A few weeks before the election, “Joe the Plumber” asked Barack Obama about his tax plan, and Obama said that he intended to reform the tax code to “spread the wealth.” The McCain campaign seized on this gaffe and ran with it: what Obama was advocating, they said, was tantamount to “socialism.”

The “socialist” charge was repeated many times throughout the remainder of the campaign, and it continues to be levied against President-Elect Obama even after his historic election. Recently, Investor’s Business Daily editorialized that the “change” Obama favors “can only be described as socialistic.” But what does this even mean?

Is “Socialist” Nothing but a Slur?

Kansas City Star editorialist Lewis Diuguid says that “socialist,” in the context used by McCain and his supporters, is nothing more than a thinly veiled racial epithet. After all, Diuguid points out, iconic African-Americans such as Martin Luther King, Jr., W.E.B. Dubois and Paul Robeson were all smeared as “socialists” by their racist opponents. But the inconvenient truth is that King, Dubois and Robeson were socialists.

Dubois and Robeson were long-time members of the Communist Party of America, and Martin Luther King, in just one of many examples, once gave a speech in which he called for a “better distribution of wealth” and opined that “maybe America must move toward a democratic socialism.” Socialism was “not the sum of these men,” says libertarian Lew Rockwell, “but they were all red-blooded socialists.”

Regardless, “socialist” can definitely be used as a mean-spirited slur, but the word also has a legitimate meaning. The question remains: Is Barack Obama a socialist?

What is Socialism?

Socialism is defined as an economic system wherein the means of production and distribution are collectively owned, typically by a monopoly government. Politically, a socialist state can be democratic, dictatorial or anything in between: contrary to popular belief, the method in which leaders are chosen is not an element of socialism.

There is no such thing as “private property” under socialism: production is centrally planned by committees on the basis of what they think people want or need. Theoretically, each individual is expected to produce according to his ability and consume according to his need. It sounds like heaven on earth—or does it?

It is often said that socialism is good in theory but bad in practice. Actually, this is untrue. The Austrian economist Ludwig von Mises proved that socialism is not good in theory and cannot work in practice. Mises’s 1922 work Socialism demonstrated that a pricing system and for-profit ownership of the means of production are necessary to signal to producers what to produce. Mises thus predicted the collapse of the Soviet Union, with great accuracy, almost 70 years before the fall of the Berlin Wall.

Democratic Socialist or Social Democrat?

Even the most paranoid “ditto head” could not seriously think that President Obama will collectivize all U.S. property in the hands of the federal government. Clearly, Obama will not usher in a truly socialist America. He might, however, move us in the direction of greater “social democracy.”

Our national confusion in regard to political taxonomy dates back to the New Deal, when the word “liberal” changed meanings in America. Previously, a “liberal” had been someone who emphasized individual liberty, private property and limited government. These were the ideas that dominated the Democratic Party from Jefferson through Cleveland, and although Woodrow Wilson’s “progressivism” represented a departure, Franklin Delano Roosevelt actually campaigned as a traditional, classically liberal Democrat. Once in office, however, FDR “flip flopped”—and took the term “liberal” with him.

What we now consider “liberalism” in the United States is referred to as “social democracy” throughout the rest of the world, and “social democrats” are often slurred by their opponents as “socialists.” But social democracy differs from socialism in that it leaves at least nominal ownership of industry in private hands, while heavily regulating, subsidizing and managing various sectors of the economy in pursuit of social goals. Key elements of social democracy include government-controlled education and healthcare, a broad economic safety net, environmentalism, protectionism, multiculturalism and a foreign policy that “promotes democracy.”

Dawning of a New Age?

In that same editorial cited earlier, Investor’s Business Daily said Obama “may be guided by principles different from what we’re used to and on which the nation was founded.” Based on his campaign rhetoric, President-Elect Obama certainly sounds like a social democrat, but does he really represent a radical change from our recent history as a nation? After all, George W. Bush signed Sarbanes-Oxley into law, expanded federal funding of education and healthcare and invaded a sovereign nation in order to install a “democracy”—his presidency may not have been textbook social-democratic, but it certainly leaned in that direction.

The truth is that our nation was founded on the classically liberal principles of political decentralism and laissez-faire. Regardless of what right-wing radio says, these founding principles are not at risk of going down the drain under President Obama because they were jettisoned decades ago. So while the Obama administration might represent a modest shift to the “left” (whatever that means), the essential nature of America’s political and economic systems will remain unchanged under his leadership. And that’s unfortunate.