I’m a little disappointed that Bernie Sanders hasn’t taken my suggestion to change names to “Bernice Sanders,” identify as a woman, and capture votes from those Americans who wish to see a female president. Despite this, it is time for me to declare my (lukewarm) love for Bernie Sanders for President.
Personally I would prefer for the U.S. to have a market economy along the lines of a Singapore or Hong Kong. Government would consume less than 20 percent of GDP and provide high-quality basic services. This, however, is not what a majority of Americans want. Nor is it what Republicans are actually promising (and in any case, I don’t think that Republicans have any chance to win a national election). Thus I have not educated myself regarding the Republican candidates and don’t have an informed opinion regarding which of them, if any, might make a good President. [The popularity of Donald Trump does not signify the popularity of “Republicans”; Trump was a registered Democrat until recently and many of the ideas that he espouses, e.g., restrictions on trade to increase revenues for domestic companies and increase salaries for domestic workers, are not policies that are typically considered “Republican.” If anything, the popularity of a protectionist Democrat running as a “Republican” shows that support for a market economy is shrinking even among nominally Republican voters.]
If the U.S. cannot have a market economy, what choices do we have? Broadly I think the remaining options are Socialism and Crony Capitalism.
Americans with jobs have a visceral reaction against Socialism because they associate it with other Americans kicking back and living off their labor. Maybe it is a welfare family playing Xbox with friends in a government-provided house while serving chips purchased with food stamps. Maybe it is someone who once had sex with a working American and is now living off child support and/or alimony. These, however, are not essential elements of Socialism. In the former Soviet Union, for example, able-bodied citizens had to work. You couldn’t get paid by the government and/or a court-ordered fellow citizen for having sex, having children, or having been briefly married. You couldn’t be a stay-at-home parent. You couldn’t sit at home collecting Welfare because your skills failed to command a government-set minimum wage. In a Socialist U.S. there could well be a dramatic reduction in the share of GDP allocated to the non-working.
[Example of a conversation that wouldn’t have happened under Socialism: “My sister is thinking about becoming a midwife, but she doesn’t want to study science.”; “We could show her how to make a lot more money [under Massachusetts family law] delivering her own baby.”]
Government bureaucrats allocating resources in a Socialist economy are at least explicitly tasked with doing whatever is in the best interest of a society in the long run. This is distinct from picking winners/cronies in a Crony Capitalist economy where a company might be favored with taxpayer funds because of its connections to a politician.
Let’s consider health care. If we could cut spending on health care from 17.5 percent of the GDP down to a more typical developed country level of 10 percent (or we could dream of cutting down to a smart/rich country’s level of 4.5 percent! (see Singapore in this table)), that would enable us to increase private domestic investment by at least 50 percent (current level is 16.7 percent of GDP). This would provide a bigger boost to GDP growth than almost anything else other than perhaps providing young people with a world class education (see Smartest Kids in the World for why that probably won’t ever happen in the U.S.).
Obamacare, which Hillary Clinton supports, is classic crony capitalism. It costs a fortune. The benefits flow primarily to the health care industry. Nobody cares about the 33 million Americans who end up without insurance. If the goal is to provide health care to residents of the U.S., this is perhaps the least effective and most expensive system that one could possibly design. If you add in the costs of Americans spending time figuring out which policy to buy, figuring out why a claim wasn’t paid, talking to insurers, etc. and the medical billing sub-industry’s costs, it becomes an even more ludicrous self-inflicted wound to our economy.
Bernie, on the other hand, presents the only credible alternative to the crony capitalist world of Obamacare, Medicare, Medicaid, etc.: socialized medicine to at least a basic standard. (I proposed a slight twist on this in 2009.) At Beaver Creek about half the adults with enough money, leisure time, and vitality to spend a week skiing were in the health care industry, e.g., as doctors, nurses, technicians, or somewhere in admin/ownership/investment (I didn’t meet anyone from a health insurer, though! If they are getting crazy rich from the mountains of paperwork they aren’t spending their dough at Beaver Creek). They all spoke out against Bernie, fearing a dramatic reduction in their incomes should his single-payer system be enacted by Congress.
