The Economic Agenda for America: A Commentary

Senator Bernie Sanders just released his “Economic Agenda for America.” While that agenda is certainly more progressive than the talk we hear from Democrats, and certainly is progressive in its expression of generalities. It is not nearly sufficiently progressive in its specifics.

Here’s a commentary on it.

1. We need a major investment to rebuild our crumbling infrastructure: roads, bridges, water systems, waste water plants, airports, railroads and schools. . . . A $1 trillion investment in infrastructure could create 13 million decent paying jobs and make this country more efficient and productive. . .

We certainly do need to re-invent our infrastructure. But a $1 Trillion program would only begin to scratch the surface, and won’t solve the problem. The estimates of how much we have to spend to do that are roughly $3.6 Trillion. So, why isn’t Senator Sanders proposing that?

2. The United States must lead the world in reversing climate change and make certain that this planet is habitable for our children and grandchildren. We must transform our energy system away from fossil fuels and into energy efficiency and sustainable energies. Millions of homes and buildings need to be weatherized, our transportation system needs to be energy efficient and we need to greatly accelerate the progress we are already seeing in wind, solar, geothermal, biomass and other forms of sustainable energy. . . .

I couldn’t agree more. Now what size investment does the Senator have in mind over what time period?

3. We need to develop new economic models to increase job creation and productivity. Instead of giving huge tax breaks to corporations which ship our jobs to China and other low-wage countries, we need to provide assistance to workers who want to purchase their own businesses by establishing worker-owned cooperatives. . . .

“New economic models”? What does that mean? Why not just pass a Federal Job Guarantee at a living hourly wage with good fringe benefits and fund it with deficit spending until full employment, defined as a job offer for anyone wanting to work full or part-time, is reached. The jobs could be defined by local governments, non-profits, and community development organizations with input from program participants. Projects could be locally supervised, and the wages could be paid directly to individuals duly employed in the program by the Federal Government.

Since a living hourly wage differs across regions in the United States, you wouldn’t have a living wage with equivalent purchasing power in all areas unless you began by calculating what the rate would be in the lowest cost of living region in the US and then using that wage as a baseline cost adjusted it using BLS determined measurements of the appropriate adjustment ratios for all other regions in the country. For example, a living wage in the lest expensive region might be $12 per hour, while a living wage equivalent in Manhattan might be $26.00 per hour.

4. Union workers who are able to collectively bargain for higher wages and benefits earn substantially more than non-union workers. . . . We need legislation which makes it clear that when a majority of workers sign cards in support of a union, they can form a union.

I certainly agree with this. But what else would a Sanders Government and Congress do to protect workers’ rights to organize against corporate coercion?

5. The current federal minimum wage of $7.25 an hour is a starvation wage. We need to raise the minimum wage to a living wage. No one in this country who works 40 hours a week should live in poverty.

If a Job Guarantee program at a living wage, along lines specified above, is passed, then there’s no need for a minimum wage because the JG program would set a de facto minimum wage for the rest of the economy, since any employer who offered less that that would soon find that their employment force leaving them and joining the JG program To hold their employees private sector employers would need to pay more than the living wage and have fringe benefits that were as good as the those of the JG employees.

6. Women workers today earn 78 percent of what their male counterparts make. We need pay equity in our country — equal pay for equal work.

Pass it with harsh provisions for violations including prison. To get this done the law has to make clear that no deviation from equity will be tolerated. I’d like to hear that kind of commitment from Bernie. After all, if he won’t give, who else even loosely associated with the Democratic Party will.

7. Since 2001 we have lost more than 60,000 factories in this country, and more than 4.9 million decent-paying manufacturing jobs. We must end our disastrous trade policies (NAFTA, CAFTA, PNTR with China, etc.) which enable corporate America to shut down plants in this country and move to China and other low-wage countries. We need to end the race to the bottom and develop trade policies which demand that American corporations create jobs here, and not abroad.

I’m all for this, but I would like to know what kinds of enforcement mechanisms Senator Sanders would propose, and what kinds of “barriers” to “free trade” he would propose to make this a reality. Specifically, what would he have Congress do to bring this about?

8. . . . Quality education in America, from child care to higher education, must be affordable for all. Without a high-quality and affordable educational system, we will be unable to compete globally and our standard of living will continue to decline.

