The candidates in the recent presidential election argued about whether one of them was advocating socialism.  Actually, it looks like we’re already there.  An ever-growing share of economic activity is ending up under government control.  Reports USA Today:

The government’s spending surge to ease the financial crisis and a worsening recession is increasing the federal share of the nation’s economic activity close to $1 out of every $4, the highest level since World War II, an analysis of current and projected payments shows.

Emergency rescue plans for financial institutions and increased benefits for needy individuals are mounting, as Congress considers President-elect Barack Obama’s call for a massive public works program that could exceed $500 billion and a $14 billion bailout of the auto industry.

All that spending will push the federal share of the nation’s $14.4 trillion economy to 25% or more — past the post-World War II record of 23.5% set in 1983, at the end of what was then the worst recession since the Depression.

Economists warn that the fast pace of government spending could spell trouble in the future: slower economic growth, higher interest rates, and the likelihood that tax increases or spending cuts will be needed to tame a budget deficit headed toward a record $1 trillion. The government reported Wednesday that the deficit for the first two months of the 2009 fiscal year was more than $400 billion.

“That’s the opposite of what we’re trying to do to the economy,” says Maya MacGuineas, president of the non-partisan Committee for a Responsible Federal Budget. The government should boost spending, but “we have to do it really carefully,” she says.

Federal spending as a share of the economy peaked at nearly 44% in 1943 and 1944, when spending for World War II soared. Since then, it has hovered at near a fifth of the U.S. economic output.

The government’s growing share of the economy is driven so far by the bailouts for banks and financial institutions. More than $200 billion has been used from the $700 billion Troubled Assets Relief Program, and $13 billion was used to buy stock in Freddie Mac, the housing corporation.

Other payments are likely to bring the total figure to more than $350 billion for the 2009 fiscal year that began in October, say budget analysts such as Brian Riedl of the conservative Heritage Foundation. That will bring federal spending to about $3.5 trillion.

“Excess government spending has been shown to reduce economic growth,” Riedl says. “The more money spent by politicians in government, the less spending is available for the private sector, which is the sector that usually creates more productivity.”

Plans being considered by Obama and Democrats in Congress to jump-start the economy would raise federal spending much further. Even if only $150 billion in stimulus gets spent in 2009 while the rest is spent in 2010 or thereafter, it would push the federal share of the economy past 25%.

If the Obama administration, as expected, treats the bank bailouts as credit rather than cash, they would not count toward the deficit. But they will still drive up the $10.6 trillion national debt, because the government must borrow the money.

Did the free market cause the financial crisis?  Was it unbridled capitalism?

The Competitive Enterprise Institute and the National Taxpayers Union don’t believe for a minute that capitalism caused the financial crisis.  How can we be so confident?  Because capitalism doesn’t exist in the United States, especially in the financial sector.

Nearly every industry in the U.S. finds itself making regular pilgrimages to Washington to seek special favors—subsidies for this or that, regulations that harm competitors or smaller firms, or trade deals that benefit their industry while hurting the American consumer.  No, America doesn’t have a capitalist system, we have a system of special favors, handouts, and perversion of the free market.

That’s why we’ve launched BeyondBailouts.org.  The financial system should be a free market one, not one controlled by the government, because government control and influence over the financial system is to blame for much of the current crisis.

Freddie Mac and Fannie Mae bought up bad loans, pushing the industry to make more of them.  The Fed played fast and loose with monetary policy by making money so cheap that financiers used it recklessly.  Our tax policies and myriad Federal programs are geared toward pushing people into homes they can’t afford.  Many of these policies were put into place by corrupt politicians bankrolled by those who sought to make a fast buck while distorting the free market.

Tell Congress enough is enough.  Write your Member of Congress and sign our petition at BeyondBailouts.org.

Yesterday, Nelson Cunningham, one of the panelists at a Hudson Institute conference on Latin America’s “Radical Populism Challenge” commented that it is better that the presidential campaign and debates don’t even mention the region. He said that speaking of Latin America would only bring bad news: illegal immigration and drug-trafficking.

As a Latin American myself, I could not disagree more. The region is one of the United States’ most important commercial partners, with U.S. exports valued at more than $150 billion a year, almost as much as its exports to the European Union, as Inter American Dialogue President Peter Hakim notes.

A more balanced argument was delivered by Jaime Daremblum, director of Hudson’s Center for Latin American Studies, who moderated the panel, but didn’t argue with the speaker. In his article, “What Will the Election Mean for Latin America?,” he shows how the 9/11 terrorist attacks pushed Latin America to the background of the U.S. foreign policy discussion. Meanwhile, Russia is gaining ground exploring oil fields in Venezuela.

The same controversial panelist also commented that Senator Barack Obama, if he becomes President, would probably enjoy future good relationship with Latin America—because of his Indonesian background. It is not clear how his Indonesian experience can increase his interest in a region he didn’t consider visiting during his international campaign.

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Oh, Happy Day! And it certainly is for all those who value freedom, responsibility and the true free market in which individuals are free to profit from their risks on the condition that they don’t stick the rest of us with their losses.

It’s not hyperbole to say the Republican and Democratic backbenchers who defied both parties’ leadership to defeat this $700 billion package of Wall Street socialism literally saved America. Whatever their reasons, this defeat (or rather victory for freedom), means that America is much less likely to turn into France, Venezuela, or the old Soviet Union, as this bailout/nationalization package would have set us on the road to becoming.

Several great speeches on the Right and Left were given. Democrats Brad Sherman of California and Earl Blumenauer of Oregon gave powerful speeches against corporate giveaways. And conservative leaders of the Republican Study Committee — such as Jeb Hensarling, Jeff Flake, Mike Pence, and of course Ron Paul — spoke about how government intervention was largely the cause of this predicament, but the bailout would doom arguments for the free market form here on out. The idea of the government making this kind of outlay to high-flying risk takers just didn’t jibe with members, and certainly not with the American people.

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