This alone is, to my mind, sufficient reason to vote for Bernie. Health care is the biggest problem with the U.S. economy and Bernie is the only one who is willing to stand up and say “Stop the madness.”
What about Bernie’s plan for higher tax rates? We’re voting for a president, not a dictator. He would have to make his case for European-circa-1970s tax rates to Congress and they could decide whether to attempt to muddle through with the current system or jump on the “full Socialism” wagon.
Note that I don’t think Bernie’s higher tax rates would product higher tax revenue. My theory is that the combination of local, state, and federal governments is already squeezing as much juice out of the U.S. economy as can be squeezed. Bernie assumes that people won’t respond to economic incentives by changing their behavior. Virtually every paper at the 2015 American Economic Association meeting found the opposite, as did the research cited in The Redistribution Recession. As in the old days of high nominal tax rates, sometimes the behavior change is an elaborate tax shelter (it will be turbocharged in our era due to globalization). Most Americans will respond by working less, though, just as Europeans did in response to their higher tax rates.
What if America became a society like 1970s Sweden or England where it didn’t make sense to work especially hard? That would be a materially poorer society than what we’d have given a market economy, but we’ve already chosen to cut GDP growth in favor of more bureaucracy, regulation, and government (see this CIA list of countries ranked by GDP per capita). But money isn’t everything. If you go to the Vail Valley, of which Beaver Creek is part, you’ll find a large number of Americans who are healthy enough to work, and often highly skilled, but who choose not to work. Some of them saved enough during their working years to have a fancy house but most live in modest two-bedroom condos. All of them enjoy the outdoors, spending time with friends and family, etc. It is a lot easier to build and maintain friendships there than in a place where people work hard. Good luck asking someone in downtown Boston or New York to take the day off to go hiking or skiing! If Bernie’s proposed tax rates get approved then the U.S. as a whole becomes more like the Vail Valley. People will earn enough to get by and spend the rest of their time on activities that research shows are better contributors to happiness than additional income. (Citizens of the Former Soviety Union spent a lot of time with friends, family, literature, etc., since it wasn’t practical to get ahead by working 60-hour weeks.)
Bernie as President means an open debate about what kind of economy and society we want. Hillary as President means back-room deals that quietly siphon off more of America’s GDP into the pockets of cronies.
What if Bernie + Congress = deadlock? That would mean we’d be living under more or less the same federal laws and regulations that we have now. Deadlock means millions of government workers collecting taxes, distributing handouts, and running programs more or less as they have been doing for the past few decades. Is that an emergency? Only for people who don’t think we have enough churn in laws and regulations! Deadlock might produce extra economic growth because American business owners, for the first time in memory, would have some assurance regarding the future legal and regulatory environment.
In summary, given that Republicans are so far out of step with the American majority that they can’t win a national election, and that the only other Democrat candidate is a torch-bearer for Crony Capitalism, I have concluded that President Sanders is our best realistic hope in November.
[Note that I recognize that the thinking of the American voter is typically 180 degrees opposite to mine. Thus the fact that I would choose Bernie over Hillary is to me a confirmation of my 2015 prediction that Hillary was assured of victory. I have certainly seen this among my liberal Facebook friends. Folks who were two years ago demanding a single-payer health care system and for the U.S. to emulate the highest-tax European welfare states are now saying that single-payer can’t work and that the European welfare states are horrifying examples of slow GDP growth. Everything that Bernie advocates is stuff that they were themselves advocating a couple of years ago, but now they’ve changed their mind and are advocating whatever policies Hillary proposes.]