Why not free child care to College or University for all? We need more than generalities on this matter. Remember the experience we’re having with the Affordable Care Act. Is it really “affordable” for people who need individual health insurance? Do the policies sold on the exchange that are “affordable” really provide “quality” health care. I sincerely doubt it. “Affordable” is a BS word subject to great abuse. “Free” is a more specific word. If one promises “free” public education, then all of us know what that means.

9. The function of banking is to facilitate the flow of capital into productive and job-creating activities. Financial institutions cannot be an island unto themselves, standing as huge profit centers outside of the real economy. Today, six huge Wall Street financial institutions have assets equivalent to 61 percent of our gross domestic product – over $9.8 trillion. These institutions underwrite more than half the mortgages in this country and more than two-thirds of the credit cards. The greed, recklessness and illegal behavior of major Wall Street firms plunged this country into the worst financial crisis since the 1930s. They are too powerful to be reformed. They must be broken up.

I think their executives need to be held accountable for their illegal behavior including wholesale theft of homes through fraudulent documents and robo-signings, the LIBOR rate frauds, and creating a great housing bubble through “liars loans.” In addition, the banks that are too big to exist because they are systemically dangerous need to be taken into resolution. Derivative trading should be made illegal, new “innovative” financial instruments should be banned, and the Glass-Steagall-like wall between investment banks and commercial banks, broken down by the Clinton Administration, needs to be rebuilt.

Public State-owned Banks modeled on the Bank of North Dakota, and Postal Banks also need to be established. And, going forward, banks over a certain size should be nationalized to stop bank consolidation since such banks are clearly both a danger to the economy, and to democracy because of their excessive political power.

The truth is that there is no need for private banks from a purely economic point of view. The real need for them, is political, because decentralization in the financial services banks perform across many organizations is a hedge against arbitrary financial decisions by a centralized Federal agency. But such banks should be closely regulated by a Federal Reserve whose regional banks are unambiguously Federal Departments, and whose Board of Governors is an agency within the Treasury Department.

The idea of an independent Federal Reserve hasn’t worked out, because the Fed is clearly not independent of the major banks and Wall Street, which have had excessive influence in its operations for more than a hundred years. It’s time for a change in these failed arrangements to get democratic accountability for the Federal Reserve.

Also, the banks performing routine financial services ought to be non-profit organizations, rather than profit-making entities. Why should corporations profit from routine business transactions that are very low risk and from being organizations whose solvency is thoroughly backed by the Government? Once we get rid of derivatives and other “innovative” financial instruments that’s what the banks will become, after all, and banking will be “boring” to boot. Allowing banks to make profits then, is just providing a handout to wealthy stockholders. Why is it consistent with public purpose to provide such handouts?

10. The United States must join the rest of the industrialized world and recognize that health care is a right of all, and not a privilege. Despite the fact that more than 40 million Americans have no health insurance, we spend almost twice as much per capita on health care as any other nation. We need to establish a Medicare-for-all, single-payer system.

I entirely agree. And in trying to get that passed it would be good if the Senator would start telling people how much they would save collectively if such a program were passed, and we could manage it with the same efficiency as Canada. If we did that, then the collective annual medical insurance and care bill covering all Americans would decline to 12% of GDP, a net saving of about $900 Billion per year, even if people have to pay for Medicare for All with a tax increase of $900 Billion annually. If the Government, however, decided to deficit spend the additional cost of Medicare for All compared to the amount it already spends on then the public would save $1.8 Trillion on its Medical Bill compared to what it pays now.

11. Millions of seniors live in poverty and we have the highest rate of childhood poverty of any major country. We must strengthen the social safety net, not weaken it. Instead of cutting Social Security, Medicare, Medicaid and nutrition programs, we should be expanding these programs.

Right; but it would be good to have some specifics. Right now, even the most “progressive” Democrats are only advocating for a $750 annual expansion in SS benefits, an average of $62.50 per month. What both SS recipients and the economy need is more like a doubling of SS benefits to make American pensions comparable to the Government-provided pensions in other OECD nations. Why won’t Senator Sanders advocate for that?

12. At a time of massive wealth and income inequality, we need a progressive tax system in this country which is based on ability to pay. It is not acceptable that major profitable corporations have paid nothing in federal income taxes, and that corporate CEOs in this country often enjoy an effective tax rate which is lower than their secretaries. It is absurd that we lose over $100 billion a year in revenue because corporations and the wealthy stash their cash in offshore tax havens around the world. The time is long overdue for real tax reform.

