The problem, as always, with socialism is that sooner or later you run out of other people’s money. In the case of Bernie Sanders’ policy proposals the country would need to start borrowing immediately.
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An analysis by the Tax Policy Center finds that Bernie Sanders’ proposals would cost $33.3 trillion over the next ten years. That amount would be only party offset by $15 trillion in new taxes:
Over the next 10 years, the Sanders plan would increase federal revenues by $15.3 trillion but also increase federal outlays by $33.3 trillion, growing the cumulative budget deficit by about $18 trillion or roughly 7.5 percent of GDP (table 2).
The plan is structured to guarantee that an overwhelming majority of people benefit (in the short run) from the transfers and deficit spending:
Measured as a share of income, that additional support would be most beneficial to low-income households. All groups would receive higher net transfers (transfers less taxes) except for those in the top 5 percent of households.
In other words, this is a plan designed to sell. Nearly everyone gets more benefits and only a relatively small, productive portion of the electorate stands to lose in the deal. Of course there is reason to think the good times would be short-lived. The Tax Policy Center says the impact of the additional taxes and debt on the economy “could be severe.”
If unfunded, the deficit increase would raise interest payments on the national debt by over $3 trillion over the next ten years. The dramatic increase in government borrowing would crowd out private investment, raise interest rates, further increase government borrowing costs, and retard economic growth. In combination with the dramatically higher tax rates, which would reduce incentives to work, save, and invest, the negative macroeconomic effects of the plan could be severe (Sammartino et al. 2016). Our estimates do not account for those macroeconomic feedback effects.
There is probably no end to the $1.8 trillion annual deficits in Sanders’ plan. Indeed, those deficits will presumably pile up even faster as the economy declines under the weight of new taxes. And with taxes on the wealthy already set to stun, there will be little room to demand more money from the top 5 percent to close the gap. Eventually it will occur to someone that broad based tax increases are necessary, but by that point cutting benefits could be immensely unpopular. Those who have grown accustomed to “free tuition” and “free health care” won’t want to be told the party is over or that the wealthy were only able to pick up half the bill.
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Sanders’ may be close to stepping off the national stage but his millions of young supporters are eager to see America become a (struggling) socialist state like the ones in Europe or, worse still, in South America.
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