I was watching Hogan’s Heroes re-runs the other day when a genie in a bottle suddenly appeared and waved a magic wand over my glass of JD. Suddenly I was watching a video interview of Bernie Sanders. As some of you may already know Bernie Sanders is running for President of Bloomington’s People’s Republic. No, that’s not right. Mr. Sanders is a Democratic candidate for President of the United States. Since I am not prone to voting for Democrats for President I mostly have ignored Sanders and have focused on imagining naked mudslinging fights between Hillary Clinton, Donald Trump, and Geraldo.
Anyway since I seemed to be captured by my new recliner chair and couldn’t find the eject button, I sat there and watched Mr Sanders answer a bunch of questions. And it hit me. This guy is good. He is the real thing. He says he is a Socialist and he really is. Yet unlike other Socialists who invade neighboring countries and otherwise make Vlad the Impaler seem cute and cuddly, Sanders was bright, and thoughtful, and persuasive. Wow he was good. Hillary does not stand a chance against this guy.
You are waiting for a punchline but there isn’t one. Instead of a punchline is an economics lesson. Sanders is interesting and persuasive and will continue to attract potential voters. But like last week’s post wherein I worried about politicians putting the tough stuff off until later, this post worries that the things that make Sanders so appealing are pipe dreams or worse, false dreams. Suppose you wake up from a vivid dream in which Taylor Swift asked you to run away from your wife and family so you could be her business manager. You wake up and immediately run away from your wife and family. Wow what a mistake when you learn that she does not even need a business manager.
If that didn’t convince you, then yawn, it helps to have a lesson about macroeconomics. In macro everything is driven by economic growth. Economic growth is the Tom Cruise of Macro. I would put that in caps but readers have been known to throw things after seeing stuff in all caps. Germans, Greeks, and even people living in Burnsville North Carolina believe this. Economic growth is like an elixir that fixes almost everything. Stronger economic growth means stronger job growth and higher wages.
Liberals and conservatives agree with the importance of economic growth. Conservatives like Milton Friedman ignored the short run and said it would probably fix itself. Liberals like John M. Keynes and Paul Krugman sweat and fret whenever we have short-term problems slowing economic growth. Krugman shouts to Janet Yellen – man the rudders and full steam ahead…or something like that. If there is a recession then priority #1 (in all caps) is to do whatever can be done to get economic growth back to normal or beyond.
Conservatives and liberals will throw half-eaten snow cones at each other with respect to which policy to use to restore growth. But notice – they both want more growth. Growth is what we want. In a growth economy everything is easier – finding jobs, quitting jobs, buying expensive bourbons, etc.
But if you listen to Sanders, there is little said about economic growth. Sanders wants to penalize rich people. Sanders wants to help the average guy. Sanders wants to reduce income inequality. Sanders want more justice. Sanders wants environmental sanity. And it is hard to argue with his logic. Rich guys are getting richer. Poor guys are not. The average guy/gal is having a really tough time keeping up. Environmentalists keep the pedal to the metal with respect to the data.
So to me – Joe Macro – I agree that there are a lot of problems and challenges out there. I agree that we have witnessed a reallocation of goods and a redistribution of income. I agree that there are many tough difficulties and challenges. But the biggest challenge is to not throw the baby out with the dirty bathwater.
Sandersonian economics says – if we tax the rich and/or give more transfers to the poor, income distribution will be improved. It sounds obvious enough. If it was good enough for Robin Hood then why can’t it work on 93 Valentime Lane?
That’s a good question and ought to be answered. Just because Sanders and Paul Krugman say it is so, that doesn't make it true. For one thing does the Sanders policy really have a permanent impact on the rich/poor balance? Does the policy effectively overturn the things that prevent the poor from getting richer? Second, taking from the rich and/or giving to the poor might negatively impact economic growth and that slowdown might hurt the poor more than the rich. Third, given the tenacity and complexity of all the problems Sanders seeks to address, do we really trust Sanders and Congress to go about using our national resources wisely to eradicate them?
I admit and agree that globalization, industrialization, environment, China and major global and national shifts are impacting Americans. Our history is full of examples of similar challenges (when textiles moved south or when energy prices quadrupled in the 1970s, etc). We need to address our challenges and mitigate the problems that are so lucidly explained by Sanders. But we should not be lulled into believing that identifying a problem is the same thing as solving it.
If Sanders wants my vote he will go beyond simple slogans. Sandersonian economics should explain why his way of attacking the most pressing problems will work and why he won’t end up making us all worse off when his programs damage our ability to grow. Or he needs to explain why his programs will not slow economic growth. Or maybe it is easier to say what the public wants to hear and no more.