Sunday, May 29, 2016

Jeffrey Sachs: Bernie Sanders easily wins the policy debate

Jeffrey D. Sachs is a world-renowned professor of economics, leader in sustainable development, senior UN advisor, bestselling author, and syndicated columnist whose monthly newspaper columns appear in more than 80 countries. This article illustrates why the pronouncements of even World-Renowned Professors of Economics cannot be trusted.

My comments are in bracketed italics.

Mainstream U.S. economists have criticized Democratic presidential candidate Bernie Sanders’s proposals as unworkable, but these economists betray the status quo bias of their economic models and professional experience. [Your tone suggests emotional bias on your part. Could it be that some of the criticism reflects superior models and professional experience to your own?] It’s been decades since the United States had a progressive economic strategy [thanks to progressive ideas?], and mainstream economists have forgotten what one can deliver [Another unjustified generalization suggesting uncritical thinking on your part.] . In fact, Sanders’s recipes are supported by overwhelming evidence — notably from countries that already follow the policies he advocates. [An unsupported assertion. Where is your evidence?] On health care, growth and income inequality, Sanders wins the policy debate hands down.

On health care, Sanders’s proposal for a single-payer system has been roundly attacked as too expensive. His campaign (for which I briefly served as a foreign policy adviser) is told that his plan will raise taxes and burst the budget. But this attack misses the whole point of his health proposals. While health spending by the government would go up in the Sanders health plan, private insurance payments would disappear, generating huge net savings for the American people. [An unconvincing sound-bite. Is it likely that the Government would provide more efficient health care? What has been experience with respect to Government efficiency? Is it possible to have a huge decrease in cost without a huge decrease in health care provided? Your assertion is not credible.]

Countries such as Canada, Germany, Sweden and Britain all follow something like a single-payer approach and pay much less for health care than the United States does. [You ignore the tradeoffs. Paying less for health care is easy – just don’t provide it. These countries control health care cost, in part, by limiting supply, which is not a benefit. A failure to acknowledge the tradeoffs suggests either ignorance or deception, and justifies questioning your credibility.] While the United States spent 16.4 percent of gross domestic product on health care in 2013, Canada paid only 10.2 percent; Germany, 11 percent; Sweden, 11 percent; and Britain, 8.5 percent. U.S. overspending is about 5 percent of GDP, or nearly $1 trillion as of 2016 [One would expect a positive relationship between health care consumption and real income, since health care has elements of a luxury good. Therefore, your conclusion of “overspending” is not justified by your comparison. More ignorance or deception?], mainly because of the excessive market power of private health insurers and big drug companies [You ignore the differential supply limiting of health care in your comparison. This is a crucial difference. Example: I consume more health care with a low copay and less supply limiting than I do with a lower copay and more supply limiting.]. An authoritative study by the U.S. Institute of Medicine confirms this extent of excess costs, finding losses of about 5 percent of GDP in 2009. Critics of Sanders’s health plan have failed to recognize or acknowledge the huge savings and cost reductions that would accompany a single-payer system. [Even a cursory look at the “authoritative study” shows that it has flaws that make it problematic as justification for your assertions.]

On economic growth, Sanders also easily wins the debate. While President Obama opted for a short-term stimulus that peaked after two years and disappeared by the end of his first term, and Hillary Clinton has proposed a modest infrastructure program over five years, Sanders calls for a much bolder public investment program directed at the skills of young people (through free college tuition) and at modernizing and upgrading America’s infrastructure, with a focus on renewable energy, high-speed rail, safe drinking water and urban public transport. Sanders’s growth strategy would get back to fundamentals: a long-overdue increase in productive investments to underpin good jobs and rising worker productivity. [Who makes investment decisions, the Government or Capitalists? The latter are the source of growth, not Government. What hinders investment by capitalists? Yup, the kind of things that Sanders promises in the direction of Regulation, Equality, higher taxes, and freebees.]

Sanders’s mainstream critics are mostly Keynesians. Their focus is on total spending, whether it’s consumption or investment. Sanders, instead, focuses on investment because long-term growth depends on more rapid capital accumulation (including in skills and technology). [Investment forced by Government is not economically efficient. Government muddling in the economy hurts, not helps. Do we need more inefficient and problematic investment in solar panels, wind, etc.? Crony investment is not what we need.] America’s slow growth is no mystery. The U.S. net investment rate has declined to about 5 percent of GDP, down from about 10 percent of GDP during the 1960s and 1970s. Sanders’s plan would restore a high-investment economy and, with it, a higher growth rate. [An assertion that has no obvious basis in fact.]

