The further to the left or the right you move, the more your lens on life distorts.

Tuesday, January 26, 2016

Bernie's Dream

Bernie Sanders is cheered by Leftists and most young people when he offers up a dream recipe of tax and spend proposals that will allow "the people to take back their government." A desperate Hillary Clinton tries to 'out-Left' Sanders by parroting his "millionaires and billionaires" mantra. When asked about how universal medical care, free college, massive infrastructure projects, and expansion of virtually every entitlement program on the books will be paid for, both revert to their socialist roots and demonize the rich, telling their naive followers that the rich don't pay their "fair share." Hillary chimes in with the canard that "hedge fund managers pay less in taxes than their secretaries" (are there still 'secretaries?"). No matter that the the top 20% of taxpayers pay about 84% of all income taxes collected, it's never, ever enough.

Most progressives are innumerate, either by genetic disposition or by choice. They want to believe that taxing "the rich" has no economic consequences for the "middle class" and that tax rates of 50 - 90 (!) percent can pay for the ever-expanding growth of Big Intrusive Government (B.I.G.). Of course, their fantasy of a socialist utopia funded by the hard work of others collides with reality when numbers are considered. The Wall Street Journal comments:
Perhaps you’ve heard President Obama’s talking point that the federal budget deficit has fallen by two-thirds on his watch. That overlooks that the deficit first soared on his watch, and then fell thanks largely to the GOP House and modest economic recovery, and that as he leaves office he is going to need one more asterisk: The deficit in 2016 has begun to rise again, in dollars and as a share of the economy. And after he leaves office, it takes off.

That was the news Monday in the Congressional Budget Office’s largely ignored annual budget and economic outlook. CBO’s gnomes estimate that the annual federal deficit will increase this year after six years of decline—to $544 billion from $439 billion in 2015. It will also rise as a share of the economy to 2.9% from 2.5%. The nearby table tracks the numbers across the Obama post-recession era.

December’s budget deal explains the $32 billion increase in 2016 in discretionary spending (the kind Congress approves each year). Defense spending will “edge up slightly,” CBO says, while domestic discretionary climbs by 4%. That leaves the big money to the usual suspects—entitlements. Outlays for Medicare (net of premiums), Medicaid, the children’s health insurance program and ObamaCare subsidies will increase no less than 11%, or $104 billion, this year.

Even an estimated federal revenue increase of 4% for the year can’t keep pace with this kind of spending blowout. Receipts will rise to 18.3% of the economy, which is well above the average of 17.4% from 1966 through 2015. So even as revenues return to their historical norm, they can’t compensate for the spending on entitlements that Mr. Obama has refused to reform.

Now for the bad news. CBO estimates that deficits will continue to rise each year after Mr. Obama leaves office. “As a percentage of GDP, the deficit remains at roughly 2.9 percent through 2018, starts to rise, and reaches 4.9 percent by the end of the 10-year projection,” says the budget office. This assumes that the economy grows by 2.7% this year and 2.5% next year before levelling off to an average of 2%, which also assumes there is no recession even though this expansion is already long in the tooth into its seventh year.

As ever, the big spending drivers will be entitlements, which are projected to rise to 15% of the economy from the current 13.1% over 10 years. This is the fiscal time bomb that Mr. Obama will leave his successor, thank you very much.

By the way, all of this is the optimist’s tale. The CBO estimates assume that discretionary spending will fall over the same period to 5.2% of the economy from 6.5%. This will never happen because it means defense spending would have to shrink well below 3% of GDP, a form of gradual unilateral disarmament. So without entitlement reform or faster economic growth, the deficits are likely to be much higher.

The federal debt held by the public—the kind we have to pay back—has already climbed to 73.6% of GDP (from 39.3% in 2008) on Mr. Obama’s watch and will increase to 75.6% this year. CBO expects it will keep climbing to 86% in 2026.
Here's the problem. The people who support the socialist (Democrat) model of B.I.G. are unwilling to consider the numbers presented by the WSJ. Either (1) their eyes glaze over when they read the above paragraphs, or (2) they live in the class warfare fantasy that only the rich will pay, or (3) they think that the numbers are rigged by "right-wingers." They refuse to acknowledge (the lessons of history) that tax and spend policies suppress economic activity in the private sector, reducing the availability of good jobs for the middle class.

No matter, I suppose. The young people who support Sanders' extremist view of the role of government will do so while living rent-free in their parents' basement and working as a barista after graduating with a college degree in the humanities.

UPDATE:
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In last night's Democratic Town Hall on CNN, The Washington Post reports:
Sanders was then asked about his plans for universal, government-provided health insurance. He made an admission that most candidates would be loath to make in any national forum: “We will raise taxes. Yes we will.” But, Sanders said, that’s because government would take the place of private insurers — and his system would save money on balance for middle-class Americans.

“We may raise taxes, but we also are going to eliminate private health insurance premiums,” Sanders said. He has found himself on the defensive in the last few days, as Clinton’s campaign has said that Sanders’ plans would be both politically unworkable and alarmingly expensive.
There is a certain delusional nature to Bernie Sanders pronouncements. His blithely recommends B.I.G. solutions to major national challenges, but in the context of healthcare, for example, he willfully disregards the inefficiency and incompetence in the federal government's implementation of Obamacare, the corruption of the VA healthcare scandal, the complete lack of choice and the long, long waits for medical care that are common in countries that have universal health care programs, the fiscal instability of medicare, and the rampant fraud and abuse that cost the taxpayers hundreds of billions of dollars. After all, in Sander's socialist utopia, "the rich" will pay for it all.