Bernie Sanders and His Awfully Terrible Math

Bernie Sanders may have the best intentions in his heart, but he is an unrealistic ass when it comes to his wish list for transforming the United States into a European-like socialist state.  Among those items on his wish list is expansion of Medicare (i.e., universal health care), free college tuition at public institutions, a massive public works infrastructure repair project, paid medical/family leave, and free day care.  All these items, one supposes, is what will cure this country of any real or perceived ills.  Unfortunately for Bernie, his numbers do not add up- even when liberal websites and think tanks analyze the proposals.  Thus, Bernie may have a good heart, but parts of his brain that process math have obviously atrophied.

To pay for all these things, he talks the populist talk about soaking the rich, corporations and Wall Street.  But, that proposal for paid family leave is paid for by increasing the FICA tax that every employee must have withheld from their pay check every week.  For some, what he describes as a “modest increase” could make a big difference.  As everyone is aware, payroll taxes have a greater financial hit on low and middle income earners than the rich.  Sanders states that if workers want this paid benefit, then they must suffer the “modest increase.”

Yet, there is so much more that does not add up with his plan.  For example, he wishes to fund his free college proposal by creating a financial transaction tax (FTT)- 0.5% on stock trades, 0.1% on bonds and .005% on derivatives.  He claims this would pay for the proposal.  However, the CBO found that such a scheme would raise about $60 billion in revenue annually while a free college education would cost the federal government $146 billion annually.  He may be using Common Core math, but in my book his arithmetic is off by over $80 billion.

While some economists suggest that such a scheme would decrease the amount of potentially costly speculation in the financial markets, there are likely better solutions to that problem than using the heavy hand of the tax code.  Regardless, the European Union considered- and discarded- a modest 0.1% FTT.  At that rate, they determined, it would result in a 1.76% decrease in GDP in the Eurozone.  Sanders’ proposal is five times that amount which translates into a 5-9% decrease in American GDP.  By any other definition, that is called a recession.  And as stock prices decreased as well as volume, his $60 billion in revenue would shrink also.  He would be quickly killing the goose that laid his golden egg.  But hey— more college students would be getting their free degree in Gender Studies.

His social security tax increase proposal on wealthy earners is also problematic.  The increased rates kick in for annual incomes exceeding $250,000.  The current limit is $118,500.  Hence, you have this unexplained bubble between the two figures.  If Sanders thinks that adept financial planners, lawyers and accountants will not find a way to structure income, he is more stupid than we thought.  Personally, I believe that the cap should be raised and that benefits should be means-tested on a sliding scale.  But, if you pay into the social security system over the course of your working life, then you should derive some benefit upon retirement.

Although there are other aspects to his proposals, two things are certain.  First, we are short on details despite hearing about a plan forthcoming.  His figures are based on conjecture and even at that, they are seriously flawed.  As with most proposals, they may sound great on paper and they may even sound greater in a spit-filled, arm-waving socialist populist rant on the campaign trail.  But usually the reality does not fit the proposal.  In Sanders’ case, the reality is off by a conservatively-estimated $8 trillion dollars.

Second, if enacted and if God forbid he ever became president, it would not only be the rich, the corporations and the banks that would feel the effects.  All those wonderful things he proposes in the Sanders Utopia he wishes to create costs money.  There is only so much blood one can get from a stone before the stones grow feet and walk.  A prohibitive tax on the profits of America-based foreign subsidiaries would cost this country thousands of jobs as corporations simply left the US.  The rich he wishes to “pay their fair share” (that is, soak) would do the same.  One is left with the unmistakable impression that Bernie Sanders is a dolt of the highest order.  And if anyone believes these proposals would only hurt the rich to the benefit of the middle class and lower, they are seriously mistaken.  Any investments from IRAs to 401(k)’s would also be affected.

Under the best of conditions and making the assumption that “his heart is in the right place,” Bernie Sanders is terrible at arithmetic.  What would be even worse is if American voters actually believe that 2+2=5.