South Carolina Republican Sen. Jim DeMint has emerged as one of President Obama's most visible critics, comparing the United States to "where Germany was before World War II" and saying that healthcare reform could be the president's "Waterloo" and could "break him." DeMint explains what he sees as the danger facing the United States in Saving Freedom: We Can Stop America's Slide Into Socialism. He recently spoke with U.S. News about the economy, free markets, and the role of government. Excerpts:
How do you define socialism?
Socialism is when the government owns or controls a large part of your economic system. And if you look at where America is today, with General Motors and Chrysler, AIG, the banks, our education system, a large part of our healthcare system, energy, transportation, there are not many areas of the American economy that are not overregulated or controlled by the federal government.
Hasn't the government controlled a large part of the economy since the early 20th century?
I'm not advocating no laws and regulations; they're essential to free enterprise. But once the government starts taking apart and actually managing business activity—what it's doing today—it moves from a free-enterprise concept to one that's more socialistic.
So socialism is when the government can change its role in the economy whenever it wants?
It is. And when laws become arbitrary. When laws become retroactive. When contracts are revoked or leases are taken back. Investors and business people can no longer count on contracts. If they buy stock in companies, political activity may dilute those shares or totally change a business. There are a lot of people sitting on the sidelines because we no longer have that predictable and knowable legal system.
So socialism is about trust?
When you've got 30 czars in the White House, czars that are determining compensation, for instance, that's no longer a rule-of-law system. It's an arbitrary system. And you get back to the rule of men. And that's something our founders said would not work. You can't have freedom exist when you have arbitrary laws.
You've been criticized for saying, "We're about where Germany was before World War II where they became a social democracy. You still had votes, but the votes were just power grabs like you see in Iran." Do you regret making that comparison?
America is going down that road that many countries have gone down that have been destroyed by the growth of government power that often ends up with debt, tyrants, dysfunctional government. We've seen this movie before.
Is your message that government should get out of the way?
Government should do what the Constitution says it should do. The Constitution is intended to limit government in what it can do. And it's pretty specific about defending our country, regulating interstate commerce, and a few other things. What we're doing today is way out of the bounds of the Constitution. The whole concept of property rights is being violated. When the government moves from working for the general welfare of the whole country to a lot of particular interests, it becomes dysfunctional. And no one could argue that's not the case today.
What does the financial crisis teach us?
I know how free markets work. And I know a local bank or mortgage company does not make a loan to someone who can't afford to pay it back if they can't sell that loan to the government. And that's what we created with Fannie Mae and Freddie Mac. They were buying up loans that weren't any good. Investors are not going to buy [a security] unless it has good creditworthiness behind it. And that was the implied guarantee that came through the government.
So if the government had not been buying these securities, there wouldn't have been a market for them?
No, there would not. They were sold with the implied guarantee of our government all over the world. If it had not had that implied guarantee, there would have been a whole lot more scrutiny on what was the value of those securities.
Who is to blame for the economic crisis?
Bad government policy. That doesn't mean there weren't greedy players on Wall Street. But greed is part of human nature. We were trying to do social policy through the financial markets and created a house of cards with these mortgages. What we did with government policy was take the natural accountability out of the system. The risk-reward system was out of balance. You can't blame it on free enterprise.
So deregulation had nothing to do with it?
Well, you can point to a couple of loopholes, but a lot of that goes back to our tax code. And the same thing happened with Enron. We've got such a complicated tax code that people can set up all these subsidiaries to avoid taxes, and that gets back to bad government policy.
Is George W. Bush a socialist for the bailouts?
That was a socialist-leaning idea. I'm not saying he's a socialist. And I'm not calling Obama a socialist, although the policies he's pushing are socialist-leaning. What Bush did is he grew government, he grew dependency on government, and he basically allowed Congress to expand government areas beyond what it had ever done before. Obama's just increased that exponentially.
Why is the GOP polling so badly?
Republicans have just not done what they said they were going to do. People don't trust them. We betrayed the trust of the American people. We made promises of limited government, less spending and debt, and we did the exact opposite. We've got to re-earn that trust.
Will you run for president in 2012?
When you put all your ideas down in a book, you're less likely to be able to endure a campaign—they'll take a lot of things out of context on you. For me, the big battle between socialism and freedom comes down to this healthcare issue.