What Is American Socialism?

Financial FAQs

What is American Socialism that candidate Bernie Sanders has talked about ever since he has been running for President? In fact, our one and only example of something that represents any definition of Socialism and concerted government planning benefiting all Americans was President Roosevelt’s New Deal.

But there has never been any actual American government ownership of businesses and its profits that is Socialism spelled with a capital ‘S’. Rather, tax revenues of private businesses and individual incomes have always financed government programs and investments.

New Deal-type programs were needed because we were living through the Great Depression with 25 percent of Americans unemployed that required government planning and investments to bring the U.S. economy back to life; and which also enabled the U.S. to win World War II.

There has never been American Socialism or socialist programs as defined by Marx-Engels’ classical definition that communist countries have espoused; that have only worked for a time in dictatorships by a wealthy elite such as rule China, North Korea and Russia.

Why did the New Deal work so well? By directing public investment in both infrastructure and the American people while building up an industrial base that could quickly convert to a war footing by converting automobile and aircraft factories to tank and military aircraft factories in 1941.

The investment in people was firstly creating social security, labor union legislation, Workman’s Compensation and other labor protections to support American workers, while paying Americans to keep working in such as planting trees, building dams, power grids, post offices, and all the public infrastructure we needed to boost the productivity of our economy.

The Roosevelt administration even created the Home Owners Loan Corporation (HOLC) to purchase and refinance more than one million delinquent home mortgages to keep homeowners who had lost jobs in their homes until the Depression was over.

Have we seen any such programs created today that helped US out of the Great Recession and the busted housing bubble? There were one-time spending boosts to public spending and the TARP bank bailout in 2007-08, but no new HOLC program to purchase and refinance delinquent loans and keep homeowners in their homes, which would have mitigated effects of the Great Recession and the tremendous losses for homeowners.

Yet even today, die-hard Republicans (and President Trump) call Bernie’s socialism no different than China’s or North Korea’s, or even Russia’s; where Russia is ‘owned’ by a very wealthy elite controlled by Putin and his oligarchs.

The New Deal was working so well by 1937 that Republicans gained a majority in congress, and convinced Roosevelt to begin to pay back the public debt that had boosted growth. But he had to reverse course in 1938 when the U.S. plunged back into the depression that lasted a total of 10 years, hence came to be called the Great Depression for its repeat performance.

The only reason the Great Recession didn’t become another Great Depression was a proactive Federal Reserve that printed $billions to create more liquidity when it realized government aid and action was necessary to fill the gap vacated by private business.

Why is a new New Deal necessary today? We are ignoring very real crises that could precipitate another Great Depression—maybe not this year or next. One such is looming Climate Change, or Global Warming, that could even create another World War says the U.S. Pentagon in several congressionally-mandated reports, as increasing droughts and rising oceans begin to drown coastal cities and even countries.

Professor James Livingston, a Rutgers University historian, has highlighted the excesses in capitalism responsible for the many post- World War II recessions we have endured (five just since 1980) in a NYTimes Op-ed.

It’s the decline of private sector investment over the past century in anything that continues to grow the American economy for all Americans. Corporations instead began to pay themselves a larger share of their profits in stock buybacks and higher CEO and executive salaries.

“So corporate profits do not drive economic growth — they’re just restless sums of surplus capital, ready to flood speculative markets at home and abroad. In the 1920s, they inflated the stock market bubble, and then caused the Great Crash. Since the Reagan revolution, these superfluous profits have fed corporate mergers and takeovers, driven the dot-com craze, financed the “shadow banking” system of hedge funds and securitized investment vehicles, fueled monetary meltdowns in every hemisphere and inflated the housing bubble.”

In the words of columnists Nicholas Kristoff and wife Sheryl Wudunn via a NYTimes’ Op-ed describing their new book, Tightrope, a chilling portrait of the decline of Kristoff’s tiny rural Oregon home town since the Great Recession, “First, well-paying jobs disappeared, partly because of technology and globalization but also because of political pressure on unions and a general redistribution of power toward the wealthy and corporations.”