We do need a fair tax system very badly, and considerations of equity in taxation and economic inequality are central to the future of the United States. So, we will have to tackle inequities in the tax system eventually.

Without tax equity, the very legitimacy of the US Government over the long term is questionable, because no Government can have popular support if it is perceived as one that places no burdens on the rich and powerful while at the same time it collects disproportionately heavy taxes from most of the population. And without much greater economic equality than the US has today, democracy itself is threatened, as we are seeing today in the gross buying of the Government by the wealthy, which we now see all around us.

However, this 12th and last point in Senator Sanders’s agenda is the least important one to push for right now. The reason is that most of the points in this agenda will reduce inequality, so we can greatly reduce it without taking on the task of reforming the tax system immediately. Since one of the toughest reforms to get in this program will be changes in the tax system reimposing substantial progressivity, I think it’s best to fight for this once progressive policies have proven successful in other areas and a great deal of political credit has been built by the progressive politicians who solved all the other problems on this list.

And now we get to a substantial blind spot of Senator Bernie Sanders. Many of his public pronouncements indicate that he believes the US has substantial debt and debt to GDP ratio problems, and that he believes that reinventing the progressive tax system is necessary for the Federal Government to get the revenue needed to pay for many of the programs implied by his 12-point agenda. But, this is not true, as at least four (Wray, Kelton, Galbraith, and Black) of the advisers on his “economic dream team” would tell him if he asked.

The US can generate spending capacity using other means apart from taxing and borrowing. Among these other methods is High Value Platinum Coin Seigniorage (HVPCS) which I explain briefly here and in great detail in my e-book on the subject.

HVPCS gives the Treasury Department the capability to produce enough reserves in its spending account at the Federal Reserve to pay for full debt repayment as its securities fall due without further borrowing, and also the capacity to pay for deficit spending for a period of time as long as the Treasury cares to provide for without increasing tax rates or reforming the system at all. So, using HVPCS means that the Treasury has the capacity to pay for any programs Congress cares to legislate and to get rid of the debt/debt to GDP ratio problems the Senator is worried about.

It also means that the tax reform we need eventually need not be passed before all the other measures in a progressive economic and social justice program are legislated. So, there is no need for the Senator to give constant lip service to these “problems,” and to include that 12th point in his current agenda.

From the standpoint of doing the politics of both his program and the amplifications to it I’ve described, it will be far easier to forget about tax increases in the pursuit of economic justice until we’ve lifted most of the 99% up, than it will be to continue to prioritize the goal of immediate tax fairness and run full force into all the memes the right has gathered to whip up fear and hate of the tax man among the American people.

One notable absence from Senator Sanders’s economic agenda is the idea of a Basic Income Guarantee (BIG), a new entitlement for all Americans. A BIG set at something like $8.00 per hour cost-adjusted across regions would be very useful for people who don’t want to work at pursuits defined as socially valuable by others, and would also be very helpful for people who cannot work at all for various reasons. We, as a society can support it. It would help the economy and provide a measure of economic justice. It would also support innovation, a bit of space for people who want to employ most of their time on innovation and artistic pursuits even at the cost of having a subsistence income. All that said, there are many objections to a BIG which may outweigh these advantages.

Also, it would not cut into the labor force provided there was sufficient difference between the BIG subsistence rate and the living wage rate provided by the Job Guarantee. What I’ve specified above is a difference of 50% in JG vs. BIG compensation. If that’s not enough of a gap to provide an economic incentive to work, then the BIG rate could be lowered accordingly. So, I think Bernie ought to include a BIG in his economic agenda, along with his other measures, since it too would strengthen the safety net and moderate inequality.

Finally, I hope it’s clear from this commentary on the economic agenda, that Senator Sanders’s agenda really isn’t very aggressive when it comes to making progressive policy commitments or laying forth a truly compelling agenda. Mostly, it includes the right words in expressing sentiments and general ideas, but it is pretty short on policy commitments.

Why so? What does the Senator hope to gain from generalities, or to lose from greater specifics? And why can’t we have an alternative presidential candidate who will just lay her/his views out there?

7 responses to “The Economic Agenda for America: A Commentary

  1. Pingback: The Economic Agenda for America: A Commentary |...

  2. Pingback: The Economic Agenda for America: A Commentary « Economics Info