What is Socialism? For the purposes of this entry, Socialism is the idea that government owns everything. Without any limits, government decides what you do, how you do it, and when you do it. Everyone will "win" just as much as everyone else. Everyone spends 8 hours sleeping, 8 hours working, and 8 hours studying/having fun. It is the epitome of government regulation; it is the epitome of fairness.
What is the status quo? The status quo is a mixture of the two. We obviously live in a capitalist society. However, take a look around you: the police, the income tax, and market regulations are not very capitalist. We would like to believe it is pure capitalism, but it is not. It is capitalism sustained by socialism.
Suppose, for a moment, that the United States took a radical step away from Socialism. This would present some obvious problems. If someone robs your house, you have no one to go to. If you get lied to by an insurance agent, you have very few resources to utilize to hold him to it. If you apply for a job, you can't ensure you will get a fair wage. This is why the government is crucial to sustaining any capitalist society. A truly capitalist society can not sustain itself because of its very nature. A business tries to maximize it's profits by lowering wages. But the price of its product remains the same. Which means people have less money to pay for the same amount of goods, which is inherently unsustainable. This is empirically proven with healthcare: the price of insurance increases, while wages stay the same, and we have a crisis.
This would also present some advantages. A truly capitalist society would allow everyone to have a chance to make it big. It would allow the maximizing of profits. It is also good for peace because countries that give everyone their own shot tend not to go to war with one another. They tend to govern themselves in a more peaceful manner because there is a higher standard of accountability.
Suppose, now, that the United States took a radical step towards Socialism. This too presents some problems. How do we employ people? Who determines how much everyone gets paid? Who determines who does what? In a socialist society, people have no choice. It may be more fair, but any value to life that is created in a socialist society is taken away by the fact that they are stuck without a chance to make it big. They are frozen with nowhere to go. They can't succeed because that would be a break in the system. Plus, there can not be an economy, by definition, because it would be entirely regulated and invented by the government, which would be detrimental to the United States' hegemony.
This too has some advantages. It allows for greater value to life among the poor. Those who lose in the capitalist system are allowed to succeed in a world of socialism. They have a home, a life, a job. They may not have a chance to succeed, but at least they have something to come home to. They are not cast out of society as failures, they become productive members of society.
However, it appears that capitalism is inevitable. If you go to the poorest areas of our society, the people there are not looking to overthrow the government. They are looking to succeed within the system. They want jobs, to start businesses, to buy a home. They will not spew speeches about the horrors of capitalism, instead success within the system is favored.
I would agree with you that the U.S. (and most of the world) rests somewhere between capitalism and socialism. However, I think the "capitalism" you describe is closer to anarchy. In my understanding, capitalism recognizes a place for government--it enforces contracts between people and businesses, upholds rights, etc. What isn't capitalist is when governments start doing the job of businesses--providing goods and services such as health care. You could argue that pure capitalism is not realistic or desirable, but it is a little less extreme and more viable than the anarchy you described.
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