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Saturday, February 27, 2016

Bernie Sanders for the Economy, Part 2

Bernie Sanders for the Economy, Part 2

With regard to Democratic establishment economists who continue to say that Sanders' plans are unrealistic, I have three arguments in favor of Sanders:
  1. The Democratic economists have a poor track record in making economic predictions.
  2. Most of Sanders proposals have been succcessfully implemented in developed nations around the world. 
  3. Young people have good reason to support Sanders' economic proposals.

Democratic economists have a poor track record in making economic predictions.

  • Democrats in 1980 criticized Reaganomics as unrealistic because of "supply side economics" and consequent budget deficits.  Budget deficits have not been a problem since.  The real problem with Reaganomics was increasing income inequality, something the Democratic economic establishment missed at the time and continues to underplay.  
  • Paul Krugman became the foremost spokesman for Democratic economists, yet has been wildly off the mark with regard to the issue of government deficits.  See Paul Krugman in 2003 predicts the exact opposite of what has taken place seen then.  Krugman has since changed his position 180 degrees with regard to the dangers of too much government spending, but remains attached to the discredited theories which got him to the wrong position in the first place.
  • Austan Goolsbe in 2007 praised subprime housing loans, just as the subprime housing loan crisis was evolving into the deepest recession since the 1930s.
  • Mainstream economic forecasting around the world has been consistently overoptimistic about economic growth.  Inflation has consistently come in below expectations.  Yet Democratic economists continue to give the underlying economic models credibility.  
  • When forecasts have proven wrong, Democratic economists have responded by lowering estimates of what is potentially achievable.  As the Romers say,
    Even very generous estimates of the amount of slack still present in the American economy would not be enough to accommodate demand-driven growth of anything near what Friedman is estimating. As a result, inflation would soar and monetary policy would swing strongly to counteract them.
    Friedman predicts growth similar to that achieved during the Reagan Administration, and the Romers say this is impossible.

Most of Sanders proposals have been succcessfully implemented in developed nations around the world.

Health Care Financing:  It's widely known that every developed country has government mandated universal health care, with comparable or better results than the U.S., and at a fraction of the cost and administrative complexity.

Minimum Wage:  Sanders minimum wage proposal ($15/hour) is less than the actual minimum in other developed countries such as Australia.  

Higher Education:  College is much more heavily subsidized in other developed countries, and much more affordable.   For example, college is free in Germany.

Young people have good reason to support Sanders' economic proposals.

Middle class is much less affordable than it used to be.  Pensions are no longer guaranteed, health care involves much higher out-of-pocket payments, education is more expensive.  Overall, the trend is to get people in debt when they are young, and to let them spend their lives in that state.  We can do better than this, and have in the not too distant past, and most other countries do better today.

Updates 2/29/2016:


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