Note: Blog posts reflect the views and opinions of their authors and not necessarily those of Penn Democrats as an organization.
I like Bernie Sanders. I think he’s an honest, principled man, with admirable ideals and good priorities. He’s ideologically consistent and has largely stayed away from the demagoguery that other candidates have so readily embraced.
Unfortunately, however, that is where my praise of the man ends. Although he has good principles, his specific policy proposals are nothing short of ill-conceived populist drivel. Good intentions aside, the execution of Sanders’ economic ideas would be disastrous on a number of levels. Most prominently, on American monetary policy.
As recently stated in a New York Times Op-Ed, the Vermont Senator believes that interest rates should only be raised as a last resort, and never before unemployment falls below 4%. Ignorant of the fact that raising rates is a natural part of countercyclical economic policy, and not some sort of nuclear option used in the face of massive inflationary gaps, Sanders betrays a lack of basic monetary understanding. If these policies were actually implemented, the United States economy would grow at a reckless pace and incentivize financial institutions to take unprecedented risks.
But Brian, you say, the President doesn’t have control of the Central Bank. It’s a quasi-private institution, which operates independently of the Federal Government. So, it doesn’t matter that Sanders is wrong about monetary policy since he can’t do anything about it anyway. And that would be true…if the Senator hadn’t already sponsored Ron Paul’s Audit the Fed bill. Legislation that would essentially politicize monetary policy by making every open market transaction subject to Congressional review, the Federal Reserve Transparency Act would make it extremely difficult for the Federal Open Market Committee to make responsible decisions. With their leash being held by politicians who never want to see the economy slow, the Federal Reserve may be forced to acquiesce to Senator Sanders’ ridiculous monetary proposals of stunted interest rate growth.
This may sound hyperbolic, but people have died over mistakes like that. One of the biggest reasons that the Great Depression got as bad as it did was due to the Federal Reserve’s inability to act appropriately. In that time period the rigidity came from being tied to the Gold Standard (which is part of the reason Ted Cruz’s candidacy is so frightening). Under a Sanders administration, that rigidity would come from excessive bureaucratic meddling. Either way, you can safely assume that the economic results won’t be pretty.
Now, in terms of damage, that’s probably the largest a Sanders Presidency could inflict on America. But problems with his other policies are worth looking at too. Namely, his position on free trade. Diametrically opposed to the concept, the Senator is almost “Trump-esque” in his criticism of the practice, erroneously claiming that global competition has brought down wages, and that we’ve lost millions of jobs to China. In reality, workers, everywhere, are paid at a wage rate that roughly corresponds to the Marginal Revenue Product of their labor. American workers will be paid more than Vietnamese workers, because they are more productive than Vietnamese workers (due to higher levels of human capital.) In addition, because of the principles of comparative advantage, free trade will necessarily raise the real incomes of all parties involved.
And, because of exporting opportunities, jobs will not be lost in exchange for these vast gains in income. I mean, sure, jobs will be displaced. People will have to retrain and find new sectors of the economy to participate in. But, never, ever, is it economically prudent to halt innovation (also known as finding a more efficient way to do things) in an attempt to save jobs in the short run. The only thing that Senator Sanders would succeed in doing by taking on NAFTA would be to lower the incomes of everyone in the United States. And this isn’t just me saying this. There is a vast amount of economic literature proving that the “Giant Sucking Sound” is nothing more than a liberal myth. It has been proven that trade has caused American real wages to rise, while having a slight positive effect on employment. The bottom line is that the benefit of free trade to economists is like the existence of global warming to climate scientists. There’s a consensus, and to deny it means that you’re, well, wrong.
So far, we’ve seen that Sanders’ monetary and trade policies are misguided. But what about his fiscal policies? Well, as it turns out, Sanders is 0 for 3. Estimates show that the Senator’s proposals would cost anywhere from 20 to 30 trillion dollars, with his universal healthcare proposal constituting the majority of the spending. Though the Sanders campaign and related parties have predicted tax revenues high enough to offset these costs, these estimates rely on GDP growing by an absurd, unprecedented amount. When someone, an economist named Gerald Friedman, attempted to make this math work, the results were so outrageous that four former Democratic Chairs of the Council of Economic Advisors to the President wrote a letter to the campaign, dismissing the research as “extreme” and “exceed[ing] even the most grandiose predictions by Republicans about the impact of their tax cut proposals.” So, make no mistake, Sanders’ proposals will not be paid for, and will force the government to assume massive amounts of debt.
Now, I know what you’re thinking. Debt at the national level isn’t necessarily a bad thing. And you’re right, it isn’t. But when a country’s debt rises by a good measure and the economy fails to grow, government borrowing will begin to crowd out private investment–a problem that will only be exacerbated as time passes and interest rates rise. If Sanders’ monetary ideas come to fruition and interest rates are kept unnaturally low, then the country would be facing severe inflation, and potentially another crisis.
Bernie Sanders has principles. He has ideals. He’s a moral man, who is not controlled by special interests or third parties. But he’s wrong. He’s wrong about the Federal Reserve, he’s wrong about free trade, and he’s wrong about fiscal policy. Yes, he has good intentions. But the road to Hell is paved with those, and America can’t afford to elect a candidate whose ideas just sound nice. It can’t afford to elect Bernie Sanders.