Angel Creek Economic Platform of Bernie Sanders

Bernie Sanders' economic platform is based on the concept of income inequality. As a socialist liberal, his main thesis is that the U.S. economy is producing wealth, but, at the same time, a large income inequality. His platform explores an interesting dichotomy, namely the fact that, despite the continuous increase in economic productivity over the years and despite the tremendous advances in technology, which should theoretically balance a reducing of economic disparities, workers have to work longer hours for the same or lower wages.

Sanders's approach is more complex than just emphasizing economic disparities. He is interested in building his platform around a transfer of wealth, not only on wealth disparities, between the middle class and the rich and very rich classes. As all know, the U.S. was built around the proliferation of a rich middle class, so this transfer should be of concern to potential voters. At the same time, when talking about poverty, Sanders emphasizes child poverty, where the U.S., according to him and UNICEF, has the highest child poverty rate among developed countries (32.2%, compared to the second in the list, the UK, with 25.6%).

Therefore, Bernie Sanders's cornerstone of the economic platform is to revive the middle class. There are several ways it intends to do this, including major federal jobs programs, fueled by a strong investment in infrastructure, with an estimate that 1 trillion USD can provide as many as 13 million jobs. This is a return to the Keynesian type of economics, which was successfully used by F.D. Roosevelt during the New Deal. The idea is to make targeted investments in broadband, the electric guild, water infrastructure, freight and passenger rail, transit, bridges and roads with the aim of creating more job opportunities for the middle and lower classes, and hence, reducing income disparities. Sanders intends to fund the same by making corporations pay taxes on profits shifted offshore or earned abroad (Luhby). Currently, U.S. businesses only pay taxes on profits generated abroad if the same are brought back into the country (Luhby; National Tax Foundation Policy). According to CNN, this policy costs the U.S. economy approximately $90 billion every year (Luhby). Fig 1 below illustrates how the country stands to benefit from the implementation of Sanders' infrastructure plan.

Fig 1: AD-AS Model Showing the Effect of Sanders' Infrastructure Plan on the Economy

AD2

Price AD1 AS1

Level

AS2

P1

P2

Key:

AD2

AS -- aggregate supply

AD1 AD- aggregate demand

Y1 Y2

Real GDP

The aggregate levels of demand and supply currently are represented by curves AD1 and AD2 respectively, at price level P1 and income level Y1. If Sanders' infrastructure plan is implemented, the government would collect approximately $90 more in tax revenue, implying that it would have more to spend in government purchases. The level of aggregate demand would go up, causing the aggregate demand curve to shift from AD1 to AD2. The increase in demand would cause an upward pressure on the price level, causing suppliers to supply more. Increased supply would also be stimulated by the improved infrastructure, which would reduce the cost of production. Ultimately, the aggregate supply curve would shift outwards to AS1 at a lower price level and higher income level. Thus, consumers would benefit from low commodity prices and the government would have more income to use in improving the quality of life of the poor.

Along similar lines, B. Sanders has also pledged to increase the minimum pay from $7.25 an hour to $15 an hour over the next years, up to 2020. This would be another attempt to reduce income disparities, but, primarily, this would be focused on reducing poverty across the U.S. society, including targeting child poverty and other auxiliary aspects. Expansion of benefits should also include, according to Bernie Sanders, an expansion of Social Security benefits, overall protection of social security and consistent funding for Medicaid and Medicare programs.

A minimum wage inflation would boost the activities of both individuals and businesses on a large scale. To begin with, it would boost wages for the over 60 million workers currently working for less than $15 an hour (Williams). This would obviously imply higher disposable incomes, and improved abilities to meet the basic expenses of life. Businesses would benefit from this group's higher disposable incomes as a result of the trickle-down effect. They would report higher profits, which could be taxed to provide better facilities and improve the...

Aside from the trickle-down effect, businesses and individuals could also benefit from increased productivity and higher incomes as a result of increased psyche and stress relief (Williams).
From a cost perspective, however, Sanders' wage inflation proposal could have some serious flaws. For starters, wages would have to go up for everyone, not just those currently working below the minimum wage so that the skill-pay balance remains viable (Williams). This would increase the cost of doing business and business owners would be forced to respond by either cutting their jobs or hours, or raising commodity prices to reflect the increased cost of production (Williams). Either option would impact negatively on Sanders' plan to empower the middle and lower classes. Secondly, wage inflation could make current minimum-wage workers less inclined to learn new skills that would enable them move up the career ladder.

Economists caution against rolling out such a large increase in the minimum wage at the national level without fully weighing the repercussions of such a plan (Williams). They advise that a more viable approach would be to wait and see whether the plan works in cities such as Los Angeles, San Francisco and Seattle, which have already implemented the same, and to then make a decision based on that (Williams).

There is no question about the attractiveness of Sanders' plan; however, one could legitimately question how such a generous benefits platform would be funded. In order to bring the discussion within a macroeconomic framework, the budget is generally formed of income and expenses. Given that Sanders's platform incurs so many expenses, ranging from a doubling of the minimal wage to social security and to huge infrastructure problem, and knowing that the U.S. will no longer be able to run the kind of budgetary deficits it used to ten years ago, the legitimate question is where will Bernie Sanders have the money to cover all these expenses.

Taxation seems to be one of the methods he has proposed to use and this was clearly outlined in his platform. First, as mentioned earlier on, he proposes to close some of the taxation loops, whereby companies that move funds into fiscal paradises such as the Cayman Islands will either no longer be able to do so or will find more difficult conditions on moving profits back to the U.S.

At the same time, Sanders is also looking at higher taxation for Wall Street speculators, but also for a progressive estate tax, looking to obtain additional revenues from taxation on inheritance, but also from a variety of other sources. The common denominator remains similar: taxation of high-earning individuals or economic entities and returning the funds to the middle and lower classes, either in the form of benefits or in the form of infrastructure and similar projects.

Sanders's economic platform is not limited to this type of Keynesian approach. For one thing, noticing and emphasizing large disparities when it comes to unemployment rates, he aims to keep jobs in the U.S. For one thing, he is an oppose of the Trans-Pacific Partnership trade agreement, but this is in a larger line of economic philosophy that he proposes and that aims to limit the type of free trade agreement that the U.S. has established, such as the NAFTA or the CAFTA, allowing for the U.S. to profit from cheap labor in Latin America. Sanders believes that free trade agreements such as the TPP would be hard on the American middle class, which he is focused on empowering. His opposition is based on the premise that most of the countries that the U.S. will be trading with through the TPP platform are more labor-abundant and poorer than the U.S. When the U.S. expands trade with such countries, the level of national income in both countries rises; however, the increase is distributed upwards within the U.S., making the middle class worse off. This is according to the Standard Trade Theory of economics.

Some have, however, argued that the TPP would in fact go a long way towards creating a stronger middle class. They argue that commodities would be more expensive if everything were to be produced in the U.S. When the middle and lower classes cannot afford basic commodities, their quality of life deteriorates. The effect of international trade on the economy, particularly the middle class thus remains a subject of debate.

Sanders is also not in favor of permanent normal trade relations with China, because he sees this as an impediment in rebuilding the manufacturing industry in the U.S., which Sanders sees as the basis for reducing economic disparities and rebuilding the middle class.

Bernie Sanders proposes a new, somewhat Socialist economic platform for the…