Bernie Sanders doesn’t have to call his election platform Socialism, since the New Deal was not really a lesson in socialism, but how governments should work for all Americans in a capitalist, private-ownership economy.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What Happened to Main Street—Part II?

Popular Economics Weekly

FRED

Corporate responsibility is back in the air with a vengeance; not only from Senators Elizabeth Warren and Bernie Sanders who constantly remind us on the campaign trail that corporate misbehavior has tilted the “playing field” of economic benefits too much in corporations’ favor.

Now Jamie Gamble, a former corporate attorney, has touched the third rail of corporate behavior—business ethics. He has written an as yet unpublished essay that asserts corporate executives “are legally obligated to act like sociopaths,” according to Andrew Sorkin of the New York Times.

“The corporate entity is obligated to care only about itself and to define what is good as what makes it more money,” Gamble is quoted as saying in his essay. “Pretty close to a textbook case of antisocial personality disorder. And corporate persons are the most powerful people in our world.”

I call it the third rail because it’s a topic that comes up for discussion only when a crisis is brewing, or an election, though economic futurists like Hazel Henderson have been writing about the need to train business executives on higher business ethics for decades in books like, Building a Win-Win World, (Berrett-Koehler, 1996).

“When I published “Should Business Solve Societies' Problems? In the Harvard Business Review in 1968,” said Henderson, “there were few MBA courses on business ethics. By 1995 such courses were standard and often compulsory.”

Ethical behavior leads to what she calls “win-win” corporate behavior, defined as cooperative outcomes that benefit not just corporate executives and their shareholders as happened with the recent Republican tax cuts.

Simply put, such sociopathic behavior benefits just the few with its pre-occupation with maximizing quarterly profits, rather than benefiting the employees and market customers it also services, while adding to the ‘hidden’ public costs of maintaining a clean environment and public infrastructure that it depends on.

These are what are termed the social costs of doing business that Senator Elizabeth Warren intoned in her first campaign to become a Massachusetts Senator:

“You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

 “Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

In fact, Jamie Gamble has formulated a list of ethical rules he wants corporation executives and shareholders to adopt, and be liable for if they are not adhered to.  They should include:

· Their “relationship with their employees.”
· With “their communities in which they produce and sell.”
· Their “relationships with customers.”
· Their “effects on the environment.”
· And “effects on future generations.”

It is not surprising that Gamble’s ethical rules also meet the definition of sustainable economic growth, which is growth for the long term that benefits more than the few, because it is the “win-win” path that maintains stronger, lasting economic growth with fewer down cycles and economic crises that have wreaked so much economic and social damage in recent decades.

Harlan Green © 2019

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

In Search of a Moral Economy

Financial FAQs

vox.com

Vermont Senator Bernie Sanders defined a moral economy in a recent Duke University dialogue with the Reverend William Barber II: “A moral economy is one that says, ‘In the wealthiest country in the history of the world, all our people should be able to live with dignity and security.’”

We don’t have to quote the very progressive U.S. Senator to know what a moral economy should look like. One has only to study the history of income and wealth redistribution since 1980 when demand-side economic theory—the Keynesian economics of English Lord John Maynard Keynes that guided Roosevelt’s New Deal—was replaced by so-called supply-side policies—under the conservative but never validated premise that enhancing the wealth of holders of capital with lower taxes and regulations would maximize production, while suppressing the rights and wages of their workers.

History since then has borne out the immorality of what came to be called trickle-down economics—record income inequality in the American workforce. Its rationale came from a diagram on a napkin that then White House Chief of Staff Dick Cheney took to heart as the mantra that guides conservative Republicans even today.

It’s an absurd equation. President Reagan at the time believed that lower taxes would motivate workers to work harder and produce more. The problem was reducing everyone’s taxes would stymie government programs that helped to level the opportunity table. It was the wealthiest that benefited most with reduced personal tax rates that were as high at 92 percent in the Eisenhower administration, which financed the federal highway system, sent us to the moon, and instigated many of the public programs that have made America so productive.