Related:
- “Charles Koch: This is the one issue where Bernie Sanders is right” (the hated rich bastard says “[Bernie] thinks many corporations seek and benefit from corporate welfare while ordinary citizens are denied opportunities and a level playing field. I agree with him. Democrats and Republicans have too often favored policies and regulations that pick winners and losers. This helps perpetuate a cycle of control, dependency, cronyism and poverty in the United States. … The tax code alone contains $1.5 trillion in exemptions and special-interest carve-outs. Anti-competitive regulations cost businesses an additional $1.9 trillion every year. Perversely, this regulatory burden falls hardest on small companies, innovators and the poor, while benefitting many large companies like ours. This unfairly benefits established firms and penalizes new entrants, contributing to a two-tiered society. … That’s why Koch Industries opposes all forms of corporate welfare — even those that benefit us. (The government’s ethanol mandate is a good example. We oppose that mandate, even though we are the fifth-largest ethanol producer in the United States.)”)
Completely agree. I’ve never contributed to any presidential candidate before, but I think Bernie deserves both my vote and my money. Wrt deadlock, I doubt that Hillary will get anything passed that doesn’t benefit the 0.01%. So if there is any slim chance at some reforms, they are more likely to come from Bernie than Hillary.
A deadlock in Congress would mean, first and foremost, US default on its debt as Republicans would refuse to lift debt ceiling under Bernie. And then people living in two-bedroom condos in Vail Valley would suddenly find out that their savings have evaporated, if they had them invested in bonds (I am assuming here that Treasury would not start printing money to finance the economy, in which case hyperinflation is the only real alternative to default).
sv: So we will all be impoverished if Bernie gets elected? The sky will fall, in other words?
I am wondering why we would assume that Congress is a fixed entity. If Bernie is President and can address American voters directly and regularly, wouldn’t he (or she, if my “Bernice Sanders” proposal is adopted) be able to convince voters to elect different Representatives and Senators? If nothing else, Donald Trump has shown that Republican voters can be appealed to with ideas that are not traditionally “Republican.” Thus it might be the case that even a nominally “Republican” member of Congress would actually agree with Bernie in many areas.
“Wouldn’t [POTUS] be able to convince voters to elect different Representatives and Senators?”
Yeah, that seemed to work pretty well for Obama.
The danger is that we’ll get the worst of both worlds with social expenditures driving a sluicing of funds into crony pockets. (Look how the government runs IT projects or road projects now)
It’s sort of like: every now and then someone says we should scrap the income tax (that is punitive towards labor) and replace it with something more virtuous like a carbon tax or a consumption tax. The argument is that what would really happen is that the income tax would remain in vestigial form and then slowly grow back, and then we’d be stuck with both.
Frank: Well, maybe Obama didn’t have ideas with which voters agreed. Perhaps he was elected for reasons other than his ideas/agenda. Then it would make sense that voters were happy with a figurehead President whom they adored and a Congress that would block that figurehead from doing too much.
Agree w/ superMike; socialism is inherently dangerous and would tend (one imagines) to increase waste+cronyism. Aside from the “let’s squeeze health care profits” (which is trivial, though cruel to people who invested under the old regime, given the political will).
This is devil’s advocacy, but tempting, isn’t it? It helped me entertain the possibility that there are changes in the direction of socialism (which i despise but maybe when robots are unemploying 70% of people instead of 7% i’ll come round) that aren’t worse than the status quo.
> Broadly I think the remaining options are Socialism and Crony Capitalism.
Why not *both*?
superMike, Jonathan, Barak: You guys are depressing me, but you’re probably right. That’s definitely an outcome that I hadn’t considered. We could have Socialism from the President and Crony Capitalism from the Congress. Well, then I am out of ideas for this election!
That’s defeatist. So what’s the solution? Elect an even inferior candidate? Move to the socialist True North? Ya gotta go with the highest probability of some positive change, which at this point is Bernie.
http://m.imgur.com/psUhEiY
Phil, if Bernie (or Bernadette — surely not Bernice) gets elects, that might signal that the next round of elections for the house and senate could be pretty interesting. In other words, it is well possible that Bernie will not end up like a lame duck. In addition, if Bernie gets to give the US a national health service like every other western country has, and thus frees a large amount of money, it is well possible that, even in a crony capitalism situation, everybody will be better off nonetheless.
Basically, the only rational approach is to decide for the candidate whose policies are most likely to improve the current situation, not the candidate whose policies will abolish death and provide a unicorn in every house. Because of social, economical and political inertia, trying to get an large reform is likely to get some reform done than a more modest plan, which is more likely to be modified to ‘business as usual’ — assuming that is the goal.
