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ToxicJosh said:
Honestly, I don't think many Americans actually understand what Socialism is.

Actually, like with any concept, things change. At one point socialism and socialists had a principled, structured system that demanded the common ownership of the means of production in order to reach the goal of their concept of social justice; however, with the flaws in their system revealed they turned to other means to reach this same concept of social justice, the more unstructured concept of the welfare state. In that way, yes the welfare state is socialist, because it demands that society's economic production must be manipulated through the political process so that egalitarian results (the socialist concept of social justice) arise. It might not be the old system, but the goals remain the same whereas the means are different. 

http://lamar.colostate.edu/~grjan/hayekwelfarestate.html

During this period socialism had a fairly precise meaning and a definite program.  The common aim of all socialist movements was the nationalization of the "means of production, distribution, and exchange," so that all economic activity might be directed according to a comprehensive plan toward some ideal of social justice.  The various socialist schools differed mainly in the political methods by which they intended to bring about the reorganization of society.  Marxism and Fabianism differed in that the former was revolutionary and the latter gradualist; but their conceptions of the new society they hoped to create were basically the same. Socialism meant the common ownership of the means of production and their "employment for use, not for profit."

The great change that has occurred during the last decade is that socialism in this strict sense of a particular method of achieving social justice has collapsed.  It his not merely lost its intellectual appeal; it has also been abandoned by the masses so unmistakably that socialist parties everywhere arc searching for a  new program that will insure the active support of their followers. They have not abandoned their ultimate aim, their ideal of social justice.  But the methods by which they had hoped to achieve  this and for which the name "socialism" had been coined have been discredited.  No doubt the name will be transferred to whatever new program the existing socialist parties will adopt.  But socialism in the old definite sense is now dead in the Western world.

The  reasons for this change are manifold. So far as the socialist school which at one time was most influential is concerned, the example of the "greatest social experiment" of our time was decisive: Marxism was killed in the Western world by the example of Russia.  But for a long time comparatively few intellectuals comprehended that what had happened in Russia was the necessary outcome of the systematic application of the traditional socialist program.  Today, however, it is an effective argument, even within socialist circles, to ask: "If you want one hundred per cent socialism, what's wrong with the Soviet Union?"' But the experience of that country has in general discredited only the Marxist brand of socialism.  The widespread disillusionment with the basic methods of socialism is due to more direct experiences.

But, though the characteristic methods of collectivist socialism have few defenders left in the West  its ultimate aims have lost little of their attraction.  While the socialists no longer have a clear-cut plan as to how their goals are to be achieved, they still wish to manipulate the economy so that the distribution of incomes will be made to conform to their conception of social justice.  The most important outcome of the socialist epoch, however, has been the destruction of the traditional limitations upon the powers of the state.  So long as socialism aimed at a complete reorganization of society on new principles, it treated the principles of the existing system as mere encumbrances to be swept away.  But now that it no longer has any distinctive principles of its own, it can only present its new ambitions without any clear picture of the means.  As a result, we approach the new tasks set by the ambition of modern man as unprincipled, in the original meaning of this word, as never before.

Unlike socialism, the conception of the welfare state  has no precise meaning.  The phrase is sometimes used to describe any state that "concerns" itself in any manner with problems other than those of the maintenance of law and order.  But, though a few theorists have demanded that the activities of government should be limited to the maintenance of law and order, such a stand cannot be justified by the principle of liberty.  Only the coercive measures of government need be strictly limited.  We have already seen (in chap. xv) that there is undeniably a wide field for non-coercive activities of government and that there is a clear need for financing them by taxation.