Why Socialism Doesn't Work: Running Out of Other People's Money

Why socialism doesn't work, and the consequences once you've run out of other people's money.

Item: Police in Venezuela seized 2,500 rolls of toilet paper in an overnight raid of a clandestine warehouse. In addition, officers seized 400 diapers and 7,000 liters of fruit juice.

Item: The Elysee Palace sold off a tenth of its wine collection in a Presidential garage sale. The French government says it's no big deal, and they're trying to set the example.

Selling presidential wine in a nation that loves its wine might chip away at awful approval ratings, but it speaks more to the stupidity of goals that include squeezing the inequality gap by bringing the top lower, taxing rich people and businesses, and demonizing success. Venezuela has become a shell of itself after confiscation of foreign assets and saber rattling spooked away expertise and investment. In the meantime, promises made to an entire continent aren't being kept, as it's become hard enough to keep toilet paper and diapers for Venezuelans in stock.

Margaret Thatcher talked about running out of other people's money, but in the game of ruining a country and squandering potential, running out of money is just the start of the fun and games. Usually by the time it begins, draconian options like higher taxes, fees and wealth confiscation has already been in place. Then it comes down to simply cutting spending or as is it's generally called- implementing austerity. But, in nations that have afflicted themselves with the most socialist policies, it's always back to higher taxes and confiscation of wealth anyway.

Of course when it's all really said and done, the end game looks like Greece where there's been talk of selling more than a thousand bottles of wine but major attractions including tourist sites and islands.

But for all these nations the spending doesn't stop, and yet they call it austerity. In America, we got a taste of austerity in the form of reinstatement of social security tax and sequestration. I didn't like the cut in social security tax, instead it should have been a permanent break on income taxes, but this was the easiest way to get wealth redistribution going along with supped up initiatives like the earned income tax credit and child tax credit. These scams used the cloak of rewarding workers when it was really focused on not helping people that earn too much.

(The starting point of most administration policies is how to make sure certain people do not benefit rather than how can we lift the entire nation. It's not a stretch to see how exclusive economic policies could lead to targeting by government toward other unfavorable people and organizations.)

If This Is How the End of the World Looks- Sign Me Up!

President Obama talked about the devastating impact of sequestration and even went on a national tour touting the harsh outcomes of government slowing the rate of spending by just two percent. Never mind American households took a $1.3 trillion haircut over the past few years ... we were promised Armageddon beginning on March 1st.

This is what we got instead:

  • Dow Jones Industrial Average +1,234 points or 9 percent
  • Existing home prices (median) +19,600 from Feb or 11 percent
  • Job creation of 303,000 with April's tally as high as or higher than seven months in 2012
  • Washington DC has seen 40,000 jobs, 5.3 percent unemployment, and huge spikes in tax receipts for neighboring states and more cranes anywhere in the world than maybe Dubai

Europe Continues to Spiral

While this was going on, Europe raised taxes as its form of austerity eschewing pro-business policies to support their welfare states and impossibly lavish social spending.

Headlines out of Europe this morning were heartbreaking.

Euro Zone unemployment is now at record high 12.2 percent, but that is just the tip of the iceberg. A country-by-country look speaks to a kind of desperation that can't be cured overnight or by printing money. Unemployment in the most troubled areas of Europe continues to deteriorate and is now in crisis mode, particularly for those nations' youth.

Last month I read that there are 6,000 pizza jobs unfilled in Italy because nobody wants to do that kind of work anymore. Yet the unemployment rate among Italy's youth is at an all-time record high (records kept since 1966). This speaks to the negative impact of the welfare state and welfare mentality. If you can get paid and live well, even live an inevitable life without working, then why make pizzas, why get off the sofa unless it's to go to the beach - where American tourists become jealous and think "these guys got it right."

They got it wrong!

Arvind Mahankiel got it right! Arvin was winner of Scripts National Spelling Bee after correctly spelling "Knaidel" to become champion of the competition last night. The beauty is Arvind actually got knocked out of the competition the two prior years when he was tripped up by German words. Last night he turned his weakness into his strength and got the German word and the title. This is what America has always been about, grit and determination made us great and is the only way to stay that way. More and more of our youth along with society at large are being lured into a European existence where the state takes care of our needs relieving the need to get better, overcome adversity, and to be great.

Charles V. Payne is a regular contributor to the Fox Business and Fox News Networks. He is also the Chief Executive Officer and Principle Analyst of Wall Street Strategies, Inc. (WSSI), founded in 1991 which provides subscription analytical services to both individual and institutional investors.

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