This Ain't Socialism

Hale Stewart points out that the "S" word has been robbed of all meaning in our political discourse (via Ritholtz):

The above chart gives us more detail of government contributions to overall GDP growth.  First, notice the blue line, which is defense spending.  This number has been a powerful contributor to economic growth over the last three years; it has only contracted in four quarters.  Secondly, notice federal non-defense spending -- the red line.  Its contribution at the beginning of the chart was actually far weaker than defense spending.  In other words, it was the war efforts that really added to overall growth.  More importantly, in the 4Q09-2Q10 period we see non-defense spending at higher levels than defense spending -- a situation we also see in 1Q09 and 2Q10.  Put another way, out of the last 15 quarters, federal non-defense spending has contributed more economic growth than defense spending in 5 quarters -- or 33% of the time.  Finally, notice the green line, which shows the percentage contribution of state and local spending to GDP growth.  This number has subtracted from growth 11 of the last 15 quarters -- or 73% of the time.  For the quarters it did contribute, it did so at very low rates.

What to these two charts tell us?

1.) Defense spending is actually far more important to overall GDP growth over the last 15 quarters than federal non-defense spending.

2.) State and local governments fiscal issues are hurting overall economic growth.

3.) An economic policy that is contractionary, in fact, leads to slower growth.

Put another way: this ain't socialism.  

I'm sure some Tea Partier will bring up Medicare, Medicaid and Obamacare.  I don't really know why folks like to put health care in the "fend for yourself" category.  We don't have total control over our health, and in our system, we face economic ruin without health insurance or government health care assistance (and we still often face ruin even with insurance).  My favorite example of this was to make the point against the insurance mandate, I heard a radio talk show host citing as an example one (1!) person who has managed to reach old age by paying cash for all health expenses and never buying insurance.  This really gets to the point of what insurance is.  It is socialization of expenses.  Customers pay in, and mitigate the risk of major economic loss.  Mutual insurance is then just socialism.  What a terrible system.  Yes, I know that government mandates take away the liberty of voluntary participation in the system, but why would somebody take greater economic risk for greater cost?  For the freedom to go bankrupt or get their blood sucked by major corporations?