The verdict is in. Bernie Sanders is riding to the White House atop a wave of economic illiterates. A recent claim – praised by CNN – that Bernienomics would produce “soaring” wealth and job numbers is proof.
Gerald Friedman, an economics professor at University of Massachusetts Amherst, is the source of this claim.
Friedman is typical of far-left faculty types. According to his Amherst faculty webpage, Friedman’s:
– Never held a job outside academia.
– Never had to meet a payroll.
– Limited his field of study to that narrow segment of economics bounded by labor unions, socialism, class envy, and social justice.
– Spent his free time writing “single payer” health care models for various states.
– A New Deal worshipper.
With that background, no wonder Friedman forecasts that under Bernie, Americans would see:
– A middle-class income increase of more than $22,000 per year.
– Nearly 26 million new jobs.
– A 3.8% unemployment rate.
– A 5.3% economic growth rate.
– Eventual payoff of the budget deficit resulting in a surplus.
How so? Free stuff of course. Somehow all those Bernie Sanders freebies would translate into an economic boon bigger than anything the modern era has witnessed. CNN of course is all in. They explained:
“The thinking goes: This enhanced government spending would increase demand on businesses who would then hire more workers to meet their needs. The increase in employment will prompt people to buy more, leading other businesses to hire”.
And, “Friedman however argues that Sanders’ plan would be more stimulative (than the New Deal) because it is pouring money into the economy as opposed to cutting taxes”.
Except the New Deal didn’t cut taxes. The New Deal poured massive amounts of money into the economy. It was Keynesian economics on overload. During the New Deal, a 94% tax rate was levied on those earning more than $200,000 per year. For all the money poured into the economy, the New Deal was ineffective in stimulating the American economy. Things didn’t begin to turn around until the United States entered WWII which required a massive industrial surge to meet the war’s demand.
Nor has any other similar economic scheme resulted in anything approaching Friedman’s expectation for Bernienomics. There are simply no examples of massive Keynesian systems being imposed that have made everyone rich and employed:
– The example of Scandinavia is misleading. Those economies are dependent upon comparatively small populations and specific sectors such oil and gas, commercial fishing, and forestry. Recognizing the shortfalls of their systems, Scandinavian countries are transitioning away from Socialist models and towards ones more Capitalist in nature.
– Free education isn’t the economic engine liberals think it is. Uruguay has free college education. Uruguay rates around 57th of world economies.
– During Obama’s first term a $767 billion “stimulus” package failed to have any appreciable effect on the American economy.
– Southeast Asia, in particular places like Hong Kong and Singapore, are economic powerhouses. They are because they boast some of the lowest tax rates and least intrusive regulatory regimes among modern world economies.
Facts like these don’t register in the Bernie supporter’s mind though. This is because in their thinking, they are working from a very different starting point than most Americans. An example of this is found in a September 16, 2015 piece Gerald Friedman wrote as a rebuttal to a Wall Street Journal article that questioned the Sanders plan. In “An Open Letter To The Wall Street Journal On Its Bernie Sanders Hit Piece” which ran on the Huffington Post website, Friedman calculates deficit reduction under Sanders. He includes “Reduced Private Spending” in the amount of $19.7 trillion over ten years. “Reduced Private Spending” represents “…the 10 year savings on private health insurance premiums, reduced out of pocket spending, and other private health spending”.
How does private spending by a private individual reduce the government debt? Friedman’s assertion is no different than suggesting that the federal deficit could be reduced if every American voluntarily bought a cheaper, used model when purchasing a car. Or that the deficit could be lessened if Americans didn’t spend money on vacations, top of the line electronic gadgets, or name-brand spaghetti sauce.
The only way Friedman’s correlation of an individual’s private spending to federal deficit reduction is if the starting point is that all wealth is owned by government and government allows individuals to have some of it for private use. Looking at things this way helps explain how Friedman can forecast a national economic windfall under Sanders.
It’s a dangerous fallacy to fall victim to. It’s not just that such systems have failed horribly throughout human experience. The proposition isn’t just that government is the owner and originator of wealth, but that technocrats in the halls of power can act as a vast unseen force in pushing monies this way and that to selectively stimulate the economy. When it’s implemented and it fails to achieve results, the fallacy will be perpetuated by those who ask for just a few more technocrats and more “smart government” to do a little bit more to make things right. There is always more to be done under such regimes.
East of the Iron Curtain they relied on “Five Year Plans” for this. When harvests didn’t meet the needs of the state another Five Year Plan would be waiting right around the corner, written by technocrats to be managed by technocrats and to ultimately do more harm than good.
Under a truly capitalist system – not the current crony-infused version – the unseen economic force is the marketplace. And it works:
– Consider the success of Uber for both drivers and passengers. (Yes, crimes are sometimes committed against Uber drivers; just as they are committed against traditional taxi cab drivers — this doesn’t mitigate Uber’s success).
– The growth of Amazon’s home delivery service. Does anyone that needs a loaf of bread rely on the Postal Service to have it delivered, or do they choose Amazon?
– Social media. Contrast any aspect of social media with PBS or NPR.
– Crowdfunding. New ideas are coming to life without the hurdles traditional business financing requires.
These are but four of many examples that invalidate the Sanders plan and Friedman’s assessment of the plan. Things like Uber are successful because inherently, they recognize that wealth belongs to individuals free to use it as they wish. Never in all of human history has a government system created something like Uber, and successfully operated it In the service of the people. Despite this, in 2016 the Sanders machine is guiding it’s herd towards an economic model nearly a century old and without a single example of success to point to.