Tuesday, February 23, 2016

Bernie Sander's Economic Plan - The Good and the Bad

There is no doubt that Democratic presidential candidate Bernie Sanders has some economic proposals that are creating waves in the United States including his support for programs that will reduce income inequality and misdeeds by Wall Street.  

Let's start at the beginning.  Here are the highlights of an analysis of Sander's economic programs by University of Massachusetts at Amherst Professor of Economics, Gerald Friedman:

1.) The growth rate of the real gross domestic product will rise from 2.1% per annum to 5.3% so that real GDP per capita will be over $20,000 higher in 2026 than is projected under the current policy.

2.) Faster economic growth and redistributive taxation will raise the growth rate of median income from 0.8% per annum to 3.5%, adding nearly $22,000 to median household income in 2026.

3.) Higher GDP comes with increased employment, specifically nearly 26 million additional jobs in 2026.

4.) The unemployment rate will fall to 3.8% by the end of the first Sanders term in 2021, and remain at that full employment level through the end of his second term in 2025.

5.) Medicare-for-all will lower the cost of health care and contain health care inflation even while saving thousands of lives by extending insurance coverage and access to health care to all Americans.

6.) Rising employment, increases in the minimum wage, and enhancements to social security will lower the poverty rate to 6%, the lowest recorded rate, and the poverty rate for children will fall by nearly half, to below 11%.

7.) The gap between rich and poor will narrow dramatically, with the ratio of the average income of the top 5% to that of the bottom 20% falling from 27.5 to 10.1.

8.) After increasing in the first years of the Sanders Administration, the Federal budget’s cash deficit will drop sharply and there will be a significant and growing surplus in a Sanders second term. Instead of a deficit of $1.3 trillion in 2026, there will be a large budget surplus.

Here is a look at the extra federal spending that will be required over the ten year period:

Dr. Friedman notes that the extra spending required will be more than funded through changes in the tax code as shown here:

In response, here is an open letter from four economists who take aim at Dr. Friedman's analysis:

Just in case you wondered if there was any sort of political motivation to this criticism, Alan Krueger served as Chairman of the Council of Economic Advisors in the Obama Administration for nearly two years and as Assistant Secretary of the Treasury for Economic Policy, again, in the Obama Administration.  Austan Goolsbee also served as Chairman of the Council of Economic Advisors in the Obama Administration for nearly a year, serving in that position before Alan Krueger took his place.  Christina Romer was also Chairperson of the Council of Economic Advisors in the Obama Administration for 20 months, serving in that position before Austan Goolsbee took her place.  Most interestingly, Laura Tyson served as Director of the National Economic Council during the Bill Clinton Administration and was also Chairperson of the Council of Economic Advisors between February 1993 and February 1995, once again, in the Clinton Administration.  Given her ties to the Clinton Administration, we have to wonder what her motivation for criticizing Hillary Clinton's opponent would be, wouldn't we?  For those of you that are not aware, the Council of Economic Advisors is an agency within the Executive Office of the President of the United States that advises the President on both domestic and international economic issues.  It is currently composed of a Chairperson and two additional members as well as a staff of senior economists, staff economists and research assistants. 

In case you didn't think that this was enough coverage of Bernie Sander's economic platform, here is an open letter from 170 economists who have endorsed Bernie Sander's platform regarding Wall Street in the implement of a newly minted Glass-Steagal Act:

Interestingly, Robert Reich served as Secretary of Labor in the Clinton Administration.  Dean Banker foresaw the collapse of the American housing bubble and opposed the federal government bailout of the Wall Street banking system.

As we can see, economists have a great deal of difficulty assessing the true impact of Bernie Sander's economic platform and some of his critics have a close connection to either the Clinton Administration or the Obama Administration of which Hillary Clinton was an insider.  Either way, one has a great deal of difficulty arguing that the current state of the economy in the United States has favoured the wealthy over the 99 percent of Main Street Americans, the Bill and Hillary Clinton included.

1 comment:

  1. Aside from the fact the authors of the "letter to sanders" represent a particular background, it is worth noting that the letter itself is filled with logical errors and offers no substantive critique of the Friedman analysis. It is merely a slap from some self appointed authorities appealing to their own sense of their importance.

    A high schooler submitting such shoddy work would receive at best a D- (but only for the fact the grammar is more or less correct). But I guess the fact they even bothered indicates how scared they are of the truth.

    I began annotating it here, but a full take down would require more effort than the letter is worth: