C Adam Pfander
Last week, the First Report briefly outlined the economic platforms of each of the major candidates – as well as one dark horse – in the 2016 presidential campaign. In the coming weeks, we will pick apart these positions and discuss their economic basis. To kick off this series, we take a closer look at Senator Bernie Sanders and his proposed plan to reduce inequality.
The backbone of Sanders’ economic agenda is a progressive tax plan. In this context, “progressive” is an economic term, not a value judgement, which means that the tax rates increase with income. A progressive tax system thus forces the wealthy to pay the lion’s share of taxes. To implement this plan, Sanders intends to expand the estate tax – the tax levied on inheritance exceeding $3.5 million; he also wants to increase taxes for big corporations and big banks.
With this newfound revenue, Sanders intends to fund numerous public projects. Most notable among these, he has pledged $1 trillion in public works investment. He plans to put an estimated 13 million Americans directly on the government payroll to build roads, bridges, dams, and other critical infrastructure. He has also announced a $75 billion a year college tuition plan, which would make public colleges and universities completely free, while cutting interest rates on student loans for private institutions. This latter program would be completely paid for, Sanders argues, by taxing speculative behavior on Wall Street.
The goal of these spending projects is to help the American workforce. The Sanders campaign has stated that his plan would lower the unemployment rate to below 4 percent, compared to the current level of 4.9 percent, while also bringing the long-term unemployed back into the labor force. Ideally, his education plan would also raise the productivity of the American workforce. Further, Sanders intends to raise the federal minimum wage to $15 per hour, a move designed to raise the standard of living for many American workers.
Sanders’ critics, however, have not embraced his ambitious, and undoubtedly expensive, economic agenda. Some economists speculate that he is overestimating his revenues while underestimating the burden of his newfound expenses, a combination that would add to the nation’s growing debt burden. Others – including New York Times columnist Paul Krugman along with four former chairs of the Council of Economic Advisers – disagree with the supposed benefits of Sanders’ economic plan. They contend that his forecasts for the unemployment rate are more conjecture than fact. Krugman went so far as to call Sanders’ claims, “voodoo” economics.
Finally, Sanders has made no secret of his hostility toward big investment banks. If elected, he intends to break up the largest investment banks and increase government oversight of Wall Street. These actions are designed to limit the risks Wall Street can take on, and thus protect our economy from financial collapse. However, critics –especially bankers – argue that Sanders’ regulation would reduce market efficiency; in avoiding the bust, we forestall the boom.