It’s hard to know where this thought process came from. History shows that people work just as hard—sometimes even harder—when they receive a smaller share of their paycheck; especially when a portion goes to insure future benefits like workman’s compensation insurance, social security, Medicare and Medicaid.

But conservatives latched onto several Austrian economists who hated almost any form of authority; so much so that they advocated limiting the powers of democratically elected governments to care for their own citizens. Such was the fear of centralized authority by economists like Fredrick Hayek in his book, The Road to Serfdom, called any regulations to tame capitalism a form of enslavement without recognizing that raw, unregulated capitalism meant serfdom and exploitation of those workers.

Graph: metroscan.com

We do now have a better understanding of how capitalism—the worst economic system, except for all of the others (to paraphrase Churchill)—works for Main Street as well as Wall Street.

It means in part returning to the much more progressive personal tax rates of earlier U.S. administrations—before President Reagan made the immoral tax cuts that even underfunded the military at the time, and initiated the massive federal debt burden we carry today.

All the public programs funded by governments enhance prosperity and productivity in some way—whether it’s to upgrade our infrastructure, fund new health discoveries, strengthen the public insurance and pension programs; and protect the environment, without which no Americans can prosper over the long term.

Then we can afford to protect those most in need. That is what a moral economy looks like.

Harlan Green © 2018

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

What Happened to Tuition-Free College?

Popular Economics Weekly

Senator Bernie Sanders wants it. Until the Vietnam War, most public colleges and universities had it. So what happened to our tuition-free public universities and colleges?

UC Berkeley is perhaps the poster child to what has happened to the idea of tuition-free colleges and universities. It is something most other developed countries have for its citizens but no longer in the U.S. And tuition-free higher education—particularly for taxpayer funded public colleges and universities—was in the founding charters of most higher public educational institutions.

When I entered UC Berkeley as a freshman in the late 1950s my $300 scholarship covered the first year administration fees. There was no tuition. Today UC Berkeley charges a tuition fee of $13, 518 per academic year for California residents. Out-of-state residents have to add an additional $26,682 in tuition fees.

That is why students today have accumulated some $1.2 billion in student loan debt that averages up to $35,000 per the most recently graduate student in a recent Champlain College panel discussion convened on the subject.

· The total outstanding student loan debt in the U.S. is $1.2 trillion, that’s the second-highest level of consumer debt behind only mortgages. Most of that is loans held by the federal government.

· About 40 million Americans hold student loans and about 70 percent of bachelor’s degree recipients graduate with debt.
· The class of 2015 graduated with $35,051 in student debt on average, according to Edvisors, a financial aid website, the most in history.
· One in four student loan borrowers are either in delinquency or default on their student loans, according the Consumer Financial Protection Bureau.

As late as 1960 The California Master Plan developed under Chancellor Clark Kerr supported keeping the UC system tuition-free. How much has changed since then! It’s almost as if California has been made to pay for being the vanguard for anti-war and anti-establishment protests during the 1960s and 70s; when it was in wholesale rebellion against the policies of the Cold War, or any war.

Why the exorbitant costs for higher education today, and why is it so important to make higher education affordable to most Americans, something that the young people coming to Bernie’s rallies also want? The first answer is that it’s important to have a well-educated public for a functioning democracy.

And Senator Bernie Sanders has made it a central issue in his campaign. “In a highly competitive global economy, we need the best-educated workforce in the world, says Bernie on his website. “It is insane and counter-productive to the best interests of our country and our future, that hundreds of thousands of bright young people cannot afford to go to college, and that millions of others leave school with a mountain of debt that burdens them for decades. That shortsighted path to the future must end.”

There is also the skills’ shortage employers lament about today. College graduates have the highest employment rate and incomes (blue line in graph)—and the lowest unemployment rate; actually below today’s 5 percent unemployment rate. Whereas high school grads have something like a 7 percent unemployment rate, and comparably lower incomes.

