Anyone in earshot of a television set, or a smart phone, is undoubtedly aware that the undisputed front-runner in the Democratic Primary wants to spend more money – a lot of it. And, while these policies are economically flawed, Senator Sanders also has a fundamental math problem.
Reviewing his website, there is a long list of new spending promises.
Perhaps his top spending priority is his desire to nationalize health care where patients pay “no premiums, no deductibles, no co-pays”. But, this spending is only the beginning.
He will implement the Green New Deal making “investments in weatherization, public transportation, modern infrastructure and high-speed broadband… providing $200 billion to the Green Climate Fund…[and] invest in conservation”.
With respect to education, Senator Sanders wants to “guarantee tuition and debt-free public colleges” to all, “cancel all student loan debt for the some 45 million Americans who owe about $1.6 trillion and place a cap on student loan interest rates going forward at 1.88 percent.” The Senator also wants to spend “$1.3 billion every year in private, non-profit historically black colleges and universities and minority-serving institutions.”
If these new spending promises were not enough, Senator Sanders will spend “$2.5 trillion to build nearly 10 million permanently affordable housing units” and spend “$70 billion to repair, decarbonize, and build new public housing”.
Then there is the expansion of Social Security benefits, the elimination of the “$81 billion in past-due medical debt”, the guaranteed minimum wage for teachers of $60,000 a year, and the universal childcare proposals. Of course, these new spending promises are on top of the $4.6 trillion the federal government is already spending.
How Senator Sanders plans on paying for all of this new spending is also well known – he will ensure that the “billionaires pay their fair share of taxes”. For example, he has proposed a wealth tax on the super-rich that begins with a 1% tax on wealth above $32 million. The tax would progressively increase capping out at an 8% tax on wealth over $10 billion.
Even though these taxes are unprecedented and economically destructive, the amount of money he can raise from his tax plans pale in comparison to the Senator’s spending needs. To see why, imagine the following argumentum ad absurdum. Instead of only taxing a portion of the rich’s wealth, imagine that Senator Sanders simply expropriated all of it.
It is, of course, impossible to instantaneously liquidate the assets of all of the billionaires living in the U.S., but if we could liquidate their entire holdings without reducing the value, then, based on the net worth data maintained by Forbes.com, this government taking would raise a combined $3.1 trillion in revenue for the federal government as of 2019.
While $3.1 trillion is a tremendous sum, it is mere spare change in comparison to Senator Sanders’ spending needs. Take just one of his spending programs – Medicare for All. According to the Mercatus Center at George Mason University, Medicare for All would increase federal spending by $32 trillion over 10-years. Adjusting its assumptions to be consistent with the Mercatus Center’s analysis, and the Urban Institute found that the 10-year cost of Medicare for All was $36 trillion.
While the annual cost is not precisely one-tenth of the ten-year total, as a back-of-the-envelope calculation, these studies imply that Senator Sanders’ plan to nationalize health care would cost between $3.2 trillion and $3.6 trillion a year.
Therefore, even if it were possible to expropriate the entire net worth of all of the country’s billionaires, their wealth could scarcely fund Medicare for All for one year. Beginning in the second year of the program, unless other broad-based taxes were imposed on everyone else, Medicare for All would be bankrupt.
Of course, our absurd wealth appropriation tax has not funded the Senator’s spending plans for the Green New Deal. Nor has he funded his education spending plans, expanded Social Security benefits, free college tuition, and the scores of other new government programs the Senator promises to voters every day on the campaign trail. Clearly, Senator Sanders’ math does not add up.
The damage created by Senator Sanders ideas are also easy to see under this ridiculous policy scenario. The fortunes that Senator Sanders is attempting to expropriate exist because entrepreneurs fundamentally improved the way we live and work — think Steve Jobs revolutionizing the technology sector.
Expropriating wealth creates economic obstacles that will prevent the next generation of entrepreneurs from improving our lives. Perhaps the lost investment will deny us the next clean-energy technology, or the next life-saving medicine. Perhaps it will be a better smart phone. While these lost opportunities are, by definition, unknown they are no less real.
These lost opportunities are the real costs of the Senator’s policies. While Senator Sanders likes to say, “he wrote the damn bill”, and that may be true, he clearly has not done the math.