Capitalism and socialism coexists

On more than one occasion, I have seen letters to the editor speak of setting up beachheads in the coming election around capitalism vs. socialism. To me, this is a name-calling gimmick to persuade a voter who does not do much homework. Voters that are prone to listen to name-calling as debate will buy into this logic time and again. The irony in this debate is the United States’ economy is a blend of “fettered” capitalism with socialistic underpinnings. So, both co-exist here.

For readers in the either camp, this observation probably surprises them, especially those who are gung-ho capitalists. But, the word in quotes is also important as we do not have unfettered capitalism. If we did, the US President would have run out of money long ago with his many bankruptcies. I believe in capitalism as well, but we need to understand why we ventured down the path of the socialistic underpinnings.

These underpinnings spoke to a nation that was in a great depression and who seemingly got lost in poverty later on. Social security is a low-income weighted pension, disability and survivor benefit program that is funded equally by employers and individuals. To determine the base level benefit, 90% of average wages are used for the earlier wages then added to 32% of the next tier of wages which are added to 15% of the highest wages up to a limit.

In the 1960s, LBJ’s “War on Poverty” added Medicare and Medicaid to the mix, with Medicare helping retirees and Medicaid focusing on people in poverty. Then, we can mix equal measures of unemployment benefits, workers’ compensation and food stamps which are now called SNAP benefits. Each of these programs are forms of “social insurance” benefits. That is socialism designed to keep people fed, housed and protected.

Taking this a step further, utilities are so needed to our communities, they are either co-ops or fettered capitalistic models where rate increases must get approved by a state governing board. Companies like Duke Energy and Con-Ed must get permission before they change their rates. For the co-op model, the customers own the business.

But, the word “fettered” enters into the mix on other businesses as well. To prevent monopolies, insider trading, interlocking boards, collusion, the misuse of insider knowledge by investors, etc. rules are set up to provide governors on capitalism. Then, there is that bankruptcy thing, where a business or person can claim bankruptcy to pay debtors what they can and restart. I use the President as an example, but his experience is a good one, as he filed for bankruptcy six times on various investments.

I want people to think about our country in this context. We want people to earn their keep and be fully functioning tax paying citizens. Yet, we have programs in place to keep them out of the ditch. As we considering changes to programs, we should consider what they are accomplishing and how changes could make them more effective. And, we must understand that things must be paid for, so how do we get the best return on the investment into those stated goals?

For those that have followed my blog for some time, you know I have been involved for many years in helping homeless working families find a path back to self-sustainability. We help the homeless climb a ladder, but they climb it. Yet, we are also successful in keeping people housed on their own after two years of leaving our program because we measure things and make improvements. The ultimate goal is self-sustainability, so we measure how we can be the best financial stewards toward helping people achieve that purpose.

We need social underpinnings to help people be fed, housed and protected. Some need to be temporary in nature, while others are longer term like Medicare and Social Security. There is a cost-benefit to these equations, but we should understand that we have poverty problem in our country. We must also understand technology advances will continue to change the paradigm on employment as it has throughout the industrial age placing additional pressures to even more wage earners. Not providing ladders out of poverty or ways to avoid it would be a bad path to follow for our country.