When tax revenues reach 15% of GDP, the country supports Congressional leaders who increase Federal taxes. Recessions account for some of the swing, since GDP often drops less than tax revenues causing the percentage to dip, but for more than 70 years, regardless of who is President, what party, or what is going on in the world, the public is prepared to fork over somewhere between 15–20% with the sweet spot being between 17–18% of GDP.
These graphs are not economic theories, they reflect the will of the people and show the people have been pretty consistent over an extended period of time. Interesting no matter how much any group attempts to persuade Americans that they should move outside those parameters, Americans have not budged. Obama was the last President to try to push America above the higher limit. His pitch was greater tax revenues to socialize the cost of health care for the working poor, the sick, and older Americans and even though he got higher taxes passed, he immediately lost control of Congress and eventually the public elected Trump promising tax reform to lower taxes as a percent of GDP, which he did.
What emerged as a result, was that Americans were less opposed to increased entitlements even if they were strongly opposed to paying for them.
The problem I was pointing out in my article is captured by overlaying the graph above with the one below.
America has departed from “sustainable socialism” where tax revenues support our entitlements to where they no longer do. This means politicians have not reconciled what Americans are willing to support with what the government offers. Hence my argument that when that happens socialistic entitlements are not sustainable and some form of austerity will eventually rear its ugly head.
The reason our current entitlement programs no longer reconciling with our tax revenues is largely related to demographic changes in our population. But that is besides the point, the reality is that current spending levels are not supported by the public.
Squaring the charts would force politicians to cut government spending by nearly 20% (but given the size of the cut, it would most likely have to be reduced over 10 years or even more to avoid a recession). Alternatively, politicians could persuade Americans to pay 20% more in taxes on average (but I think this is unlikely to happen). A third option is for the government to implement the “invisible” tax of printing money. None of those options are likely in the short term and the longer our government goes without squaring the charts the more painful the fix.
At present, I think the only real option that could be sold to the American public, that would work, is a modest increase in tax rates on the wealthy, the elimination of payroll taxes on everyone and its replacement with an equivalent amount of tax revenues through a national sales tax, a reduction in government spending primarily targeting entitlement that reduce government entitlement spending overall while preserving the spending going towards the poor and health care for the elderly, and printing enough money to increase inflation to 3% a year to create “artificial GDP growth” and thereby shrink the national debt as a percent of the economy.
You will never convince Americans to abandon the mixed capitalistic/socialistic system in place today, no developed nation has achieved that. A far better chance exists to convince Americans that they must limit “socialistic” spending to what the taxpayers collectively are willing to support. But I think we have exhausted our discussion. Arguing capitalism is better socialism is not what this article was about. It deals with the reality of how advanced economies operate and how to know when the entitlements a country adopts are not sustainable in the long term.