On income distribution, Sanders accurately argues that U.S. income inequality is uniquely high among the rich countries. Only the United States has deep poverty alongside soaring wealth. [Why is income inequality bad? More income inequality does not imply a worse standard of living for the less fortunate. Would you prefer, for example and other things equal, the above median income families to have more or less? How about if all families have more but the above median income families have more more? Is that worse than no change? Your focus on inequality as inherently bad suggests more ignorance and deception. Sanders makes the same mistake.] Only the United States tolerates a hedge-fund industry in which poorly performing money managers (not to mention quite a few crooks) take home billions of dollars in pay, backed by unconscionable tax breaks pushed by Democratic and Republican senators who live off of the largesse of Wall Street. [Wow, what a diatribe. Of course, there would be no unconscionable tax code or corruption in a Sanders regime, right?]

Consider the most basic measure of income inequality, the Gini coefficient. [Yeah, yeah, so you know a little math. That does not offset the fact that you use it inappropriately. Figures don’t lie, but liars figure.] This measures the inequality of income among households, with zero signifying complete equality and 1 complete inequality. For high-income countries, a Gini coefficient below 0.3 reflects a low degree of income inequality; between 0.3 and 0.4, a moderate degree; and at 0.4 or above, a high degree. According to the most recent data from the Organization for Economic Cooperation and Development, the U.S. Gini coefficient stood at 0.40, with Canada at 0.32; Germany, 0.29; Sweden, 0.27; and Britain, 0.35. [Have you considered that complete income equality is probably inconsistent with a reasonable standard of living and with freedom? Do you have any idea of what freedom is about?]

What accounts for this striking difference? Most important, U.S. inequality has soared in the past 35 years, since the start of the Reagan era. The U.S. Gini coefficient stood at 0.31 in 1980. [OK, so let me get this right. There is more inequality now, but the poor people have iPhones.] All countries have faced market pressures pushing toward more inequality — especially increased trade with low-wage countries such as China and automation that has claimed the jobs and wages of workers with only high school educations. Yet only in the United States have these pressures turned into massive inequality of income. [Pity the poor, who have iPhones, large screen TVs, etc. Are the poor better off here or in all the countries with lower Gini coefficients? Forgot to address that question, didn’t you - or did you?]

The reasons are clear. The United States unleashed the power of CEOs to enrich themselves with mega-salaries, weakened trade unions and gave massive tax breaks to the super-rich. [Sounds like ideology, not reasoned argument.] Sanders’s policies would go after all of these unconscionable moves, bringing the United States back into line with the rest of the high-income world. He would, in short, end the age of impunity in which the rich and the powerful get their way, while the rest suffer. [Don’t forget about those iPhones, designer clothes, and large TVs. Among the poor, that is.] Sanders’s policies include higher taxes on the rich, strengthening unions, raising the minimum wage, supporting families, providing free tuition at public universities and cracking down on financial crimes. [Wow, raising the minimum wage is a solution!!!! Simply not credible.]

There is nothing magical or utopian about Sanders’s recommendations. He is advocating policies of decency long ago adopted by other prosperous high-income countries. [But not as prosperous as our own.] Our own neighbor, Canada, is a case in point. Canada has lower-cost health care, a life expectancy two years higher than in the United States, much lower college tuition, far lower poverty rates and, not surprisingly, more happiness (ranking sixth in the world in life satisfaction, behind Scandinavia and well ahead of the United States, which is 12th). [All these comparisons leave out too many variables to be credible as justification for you assertions. What are the waiting times for Canadian health care? Does the lower college tuition imply overconsumption of college education? What percentage of Canadians have college degrees? How do you determine “happiness”? Is it relevant for you comparisons? Are people spaced out on weed happier than others?]

Mainstream economists long ago lost the melody line. Their models are oriented to the status quo and underemphasize the benefits of public investment. [Perhaps with reason. Of course, you are the expert, not them – right?] They take America’s bloated health-care costs as a given, not as the result of the influence of the U.S. private health lobby. They treat low growth as natural (“secular stagnation”) rather than as the result of chronic underinvestment. [Simply untrue.] They have come to accept cruelly rising income inequality and rampant impunity for financial crimes. [Simply untrue.] Sanders knows better, based on worldwide experience, an abiding sense of decency and a strong and accurate vision for a brighter economic future.

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