It is easiest to blame then California Governor Ronald Reagan, who once inaugurated in 1966 began his attack on higher education. It was the beginning of the Vietnam anti-war protests, and he considered UC Berkeley a hotbed of socialism, and inimical to winning the Cold War.

It was also the beginning of his government-is-the-problem campaign by shifting state resources away from educating California’s students.—firstly, by cutting state funding for higher education, and calling in the National Guard to put down student protests.

But there were other reasons for abandoning The California Master Plan to educate all Californians tuition-free than the growing political polarization from the Vietnam War. Proposition 13 was passed in 1978 that limited property taxes, the main source of state and local education revenues.

Even then annual tuition and fees for Californians was just $630. The big fee increases began in the 1980s, when California enacted the three strikes law to fight the War on Drugs and began to build a record number of prisons. California’s prison population increased 500 percent between 1982 and 2000, according to historian Ruth Wilson Gilmore in her book, Golden Gulag.

The monies went elsewhere, in other words. The expansion of educational institutions stopped, despite the surging student population of baby boomers reaching college age. The result has been that state revenues now pay less than 16 percent of the UC University systems’ costs, and student tuition fees (and debt) now pay for the majority of education costs.

The UC system no longer educates the majority of Californians. This is when a recent McKinsey & Co. report predicts the U.S. workforce will need an additional one million well-educated workers by 2020, when most of the 80 million millennials, children of the baby boomers, have reached college age.

Then where will they be educated? From so-called for-profit colleges, which now make up some 25 percent of post-secondary institutions in the U.S. And they provide a much inferior education, as profit is their bottom line rather than a rounded education.

Bernie is right in this case. That cannot be, if we are to stay competitive with the developed world. It turns out government has to become the solution, the equalizer of opportunity as it once was, if we are to reduce the soaring inequalities of income and opportunity.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Bernie's Economic Platform--Part II

            Bernie Sanders and Donald Trump won their Indiana primaries, and we know why.

In February air-conditioner manufacturer Carrier, a wing of United Technologies, announced that beginning next year it will move its Indianapolis production to Mexico and lay off the company’s U.S. workers. (It will also gut the factory’s suppliers and surrounding businesses.) The announcement was caught on video and went viral just as the presidential campaign was focusing on the disastrous effects of our country’s “trade” policies.

Why is this an issue now when so many jobs have already moved overseas? Because of the presidential primaries, of course, and both Bernie Sanders and Donald Trump have taken notice. 

“United Technologies reported $7.6 billion in profits for 2015,” reports The Campaign For America’s Future, a progressive blog. “This was up from $6.2 billion in 2014. The company is spending $12 billion to purchase its own stock, which manipulates an increase in the stock price. That gives an idea of just how much cash the company has at its disposal. They use plenty of it to enrich executives, with their CEO getting almost $10 million in 2014 after getting more than $20 million in 2013.”

The sad fact is this has become an everyday event for many American workers, and the reason it has taken so long for workers’ salaries to begin to rise again, reports New York Times Neil Irwin.

United Technologies’ decision is of course an outrage, any way it’s looked at.  How can a major and very profitable corporation dare to only enrich its executives and shareholders, but not benefit its employees?  We know why.  Big Business has succeeded in reducing tax rates for the highest income tax brackets, and granting major loopholes for corporations to shelter their profits (both domestically and overseas) since the late 1970s, with the deregulation of whole industries and globalization of the workforce.

“American workers are reaping fewer of the gains of a growing economy in the form of pay and benefits,” said Irwin. “Shareholders are reaping more in the form of corporate profits. That shift has been one of the most important economic stories of the past several decades, and it’s the key to understanding stagnant wages for middle-class workers and a soaring stock market in the last quarter-century.”

It is why corporate profits’ share of national income soared to a record 14.2 percent in the middle of 2014, the highest in history, and only now is beginning to decline to 12.1 percent by the end of 2015, reports Irwin, as we edge closer to full employment.