What makes you think that the economic model of Singapore and Hong Kong would ever work in a much larger country? Both are densely populated city-states with an educated workforce, where the financial services industry has a disproportionate share of the economy (plus some other large advantages such as geographical advantage, shipping hubs, etc.). Hong Kong and Singapore would never be able to stand on their own if large industrialised countries (read China, Indonesia) provided goods and clients for their services.
> I’m a little disappointed that Bernie Sanders hasn’t taken my suggestion to
> … identify as a woman
Come on, you’re being a little picky:
https://www.washingtonpost.com/news/post-politics/wp/2016/02/18/bernie-sanders-declares-he-is-a-strong-feminist-and-honorary-woman/
‘Bernie Sanders declared himself … an “honorary woman”‘
“(The government’s ethanol mandate is a good example. We oppose that mandate, even though we are the fifth-largest ethanol producer in the United States.)”
I wonder if how much of the Koch political spending has focused on overturning the ethanol mandate.
Larry: How much of your time and money do you spend lobbying the government to reduce your own benefits and increase your own taxes?
No one has commented on Obama’s long-term goal of single-payer health-care for the US and how the ACA is meant to force a transition from the private insurance model. He said it would take 10-20 years to transition (his words from 2007).
Bernie’s idea of single-payer is nothing new, and is, in fact a continuation of Obama ‘s plan to use the ACA to break the system enough that a significant number of Americans will not only accept single-payer, they will demand it.
Hillary had the same aspirations in the 90s, but she didn’t recognize the need for a ‘transition’, and overall the public rejected her plan. I’m a little puzzled she hasn’t outright endorsed single-payer yet in this campaign…doesnt want to call ACA failed yet and potentially lose some black votes?
I don’t know why you’re capitulating.
And hoping that governments will find efficiencies is wishful thinking. There’s no competitive pressure to induce it. The reasons foreign governments find efficiencies are accidental. When a government actually tries to become more efficient they end up rationing the thing they control, so you have lower prices and less quantity. Theres only one way you reliably get better quality and lower prices.
Likewise, when governments try to subsidize something, you get price inflation. Look at the inflation charts for healthcare when Medicare was enacted and tuition charts when federally subsidized loans exploded.
B: I’m capitulating because a majority of my fellow citizens don’t share my faith in (or even a desire for) a market economy. They apparently want a substantially planned economy (government-set wages, government-determined allocation of spending (e.g., X% to health insurance), government-determined selection of qualified vendors (e.g., particular companies who can offer health insurance)). The relevant question then becomes whether the planning is done with the welfare of the average citizen in mind or whether the planning is done with the welfare of selected government cronies in mind.
I agree about our fellow citizens. But it instead motivates me to overcome my inhibitions and to think of ways to speak eloquently about the market economy to a wider audience. It feels like we’re a small group, but all activists start with a small group. Their effectiveness is in their persistence.
Not to object to either your conclusion or the position of your tongue relatively to your cheek, but still:
Soviet people were indeed unlikely to work like crazy – unless they were discriminated against by the state, which was the only legal employer; then you had to deliver 10x the average guy’s output to keep the average job, or accept a terrible job, perhaps far away from your family, or go to a labor camp (AFAIK Joseph Brodsky was sent to one, his crime being failing to obtain any sort of a job, which of course resulted from the state’s orders.)
However, some of the time saved by working less was then spent queuing for basic supplies in the company of irate strangers, as well as traveling large distances upon a notification from a friend that something exotic like shoes or underwear, which was rarely to be found in shops, was suddenly available at the given coordinates.
And then some of your time would be spent on doing things like plumbing or making a sweatshirt out of woolen socks (because you did not manage to buy either a sweatshirt or plain woolen threads but you somehow managed to buy woolen socks somewhere) that people accustomed to functioning markets usually outsource to professionals and merchants.
