Democratic presidential candidate Bernie Sanders struggled to articulate how he would break up large banks during an interview on April 1st with the editorial staff from the New York Daily News but now his socialist inspired government policy initiatives which greatly expand government entitlement programs is coming under fierce scrutiny and is estimated to add $2 trillion to $15 trillion to the unsustainable debt pile that the United States carries, according to a new fact check from a non-partisan group.
The non-partisan group Committee For a Responsible Budget has just come out with a new 2016 fiscal fact check which challenges Sanders’ fiscal initiatives by broadening government entitlements under a single payer “Medicare for all”, offering free college for Americans through a $75 billion a year plan funded by a tax on Wall Street speculation, expanding Social Security, providing paid family and medical leave with a new payroll tax, and imposing a carbon tax while investing in clean energy initiatives.
Sanders’ ambitious government spending plans largely depends on the unlikely scenario of gaining bipartisan Congressional support from Republicans.
They also include additional entitlement spending with paid family and medical leave through a new payroll tax, universal child care and preschool, fully funding the Individual with Disabilities Education Act (IDEA), expanding infrastructure by reducing business tax breaks, and reforming the immigration system.
According to new research from the Committee For a Responsible Budget– which used some estimates from outside sources– including the Tax Policy Center, Sanders’ fiscal policy mathematics simply don’t add up and would actually increase (non-interest) government spending by 38 percent over the next decade (or 33 percent including interest), paid for with significantly higher tax revenue.
The Bottom Line Doesn’t Look Promising For Sanders To Expand His Socialist Agenda
The final analysis from the Committee For a Responsible Budget maintains that the Sanders’ plan as outlined on his website would add at least $2 trillion and as much as $15 trillion to the already unsustainable national debt pile which stands at $19 trillion.
Although the Sanders campaign estimates that each one of their proposals is at least fully paid for and on net would reduce federal deficits over the next decade (including interest) by $2.8 trillion, their estimates sharply contrast with the estimates from Committee For a Responsible Budget and the Tax Policy Center as well as other independent sources, which believes in most cases, “the offsets would fall short of the costs.”
“Overall, rather than $2.8 trillion of deficit reduction, we estimate at least $2 trillion and as much as $15 trillion of higher deficits under Senator Sanders’s policies – depending on whether one uses the campaign’s single-payer estimates (developed by economist Gerald Friedman) or outside estimates from economist Kenneth Thorpe” the Committee For a Responsible Budget wrote.
During the last 50 years, the United States has spent an average of about 20 percent of GDP and never more than 24.4 percent.
But if Sanders’ expansive government plans are approved on a bipartisan level in Washington D.C., then spending and revenue will spike to levels far beyond any previous levels in the United States over the last half century.
Assuming lower health costs, spending (including net interest) will average 30 percent of Gross Domestic Product (GDP) over the decade, and assuming higher health costs, spending will average 35 percent.
Tax revenue is increased substantially to about 25 percent of GDP over the decade, significantly higher than the historical average of 17.4 percent and well above the previous record of 20 percent of GDP in 2000.
The Committee For a Responsible Budget claims that Senator Sanders’s plan would require a real annual economic growth rate of between 3.1 and 4.9 percent, a level much higher level than the 2016 average projected growth rate of 2.1 percent.
The Committee For a Responsible Budget states “it would be difficult to reach these growth rates – particularly at the higher end – over a sustainable period of time.”
Rosy Outlook Projected By Sanders’ Campaign Faces Scrutiny
The Sanders campaign bullishly claims that its policies would spark a 5.3 percent annual growth rate and actually produce budget surpluses at the end of the ten-year budget window.
But some respected economists reject Sanders’ rosy economic projections and point out some faults with his analysis.
The Sanders campaign uses analysis that has been widely criticized by many economists, including four former Democratic chairs of the Council of Economic Advisors.
A serious study of Sanders’ analysis by respected economists Christina and David Romer found his analysis to be “highly deficient.”
The Committee For A Responsible Budget believes that the tax revenue collection gained under Sanders’ plan will be significantly lower than estimates articulated from his campaign.
One respected economist – health economist Kenneth Thorpe – argues the Sanders campaign is “significantly understating” the cost of their health plan.
Most standard economic models including those used by the Congressional Budget Office and Joint Committee on Taxation, would likely find that Sanders’ policies, except for immigration reform, would “slow long-term economic growth” due to major increases in effective marginal tax rates on capital and labor as well as the expansion of various entitlement programs that are likely to discourage work and savings.
Taxing The Wealthy Still Falls Short And Is No Panacea
Sanders has proposed expanding the top statutory federal tax rate from about 43 percent to 77 percent.
However, raising income taxes to the revenue-maximizing rate for all income above $250,000 would only cover between one-tenth and one-third of what is needed to stabilize the debt.
The Committee For A Responsible Budget maintains that “it would likely be very difficult for Senator Sanders to fix the debt simply through income tax increases on higher earners alone” and “broad-based” tax increases would likely be required simply to keep the debt at its current post-war record-high levels.
Sanders Deficit Reduction Plan Is Found Lacking
Under the current fiscal policy law, it would require nearly $3.2 trillion of ten-year deficit reduction (inclusive of interest) simply to stabilize the debt at its current near record-high level relative to the economy (74 percent of GDP as of the end of 2015).
But if Sanders’ plans become adopted, and assuming they had no negative impact on GDP, it would require between $5.2 and $18 trillion of deficit reduction to hold the debt to its current levels, including interest, according to estimates from the Committee For A Responsible Budget.
So far Sanders opposes most spending cuts and he’s already proposed raising the top tax rate on high income earners to above its revenue-maximizing level.
To stabilize the debt without reducing Social Security and other domestic spending, Sanders would likely have to pursue additional tax increases for most taxpayers which would likely face an uphill battle in Congress and among Republicans.
“We applaud Senator Sanders’s efforts to pay for his ambitious policy proposals through serious and specific tax increases. However, based on our estimates, these offsets will fall short of paying the full cost of Senator Sanders’s proposals, and they certainly fall short of putting the debt on a sustainable path. This is particularly troubling given that the magnitude of Senator Sanders’s tax increases leave few options available to further tackle the debt” the Committee For A Responsible Budget wrote in conclusion.