 

Graph: Econoday

            This graph shows what corporations haven’t done with their profits, here called nonresidential investments, as a percentage of GDP growth.  The largest negative component of Q1 Gross Domestic Product (up just 0.5 percent in initial estimate) was business spending as nonresidential fixed investment.  It fell 5.9 percent for a second drop in a row. Business spending had been a plus for GDP until the last two quarters.

Instead, corporations in particular have been using their record profits to enrich their execs and shareholders, as I’ve said.  This is while consumers are still spending, which should boost nonresidential investment, since consumers make up some 70 percent of economics activity these days.  Personal consumption expenditures rose at a 1.9 percent annualized rate vs rates of 2.4, 3.0, and 3.6 percent in the prior three quarters (when GDP growth was higher).

The good news is that businesses are still hiring, but mostly in the lower-paying service industries, as higher-paying manufacturing jobs continue to move overseas.  So Bernie and The Donald are right in calling out U.S. corporations.  How is it benefiting American workers?  Stay tuned.  Maybe the outcome of this presidential election will help to answer that question.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Is Bernie’s Economic Platform Impossible?

Financial FAQs

It looks like Hillary Clinton’s nomination as the Democratic candidate is assured, but are Bernie Sander’s economic proposals impossible to achieve, as many mainstream economists maintain? Bernie wants to be able to introduce them into their platform at the Democratic convention.

He has some good ideas—such as tuition-free public universities, universal health care for all, a $15/hour national minimum wage, as well as achieve record economic growth, such as happened from 1950’s through the 1970’s.

“As President, I will invest $1 trillion to rebuild our crumbling infrastructure to put 13 million Americans to work in good jobs, says Bernie on his website, “invest $5.5 billion to employ 1 million young Americans and provide job-training to hundreds of thousands of others, and create a Clean-Energy Workforce of 10 million good jobs through a 100 percent clean energy system.”

Not possible, say economists like Nobelist Paul Krugman: “On health care: leave on one side the virtual impossibility of achieving single-payer. Beyond the politics, the Sanders “plan” isn’t just lacking in detail; as Ezra Klein notes, it both promises more comprehensive coverage than Medicare or for that matter single-payer systems in other countries, and assumes huge cost savings that are at best unlikely given that kind of generosity. This lets Sanders claim that he could make it work with much lower middle-class taxes than would probably be needed in practice.”

Actually, yes, Bernie’s goals are attainable, and have been achievable in the past. In fact, they mirror much of what was done in President Roosevelt’s New Deal, when conditions were worse (i.e., 25 percent unemployment), and government the employer of last resort. Bernie based his proposal on University of Massachusetts economist Gerald Friedman, a full-blown Keynesian economist who believes in government intervention to pull the U.S. out of its present economic malaise. Unfortunately Bernie is no FDR, able by himself to sell his program beyond union blue collar workers and our youngest, more educated generation that is looking for another new deal.

“While economists from different perspectives will differ on these fundamental issues,” says Professor Friedman in an initial response to mainstream economists that rejected his new deal plan almost outright (such as Krugman), “we have experience in the United States that demonstrates the lasting effect of government stimulus spending. Emerging from the depths of the Great Depression, New Deal stimulus spending (including monetary easing) nearly doubled the GDP growth rate from pre-1929 levels to 7 percent per year, 1933-40, and nearly 10 percent a year from 1933-44; between the 1929 peak and 1944, output grew to a level 25 percent higher than it would have been at the pre-1929 growth rate.”

Paul Krugman, a student of the New Deal, should know. He was one of the first economists to unmask conservatives’ attempt to unravel New Deal legislation—including their attempts to dismantle social security and Medicare—in his best-selling book, The Great Unraveling, yet he doesn’t seem to believe another New Deal is possible.

