I explain that isn’t really what socialism is about and actually engage. Most people don’t actually know what socialism is in practice and especially in the US their ideas are from actual propaganda they had in schools. Even self described socialists in the US often fall into the “socialism is when the government does things” trap and most people believe the lie they were told in school that socialism is necessarily the complete abolition of private property and money without questioning how that would even work in practice. I would say fewer than 10-20% of the US population even has a functional knowledge of what socialism even is in practice despite having extremely strong opinions about it.

Things like the quote in the OP are “thought terminating cliches” that serve to stop thought and dialogue before alternate ideas actually get discussed rather then form the basis of actual ideas themselves. For this one in particular I ask if they have ever actually read what Karl Marx believed and if they know that even Marx agreed with the premise that capitalism breeds innovation and economic growth, at least at the start. That this is true is not a problem for socialism intrinsically. You’re never going to change someone’s worldview or undo a lifetime of propaganda in one conversation, but you can crack the door a little and maybe spark some doubt or get someone curious enough to read on their own.