With that in mind, I’m rather sure that anyone capable of having income in the upper 10% in a market economy has vastly more time available to themselves, friends and family than they have in the USSR. I’m not quite sure about the rest, however; perhaps your ex-Soviet acquaintances, of which your writings suggest there are a few, could shed more light on this issue.
Another interesting question is pension obligations. The USSR basically defaulted on its pension obligations, though the Russian Federation pays enough money to pensioners to buy them some peanuts. It remains to be seen if US pensioners will get shafted just as badly or perhaps somewhat less. The latter scenario would point to a huge advantage of crony capitalism over socialism.
B: The U.S. had a market economy roughly 100 years ago. Pretty much every year since 1929, however, we’ve gotten closer to a fully planned economy (to the point where China, a nominally state-directed economy, has a smaller government percentage of GDP (see http://www.heritage.org/index/country/china )). Americans argue about the details of the planning but the percentage of people who argue for a market economy seems to be tiny. How much support did Rand Paul get even among Republicans?
I’m working on a relative basis, and the number of people arguing for a relatively more free market is larger than those arguing that we should go back 100 years all at once. We got to where we are by small steps, and the steps back to a better balance will be small as well.
B: You’ve raised a good point. The biggest open wounds in the U.S. economy right now seem to be (a) health care, and (b) education. Nobody is willing to go to a fully market-based approach to health care so single-payer for the basics might be the only way to have a market economy in more deluxe health care. Similarly, Bernie’s plan to have free higher education at public colleges might be a way to have the government stop fueling inflation in private college tuition.
We have free k-12. Free college would end up being four more years of high school without any better outcomes. You’d also have more demand for college, leading to overcrowding and or wait lists.
We also used to have tax supported community controlled hospitals in the form of municipal, county, and not for profit hospitals. They had over 2/3’s of all the hospital beds in the US. Most closed down with the increased regulations, and other competitive headwinds, that came with medicare
What a depressing thread. And just about everybody is right. I have drifted from “economic Republican/social libertarian” to a state closer to socialist than today-Republican (whatever that is). At age 78, all I can fall back on is “they can’t finish f’ing it up in my lifetime”. Thanks for a great discussion and I’m looking forward to more helicopters/airplanes and less politics.
I’m not surprised your a lite sanders fan. I thought you would be one.
Alternative slogan for Sanders
“Not only Doctors should be able to afford to see the Doctor”
You should change the name of this blog to
Backseat Economist Blogger Fixes The USA.
Needed correction @ Tiago #14
Hong Kong and Singapore would never be able to stand on their own if large industrialised countries (read China, Indonesia) DIDN’T provide goods and clients for their services.
Otherwise, it’s obviously correct that the economy and work ethic traditions of a model corporativist city-state such as Singapore could never scale up to the size of a continent-wide melange of your states. In theory one could probably imagine Manhattan seceding from New York, setting up toll booths on the Brooklyn and other bridges, and trying to parrot Singapore’s example (forget about Hong-Kong here), but do you really think that the resident moguls and powers that be would let that happen?
You complain about planned economy, and long for true market ditto. Perhaps you’ve forgotten that the reason there’s more and more of the first at the expense of the second, is that the uncontrolled market economy of the past, read: obscene enrichment schemes of the crony capitalists, utterly failed to provide welfare for the masses [=the electorate]; and so have given rise to the need for constant governmental oversight and worse. Which the crony schemers (also those among your rich friends and Fuckfacebookfriends) also managed to capture for their benefit.
crony capitalism is a symptom of government interference in the market and not a result of the free (as in free of government intervention) market.
the environment that utterly failed to provide welfare was also the most popular place to immigrate to and work ones way to a better standard of living. ‘it was almost humanitarian in the way it gave hope to a generation of immigrants.
the biggest cost to a welfare state is the opportunity cost. because that cost isn’t easily communicated emotionally, it isn’t accounted for by the electorate, or even educated economists. therefore the economic and political arguments that are easily understood emotionally spread easily.
constant government oversight and welfare state-ism, merely by its expansion, leads to more opportunity for cronyism, not less. it also traditionally leads to an insolvent welfare state and an economic morass.