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Bernie Sanders for President?: Economic Disaster

Every four years, we’re treated to the spectacle of a contest for the presidency of the United States. One of the reasons this year’s experience is so different is the fact that one of the Democratic candidates is a self-styled socialist. This article describes why Bernie Sanders’ economic ideas would spell disaster for the United States in general and Millennials in particular.

Why are Millennials flocking to support a socialist in record numbers? The primary economic reference point of today’s young men and women is the Great Recession of 2008 and 2009. Millennials saw their parents struggle with what looked like the stumbling, if not the outright faceplant, of capitalism. Added to that perception is the dearth of knowledge about the abysmal failure of socialism as an economic system. Former British Prime Minister Margaret Thatcher once described socialism’s primary deficit: “Sooner or later, you run out of other people’s money.” Socialism is the steroidal version of the Robin Hood notion of taking from the rich and giving to the poor. In addition to being a confiscatory farce, it’s economically unsustainable. That’s the reality.  Bernie Sanders propagates the mindless fantasy.

Who couldn’t like “free health care” and “free public college”? If only. The truth is that these commodities are not free. Someone must pay for them. Patients pay for health care directly as fee for service or via medical insurance. Taxpayers fund expenses for public colleges net of tuition and other fees students pay. Sanders’ idea to change the funding mechanism to the federal government merely shifts the financial burden to those saddled with federal income taxes.

To pay for all his schemes, Sanders would have us believe that raising the tax rate to 52 percent on the income of the bedeviled “millionaires and billionaires” will usher into being his idea of economic utopia. It seems to be an effective campaign slogan, especially because it fuels the criminal behavior of inciting class warfare. However, as with most of Sanders’ smoke-and-mirrors economics, the math doesn’t work. The relatively small number of millionaires and billionaires simply don’t have anywhere near enough money to accomplish Sanders’ specious goals.

Another example of pedantic economics is Sanders’ desire to raise the minimum wage to $15 per hour. Sustainable compensation results from market-driven realities of supply and demand for workers’ varied skills. Legislated value is a distortion that yields negative consequences. Chief among those unfavorable outcomes is higher unemployment among young, less-skilled workers—especially teenagers and particularly minorities. These are the first to be laid off when the employer can’t afford artificially high wages—compensation that exceeds its economic value in the business.

One common-sense economic axiom of which Sanders seems to be disturbingly unaware is that, if you want more of something, you tax it less. President Kennedy, who was a Democrat, orchestrated a reduction in marginal federal income tax rates from a high of 90 percent down to 70 percent. Federal tax revenue skyrocketed. Twenty years later, President Reagan did the same thing, dropping the rate to 36 percent. Again, revenues rose dramatically.

Like so many on the Left, Sanders erroneously thinks that increasing federal taxes on all those pesky millionaires and billionaires will, somehow, swell the government’s insatiable coffers. Incredibly, Sanders and his ilk never studied enough economics to understand this axiom so easily—and historically—demonstrated by the Laffer Curve, a creation of economist Arthur Laffer.

A component of Sanders’ plans calls for expansion of the so-called Affordable Care Act, colloquially known as Obamacare. Were Sanders to be elected president, everyone would be “feeling the Bern” in his or her wallet for years to come. His plan calls for substantive increases in this already-expensive, largely ineffective legislation. Sanders’ goal is a single-payer system—with the warmhearted federal bureaucracy as the payer—for your medical care. If that sounds attractive, think of the IRS holding a financial scalpel.

Space considerations here preclude me from adding to the list of economic reasons why Bernie Sanders would be a disastrous president. Suffice it to say that when a politician of any stripe or creed tells you this, that and the other thing will be “free,” turn quickly and flee.

Mr. James Rogers is Vice President of Planned Giving.

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