“The Republican candidates have been widely and rightly mocked for their escalating claims that they can achieve incredible economic growth,” said Krugman, “starting with Jeb Bush’s promise to double growth to 4 percent and heading up from there. But Mr. Friedman outdoes the G.O.P. by claiming that the Sanders plan would produce 5.3 percent growth a year over the next decade.”

However, Professor Friedman wasn’t talking about the Republican agenda to cut government programs—just the opposite. “Active Keynesian policy maintained faster growth rates for the next quarter century as well. From 1947-73, the unemployment rate averaged 4.7 percent and annual GDP growth averaged 4.0 percent; output in 1973 was 13 percent higher than it would have been at earlier growth rates."

Graph: Trading Economics

Much of that growth was due to massive infrastructure spending like our public freeway system, NASA’s moon landing, and other public works programs. It was massive government spending, in a word, that was possible with higher revenues from a maximum tax rate of 92 percent during the Eisenhower era, and an exploding baby boomer generation that gradually began to decline, until the ‘Reagan revolution’ cut the maximum tax rate to 40 percent.

Then we had the 1970s Arab oil embargo and skyrocketing inflation, due to the resultant gasoline shortage. Americans adopted conservative ways and began to believe government was the problem, at a time of greatest prosperity and a very low federal budget deficit.

It had also happened in 1937, when Roosevelt was convinced the Depression was over, and a Republican Congress called for a balanced budget and tax cuts. The result was a second depression that wasn’t over until WWII and government spending resulted in the full employment of women as well.

“Only when we abandoned Keynesian policies after 1973 did growth rates fall, says Friedman. “From 1973-2014, annual growth has averaged only 2.6 percent, almost a full percentage point below the pre-1929 rate, while unemployment has risen to 6.5 percent. Because of the slowing of growth rates after jettisoning Keynesian policies, output in 2007 was almost 30 percent less than it would have been at the growth rates of the 1947-73 period.”

Why the confusion over economic policy? The main disagreement seems to be the duration of government stimulus benefits. Krugman and other mainstream economists (some former Obama economic advisors) believe it is short term, only, whereas Friedman and some British Keynesians say history should be the final word. Spending on improving infrastructure, education, Research and Development (such as funded DARPA and the Internet), health care, not only improves lives, but also labor productivity, which stimulates more growth.

So it’s really a matter of history repeating itself, and its lessons being forgotten. Higher growth happened until the 1970s, and we don’t (yet) have another World War to bring US together, which is when we seem to realize the importance of government policies that boost growth.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

The Candidates Economic Promises vs. Pronouncements

Who should we believe of the leading candidates remaining in the Presidential primaries that last through June?  Bernie says he will tax the wealthiest enough to pay for his programs, such as free public college tuition and universal health care.  But that means raising middle class taxes, as well.

The Donald says he is such a successful businessman that he will negotiate us out of all our problems.  But how much can he be believed with four bankruptcies and three marriages already?

Polls show that economic issues top the voters’ concerns, so we should look at the how they will solve those issues.  Bernie believes he will save citizens money by converting to universal health care, because if everyone’s covered, the government will have the clout to negotiate down drug and hospital costs.

Though Trump says he won’t touch social security and Medicare, he would cut taxes for the wealthiest even more, which will only increase the budget deficit.  That’s because trickle-down economics doesn’t work (i.e., more tax breaks for the wealthiest), as evidenced by GW Bush’s two recessions and 8 million jobs lost during his 8 years.

            So Mr. Trump is trying to convince us that he is the better negotiator than President Obama, who has managed to pass so many progressive programs (like Obamacare) that conservatives say they feel betrayed.  His most hollow pronouncement is the Wall to keep out Hispanic immigrantss, when as many enter through Florida and New York, not to speak of California, and maybe Canada?  So he would have to build a wall that surrounds all of US!

Today’s economy is experiencing both record income inequality, since the wages and salaries of 80 percent of our workforce have barely risen above inflation for the past 30 years, and our degraded infrastructure.  And let us not forget Flint, but also the many other municipalities with drinking water problems.

