5-27-15 – Bernie Sanders: Apocalypto Economics Part 1

by Chris Campion

Very little should shock or amaze Americans anymore.  As an example, if I suggested that an out-of-work socialist wannabe once found himself the mayor of a small town in Vermont, by a scant few dozen votes, and would later on parlay that dubious achievement by becoming a US Representative, then a US Senator, then a presidential candidate, well, people would have laughed.

Instead, though, we’re left with the reality of a Bernie Sanders (famous non-worker), who seems to have all the ideas about how to fix the

country by shoveling all of the responsibility – meaning dollars – for applying Bernie’s “fixes” onto the backs of the people who work for a living.  All of it.  Every single dime of idiotic spending, which, as history has shown, has not solved the problems of poverty, will come out of the pockets of the people groaning to themselves on their daily drives to jobs they don’t necessarily love, but work hard at anyway, because that’s what workers do.

Workers work, they don’t preach.  Workers don’t have Socialist manifestos un-cleverly disguised as political agendas loaded daily onto a Senate website.  Recently, because Bernie’s taxpayer-supported website does not provide enough bandwidth for his breathless exhalations, Bernie posted a manifesto of sorts, for a political revolution, on HuffPo.  It’s really more of a factually dishonest rambling, but hey, he’s running for President, so he’s just following Hillary’s lead here.

So let’s begin exploring Bernie Sanders’ Economic Apocalypto:

The good news is that the economy today is much better than it was six years ago when George W. Bush left office. The bad news is that, despite these improvements, the 40-year decline of the American middle class continues. Real unemployment is much too high, 35 million Americans continue to have no health insurance and more of our friends and neighbors are living in poverty than at almost any time in the modern history of our country.

The bad news for Bernie is that he’s economically illiterate, but he’s just scoring points here off Bush.  The economy is not “much better” than it was six years ago.  In fact, the GDP growth rate, despite massive increases of government spending (one of the 3 components of GDP), is right about where it was 6 years ago.  Unemployment has gone down, but that rate reduction is largely due to tens of millions of people leaving the workforce, and an increase in the rolls of food stamp and disability programs.

And unemployment is still higher than when the recession started.  6 years into our "fundamental transformation"

 

 

And now, the obvious economic rigging argument:

This is what a rigged economic system looks like. At a time when millions of American workers have seen declines in their incomes and are working longer hours for lower wages, the wealth of the billionaire class is soaring in a way that few can imagine. If you can believe it, between 2013 and 2015, the 14 wealthiest individuals in the country saw their net worth increase by over $157 billion. Children go hungry, veterans sleep out on the streets, senior citizens cannot afford their prescription drugs — and 14 individuals saw a $157-billion increase in their wealth over a two-year period.

Incomes are declining for a host of reasons, one of which is that when people are unemployed and they can stay on unemployment for 99 weeks now – up from 52 weeks just a few years ago – there’s less incentive to take jobs at lower rates of pay, regardless of prior income levels earned.  As Bernie himself argues:

Unemployment benefits pump money into the overall economy because most recipients quickly spend all of the money they receive.

Even if this were true, and desirable (I guess Bernie’s not a fan of savings accounts), where does unemployment money come from?  Taxes.  So those dollars would have been spent already in the economy had they not been taxed, then doled out through state agencies in the form of unemployment.

There’s no “pump”.  All that’s been done is to shift consumption (spending) from one time period (when the person is employed) to another (when the person is unemployed), while filtering those tax dollars through state agencies, which means that a percentage of those dollars are taken out to pay for state employees to administer the program, etc.  By extending unemployment benefits, you actually increase the unemployment cost of the employer, which makes it more expensive to operate their business, hire a new employee, etc – so, ironically, increasing unemployment benefits decreases the likelihood that an employer will hire more people.

Well done, Bernie.  Good thing you skipped “Econ 101″ for “Understanding Engels 101“.

As for the rich getting richer, the richest people do not hold the majority of their money in the form of cash, it’s invested – so if the stock market goes up, so does their net worth, even if it’s on paper.  And since Bernie has argued to increase the tax on capital gains, he’s incentivizing the rich to keep their money in stocks and not spend it (to avoid the higher tax) – which is what he argues “pumps” money into the economy.  Whether he understands this or not, he’s actually arguing for the rich to get richer and not spend their money.

Oh, and as for veterans sleeping out on the streets, Bernie sits on the committee (and used to chair it) that’s supposed to spend billions to make sure that doesn’t happen – and he can’t even do that?  He was chair when veterans were dying in Arizona VA hospitals, but it’s somehow income inequality that made that happen?  If veterans are out on the streets, at least they’re not dying in a hospital that Bernie has the responsibility to oversee.  It’s like blaming the fire department after you set your own house on fire.

The grotesque level of income and wealth inequality we are experiencing is not just a moral and economic issue; it is a political issue as well. As a result of the disastrous Citizens United Supreme Court decision, billionaires are now able to spend unlimited sums of money to buy the candidates they want. The Koch brothers, an extreme right-wing family, recently announced that they were prepared to spend some $900 million in the next election cycle. This is likely more money than either the Democratic or Republican parties will spend. If you think that it is an accident that the Republican Party has become a far-right party, think again. The Koch brothers’ agenda — ending Social Security, Medicare, Medicaid, the U.S. Postal Service, the Environmental Protection Agency and all campaign finance limitations — has become the agenda of the Republican candidates they fund.

Citizens United is only disastrous in that if it’s speech Bernie disagrees with.  If it’s Soros-funded criticism, though, that must be OK.  Note that Bernie complains about $900 million in Koch money, but Soros money dwarfs that amount (including what he’s not paying in taxes, damn those rich hedge-fund managers, Bernie! – and Hillary has stated she’ll spend $2.5 billion on her presidential campaign).  Where will Hillary’s $2.5 billion come from?  Politically neutral donors?

So, just to clarify – it’s OK if liberals or progressive spends billions, it’s not OK if conservatives spend hundreds of millions.  Inequality in a progressive nutshell.

And now, for his next trick, Bernie will tell us how to fix unemployment.  By creating jobs!  Why didn’t I think of that?

How does Bernie plan on creating those jobs, you might ask?  How can Magical Jobs Wizard Boy do what no one else has thought to do before?  Well, here’s how:  A Federal Jobs Program!  Yay!  Why has no one ever thought of this before?

If we are truly serious about reversing the decline of the middle class and putting millions of people back to work, we need a major federal jobs program. There are a number of approaches that can be taken, but the fastest way to create jobs is to rebuild our crumbling infrastructure — roads, bridges, dams, levees, airports, rail, water systems and wastewater plants.

Why, oh why, isn’t Bernie president right now?  Let’s just call him President Genius and get it over with!  The sheer audacity of hope encapsulated in a jobs program!  Hey, didn’t we try that in 2009?  How did that work out?  We tripled annual deficits and economists agreed that paying a million dollars for a job – through the transfer of taxes taken from the productive sector to the public sector – was a fantastic idea?

Um, no.  In case Bernie needs some help here, and it seems obvious that he does, taking dollars from an employer in the form of taxes, and then transferring that money to someone enrolled in a federal jobs program does not gain you one single economic benefit.  In fact, it’s a net negative to the economy, since a) it costs money to administer these programs at the federal and state level, so you’re already shaving off some percentage off each dollar spent, b) those dollars taxed away for this program are not spent in investment or salaries in the private sector, where actual economic growth occurs, so this program will retard that growth – during a recession, no less, and c) stimulus spending is rife with political cronyism.  What we call in the private sector “felonies”.

Oh, and if federal spending and deficits at unprecedented levels are good for the economy, why does this chart look like this?

 

Federal spending goes up, economic activity goes down, and salaries are flat.  More cowbell, please!

 

Oh, wait, don’t worry – Bernie’s got a plan to fix wages, too!  How can he perform this magical feat when trillions in federal spending can’t seem to accomplish anything at all?  Answer:  Just raisewages!

Today, millions of Americans are working for starvation wages. The current federal minimum wage of $7.25 an hour is totally inadequate. In fact, the real value of today’s minimum wage has declined by one third since 1968. By raising the minimum wage to a living wage, we can provide an increase in income for those people who need it the most. Our goal must be that no full-time worker in this country lives in poverty.

Funny, American levels of obesity are at all-time highs, yet Bernie argues that millions are working for starvation wages.  How can you be poor, starving, and obese at the same time?

Hmmm.  Those starvation wages sure are filling.

Wages are a cost, Bernie.  No more, no less.  If you raise the cost of a component of a good, its price goes up – so less of that product is consumed.  That means there will be less demand for the labor to produce that good.

Get it now?  Just raising wages increases unemployment.

Let’s not fret, though, because Bernie has found more things to fix.  He trots out the now-massively-dubunked-and-hilariously-overplayed trope about income inequality between men and women:

We must also bring about pay equity. There is no rational reason that women should be earning 78 cents on the dollar compared with men who perform the same work.

Actually, there’s a perfectly rational reason for it, Bernie:  Choices.  As has been widely noted, if you take time off from work for child-rearing, or take jobs at lower rates of pay in order to facilitate child-rearing, then your income (gasp!) goes down.  Men choose more dangerous jobs (on average) than women, which inevitably pay more.  These and a host of other choices men and women make impact their incomes.  Which, once those choices are accounted for in the data, means that the difference between men and women in pay is 1-2%, not 22%.  It’s the same.  There is no wage gap.

End Part 1.  In Part 2, we try to address Bernie’s core economic fallacies, and discuss his hair.

{ 3 comments… read them below or add one }

Jim Bulmer May 29, 2015 at 9:37 pm

Only in America. All one has to do is look at the Whitehouse. Will we ever learn from our mistakes??

Reply

Larry May 31, 2015 at 4:52 am

Burlington is a ‘small town in VT’? Your post is full of bogus biases.
Reset the top tax rate to 90% and our society will benefit.

Reply

Fry Arbeiter June 1, 2015 at 1:52 am

Larry, you are being much too generous to the wealthy. Why not set the top rate to 100%? BTW, have you ever been to Burlington? You are right about the post being full of bogus biases, but not because Burlington is a small town. This is because the dominant part of the city’s population are ignorant about economics and are “moochers” (leaches). Want to join me at the heroin needle clinic for a good look at a cross section? A view of that may jolt you into the reality of Vermont. It is a state with a disproportionate number of freeloaders and addicts, leaving the hard working taxpayer (like me) to foot the bill. What is your tax rate, Larry? Or are you a moocher too?

Reply

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