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Proserpina

(2,352 posts)
Tue Dec 1, 2015, 06:32 AM Dec 2015

What Would Sanders Do? The Dynamic Effects of Seven Sanders Initiatives BY GERALD FRIEDMAN

http://www.dollarsandsense.org/archives/2015/1115friedman.html

No one should be surprised by the popular support that Sen. Bernie Sanders (I-Vt.) has attracted in his run for president as a democratic socialist. Nor should we be surprised that he has drawn attacks charging that his policies will bankrupt the United States. Sanders’ proposals for infrastructure, early-childhood education, higher education, youth employment, family leave, private pensions, and Social Security would total over $3.8 trillion over 10 years. While this is a large number, it would be barely 6% of federal spending for 2017-2026. Apart from any benefits these programs would bring directly, their cost would be reduced in four ways: Two operate by offsetting current spending and tax policies—either replacing existing federal spending or reducing tax breaks currently subsidizing private spending. The other two, which account for over 70% of the cost reduction, are the “dynamic effects” of increased economic growth—boosting tax revenues and reducing federal safety-net spending when the economy expands.

A quarter of new spending would be offset by savings and by faster economic growth. (See Figure 1.) The ongoing effects of the Great Recession that began in 2007 have left many resources underutilized. By putting unemployed workers and discouraged workers (who have stopped looking for jobs) back to work, the Sanders program would increase economic activity and government revenues while reducing spending on safety-net programs like Supplemental Nutrition. Taking these dynamic effects into account, the net cost to the public treasury would be about $2.7 trillion, instead of $3.8 trillion, over 10 years. That is, over a quarter of the total tab would be offset by reductions in other forms of government spending and by increased tax revenue derived from faster economic growth.



Figure 1: Additional Spending and Offseting Cost Reductions under Sanders Program


Each of the seven spending proposals would benefit from offsets and dynamic effects. (See Figure 2.) Universal childcare and free college tuition, for example, would replace existing spending on programs for childcare assistance and much of the spending on Pell Grants for students at public colleges, spending on infrastructure would offset some required maintenance spending, and raising Social Security benefits would allow some seniors to avoid dependence on Supplemental Nutrition (SNAP) and other safety net programs. The programs would also increase tax revenues by eliminating some existing “tax expenditures”—tax breaks that subsidize private spending—like deductions for employer-provided child care.



Figure 2: New Spending Programs and Net Costs after Offsets and Dynamic Effects


The programs would accelerate the recovery from the Great Recession. (See Figure 3.) Eight years after the beginning of the Great Recession, the American economy remains depressed. While the economy has been growing steadily since the end of 2009, output remains nearly 5% below capacity. Only 59% of the adult population is employed, down from over 63% before the recession and the lowest level in 30 years. I estimate that, due to increased government spending, the Sanders program would increase GDP growth rates for 2017-2026 enough to result in a projected GDP in 2026 $4 trillion higher than without the programs.



Figure 3: Projected Gross Domestic Product (GDP), CBO Estimates vs. with Sanders Program


The Sanders program would add six million new jobs. (See Figure 4.) The Congressional Budget Office (CBO) projects that, due to sluggish economic growth, the percentage of the working-age population employed will fall between now and 2026, from 59% to 57%. The Sanders program would directly create jobs in infrastructure, in child-care services, in higher education, and for young people. It would also create additional jobs indirectly, as the newly employed and others spend their additional income. All told, I calculate that the program would raise employment by six million jobs by 2026.



Figure 4: Projected Employment, CBO Estimates vs. with Sanders Program


Government spending would decline relative to GDP within the decade. (See Figure 5.) Federal spending would initially increase faster than GDP under the Sanders program. After 2021, however, federal spending would be lower as a percentage of GDP than it would be under Congressional Budget Office (CBO) projections, because of the strength of the economic recovery engendered by the Sanders stimulus. This is actually a conservative estimate of the boost to GDP because it does not include the productivity-raising effects of infrastructure spending and increased education.



Figure 5: Projected Federal Spending, Percent of GDP, CBO Estimates vs. with Sanders Program



GERALD FRIEDMAN is a professor of economics at the University of Massachusetts-Amherst.
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What Would Sanders Do? The Dynamic Effects of Seven Sanders Initiatives BY GERALD FRIEDMAN (Original Post) Proserpina Dec 2015 OP
This OP shows the "how" Android3.14 Dec 2015 #1
K&R Thanks Proserpina. Scuba Dec 2015 #2
You are quite welcome, Scuba Proserpina Dec 2015 #16
K&R Art_from_Ark Dec 2015 #3
Capitalism fans should love Bernie... think Dec 2015 #4
Bernie Better Than The Rest By A Wide Margin cantbeserious Dec 2015 #5
Exactly what America needs. tecelote Dec 2015 #6
Hillary has ideas too, just ask her... ummm, after you elect her. n/t A Simple Game Dec 2015 #7
don't worry, Hillary will come out with something...tomorrow that will look exactly like Sanders. nt Javaman Dec 2015 #12
Tomorrow? She must have the focus group on speed dial and working overtime. n/t A Simple Game Dec 2015 #19
I'll wait ... tazkcmo Dec 2015 #8
Kicked and recommended. Uncle Joe Dec 2015 #9
You are welcome, Uncle Joe Proserpina Dec 2015 #15
.. Uncle Joe Dec 2015 #17
Thank you, I will Proserpina Dec 2015 #18
K&R Mbrow Dec 2015 #10
K&R nt Live and Learn Dec 2015 #11
Just think of the increase in the economy if the minimum wage is increased to $12, uh, I Dustlawyer Dec 2015 #13
Let's get this article out there & get Bernie elected! peacebird Dec 2015 #14
HUGE K & R !!! - THANK YOU !!! WillyT Dec 2015 #20
You are welcome! Proserpina Dec 2015 #21

tazkcmo

(7,286 posts)
8. I'll wait ...
Tue Dec 1, 2015, 08:47 AM
Dec 2015

...until Maureen Dowd has a chance to review this "economist's" numbers. She is, after all, the Economist of Record now.














sarcasm

Dustlawyer

(10,493 posts)
13. Just think of the increase in the economy if the minimum wage is increased to $12, uh, I
Tue Dec 1, 2015, 09:36 AM
Dec 2015

mean $15 an hour! That money would be spent! Later maybe even some would be able to go into something they call savings! What a novel concept!

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