Some say Senator McCarthy prevented the US from falling to communism. The fear of communism caused the American people to have increased awareness and suspicion. It allowed the government to purge communism out of all areas of American life, and one could argue that ultimately, America was saved. While all of this is true, there is debate over whether McCarthy truly did a good deed for American society - it is enormously difficult to ignore the negative externalities of the anti-communism wave he started.
The most obvious effect of McCarthyism was the effect on society. McCarthy, by declaring that he had a list of names of US government spies, created mass paranoia among the American people. In reality, the Communist Party in the US was not very powerful - it did not have a significant amount of active members. In reality, the US itself was not at any real threat from communist takeover.
Yet this Red Scare caused people to become unnecessarily mistrustful and fearful. Anyone suspected of being a spy was dismissed from his occupation and blacklisted. He could never work again. McCarthy later reduced the list of 205 to around 60, and even then all of the accusations turned out to be false. Perhaps the most noteworthy example of this irrational fear was the trial of the Rosenbergs in 1953, though minor spies, but nonetheless were executed upon scanty evidence.
In addition, McCarthyism directly threatened the very freedoms that capitalism represented. Communism was seen as a danger to capitalist sovereignty, but during this period of "fighting communism"; America was in fact closer than ever to the USSR's Stalinist command. People could not believe what they chose to. Government intervention was at a high; people were fired or sentenced only because they were suspected communist collaborators. And communism...