           

Senator Bernie says we are the only developed country without universal healthcare and tuition free higher education.  Denmark is his oft-repeated example, but they pay for it with a maximum tax rate of 60 percent. Well, America had a maximum tax rate of 92 percent during President Eisenhower’s reign, which enabled US to build our freeway system, land on the moon, create the Internet, and we still had a 4 percent plus growth rate during that time.

So can Bernie’s promises be paid for?  We would have to reverse a trend of lower taxes begun in the 1970s.  That means bringing out new voters—mostly young—that have been sitting on the sidelines until now.  The New Hampshire primary results show that the new voter turnout was HUGE, in Bernie’s words.  But as Rachel Maddow pointed out on MSNBC, they were mostly Republicans.

His test will come with the upcoming Nevada caucus and South Carolina primary, with their much more diverse ethnicities.  The economic issues being debated this election year are really between facts and fiction—whether economic facts can trump political ideologies.  That’s the bottom line.  We, the United States of America can’t grow and thrive without our citizens having the benefits of every other developed country, and many undeveloped ones.

Those benefits may seem expensive, as in the Nordic countries, but the drag to economic growth from neglecting these issues is even more expensive—with the ongoing poor health outcomes, a crumbling infrastructure, and unprotected environment.

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Why Does Bernie Love Denmark?

Presidential candidate Bernie Sanders is breathing fire on the campaign trail these days, including his most recent campaign speech that advocated the breakup of too-big-to fail banks.  "We will no longer tolerate an economy and a political system that has been rigged by Wall Street to benefit the wealthiest Americans in this country at the expense of everyone else," said Sanders.

Then why does Senator Bernie Sanders love Denmark, and has been mentioning it and the other Scandinavian countries as ideal models for a developed country, one he would like the U.S. to emulate?

“In Denmark, social policy in areas like health care, child care, education and protecting the unemployed are part of a "solidarity system" that makes sure that almost no one falls into economic despair,” he said in a 2015 Huffington Post article. “Danes pay very high taxes, but in return enjoy a quality of life that many Americans would find hard to believe.”

 A recent Center For Economic Policy and Research report highlighted the differences between Nordic countries and the United States.  The differences are mainly because of their superior social safety nets.

           
For instance, the U.S. has the lowest average longevity at 78.8 years, vs. Denmark’s 80 years, while citizens of Iceland and Sweden live 82 years.  Do their colder climates have something to do with it?  No, more likely is the fact that they have to work fewer hours for almost the same income, with better health, educational and retirement outcomes.

  

It’s well-known that U.S. health care costs are double that of all other developed countries, as are infant mortality rates, while homicide rates are more than double of any other developed country.  We know, for instance, there are more than 32,000 gun deaths per year in the U.S., with the majority due to suicides—which also tells us the mental toll that comes with an inadequate social safety net that doesn’t support its citizens.

So it should be no surprise the U.S. has the highest income developed world, before and after taxes and transfers. The higher the Gini Coefficient number portrayed in the graph, the higher the inequality.  With the exception of the United States, there is a perfect correlation between market inequality and the role of fiscal policy in reducing inequality.

That is to say, western capitalist-oriented economies generate profits that go to the major wealth holders, so fiscal policies need to rebalance this effect.  And that is what the Nordic countries in particular, do so well.  “Countries with greater levels of market income inequality are more proactive at reducing inequality through their tax and spending systems,” says the CEPR.

Then why is there opposition in our Congress, particularly, to U.S. citizens having the same benefits as other developed countries, when we are supposed to be the richest country in the world?  It’s the successful opposition to higher taxes by the wealthiest among US.  The wealthiest have succeeded in reducing their taxes and tax rates since President Reagan, the first ultra-conservative Republican president.

The result is ugly—and shows the U.S. is not the land of opportunity for many Americans.  Instead, we have the result of a largely unregulated financial system--higher death rates, violent crime and incarceration rates, as well as inadequately funded health care, retirement, and educational systems. 

 

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen