A Twelve Step Program to Restore Prosperity: The Bernie Sanders Plan

Originally posted on December 7, 2014 at the New Economic Perspectives blog.

Here’s a summary of the plan Bernie Sanders has set out, along with my comments (in italics).

1.) We need a major investment to rebuild our crumbling infrastructure. $1 trillion investment to create 13 million decent paying jobs and make this country more efficient and productive.

Agreed, but let’s not settle for a mere 13 million jobs. We need twice that. And, of course, the “price tag” is irrelevant—so long as we create useful jobs that pay living wages, we can “always afford” to pay for them. By creating jobs we are not just investing in infrastructure, but we are also investing in our people, enhancing their participation in our society and providing them with the means to support their families. We can always afford 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. 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. Transforming our energy system will not only protect the environment, it will create good paying jobs.

Agreed. Millions of additional jobs can be created, at the wage and benefit package we decide to pay. We can train an army of the employed to bring the USA into the 21^st century, much as the New Deal’s job programs brought America into the 20^th century. We’re going to need to go well beyond these infrastructure-type jobs, however. We also need to put people to work providing care services for our aging population.

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. Study after study shows that when workers have an ownership stake in the businesses they work for, productivity goes up, absenteeism goes down and employees are much more satisfied with their jobs.

Mostly Agreed. We need to think beyond restricting job creation to our nation’s private undertakers. A federal government program of direct job creation—at a living wage—eliminates the necessity of using tax breaks and wage subsidies to try to induce the undertakers to create jobs. A Universal Job Guarantee Program ensures everyone can work at a living wage. Private undertakers will need to offer similar conditions in order to compete. However, there is room for workers’ cooperatives: let workers join together and propose projects. (This is what Argentina experimented with in its Jefes program.) The Job Guarantee program can pay wages in the coops for some predetermined period (say, 18 months), letting them get on their feet. If the coops can out-compete private undertakers, let the undertakers go under.

4.) Union workers who are able to collectively bargain for higher wages and benefits earn substantially more than non-union workers. Today, corporate opposition to union organizing makes it extremely difficult for workers to join a union. 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.

Agreed. Eliminate the barriers to unionization. Capitalism is a rigged game, giving far too much power to the undertakers. As J.K. Galbraith argued long ago, unions are a necessary second leg to the countervailing powers stool. The third leg, of course, is government. But our government’s leg is hanging on by a thin thread. If anything, unions need more power today than they had in the early postwar period because our government is practically impotent.

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.

Yes. $15 per hour with full and free health, childcare, education, maternity leave, and retirement benefits would be a start.

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.

Agreed, and the best way to ensure that is to provide a universal job guarantee program that pays a living wage with full health, childcare, education, maternity leave, and retirement benefits to ensure that no private undertaker could pay women less than that. Beyond that, we’ll need to ramp up anti-discrimination enforcement.

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.

Here I have to mostly disagree, because I think the Senator is focusing on the wrong issue. We do need fair trade—to ensure that global undertakers do not exploit desperate workers around the world. We need to block imports of any goods or services produced in inhumane conditions anywhere in the world. However, NAFTA and so on have little to do with trade. These have to do with protecting “intellectual property rights” and forcing “free markets” run amuck on the rest of the world. We need to overturn all of these “agreements” that have devastated developing nations and enriched Wall Street, Silicon Valley, and USA Agri-business. Forget the factory jobs. Factories will never again be an important source of work for Americans. Most factory jobs will be taken by robots, anyway. What we need, instead, are good jobs in America. Forget about taking jobs away from China and the developing world. When the USA and the UK developed, they did not have to compete for factory jobs with more developed and wealthier nations. Give the developing world a chance to join the developed world. The already wealthy nations need to focus in jobs in services, with a scattering of jobs in high tech industry, agriculture, and construction. Our workers today and in the future will work with humans, not with machines.

8.) In today’s highly competitive global economy, millions of Americans are unable to afford the higher education they need in order to get good-paying jobs. Further, with both parents now often at work, most working-class families can’t locate the high-quality and affordable child care they need for their kids. 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.

Universal, free, education is needed from cradle to grave. In public schools. All Americans, no matter their age, should have a right to free public school education from pre-school through graduate school. There is no plausible excuse for rationing public school education. Our nation can no more have “too much education” than it can have “too much happiness” or “too much kindness”. Here the only question is whether we have the resources to expand the supply of public education. At the college and university level, the answer is obvious: the supply of PhDs greatly outstrips the number of openings for faculty; all we need to do is ramp up federal government financing of public universities. At the elementary and highschool levels, we need more teachers. The solution is better pay, and free education at our teacher’s colleges. One of the main barriers to producing more teachers is that the cost of college is prohibitive—who wants to incur tens of thousands of dollars of debts to become a lowly paid school teacher? Eliminate all financial barriers to college education.

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.

Agreed with the sentiments but we must go further. Shut them down and investigate their leadership for crimes. Indict where there is evidence. Prosecute and convict as many as possible. And then incarcerate the guilty. Breaking up Wall Street’s banks is not sufficient. They should be shut down, and a stake driven through their evil vampire blood sucking hearts. Return to small, segmented banks and mutual saving and loan associations. They promoted the capital development of the economy.

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.

Yes, take Wall Street out of our health care system. Provide free universal health care with a single payer—the federal government. Limit private health insurance to elective nose jobs and tummy tucks.

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.

Agreed. Eliminate financial barriers to seniors working—let them collect their Social Security benefits while they continue to work without penalties. And guarantee employment at a living wage to any senior who wants to work. And, yes, raise all Social Security benefits to the maximum now paid. It makes no sense to penalize workers who made less during their working lives with less retirement pay. Those who earned more while working had a chance to accumulate private savings and private pensions. There is no justification for giving them more generous Social Security benefits. Pay all seniors a living pension through Social Security and give them free healthcare through Medicare.

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.

Partially correct. Eliminate preferential treatment of capital gains and unearned income. Tax all income—no matter the source—at a progressive rate. Impute all corporate profits to owners and tax it as income. Eliminate all corporate tax breaks and subsidies, but also eliminate corporate taxes. Tighten accounting standards to eliminate tax avoidance by shifting or hiding profits. Punish off-shore income by imputing it to owners with double the tax rate applied to income earned domestically. The issue is not “lost” tax revenue. Uncle Sam has the magic porridge pot—he doesn’t need the revenue. The issue is fairness and promoting the public interest. All income—no matter the source—benefits the recipient. As we economists say “money is fungible”. Whether it is wage income, interest income, or capital gains. At the same time, no public purpose is evident in moving income offshore for tax purposes. Discourage that by taxing it at twice the normal rate. Not because Uncle Sam needs it, but because he ought to discourage creation of tax havens. Yes, I know it is hard to catch. So tax it and then impose very high penalties for evasion. Uncle Sam will never catch all evaders, but he can make them fearful.

Outlaw corporate buy-backs. Eliminate stock options awarded to CEOs, or tax gains on those at confiscatory rates. No public purpose is served by either corporate buy-backs or stock options. If corporations do not serve identifiable public purposes, take back their corporate charters and subject owners to full personal liability for all debts and misdeeds of the firms.

Let’s see how many people would want to own Citibank or British Petroleum if they would be held liable for crimes and misdemeanors of those firms.

To be clear, I think Senator Sanders has laid out a bold plan, most of which progressives ought to embrace. I won’t be holding my breath to see if Hillary will match it.

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18 RESPONSES TO “A TWELVE STEP PROGRAM TO RESTORE PROSPERITY: THE BERNIE SANDERS PLAN”

1. Jim Shannon | December 7, 2014 at 12:25 pm |Thanks for posting and your fabulous response.
   Clearly the destruction of consumer wealth and ability to consume, is not working and will not work in the long run!
   The transfer of wealth to the .01% Ruling Class must stop and it must be reversed!
   
   
2. John Casper | December 7, 2014 at 12:35 pm |Thank you!
   
   
3. RoswellJohn | December 7, 2014 at 2:10 pm |And a copy has been sent to Bernie Sanders?
   
   
   • Brian | December 7, 2014 at 11:45 pm |Not a bad idea! Applaud his bold plan and courage, while making some gentle suggestions for improvement.
     Especially the taxation idea, I think these views can be more politically acceptable if one takes a less “harsh” view on income taxation, but focuses on a FTT, cap gains, dividends…since even conservatives, at least open minded ones, seem willing to admit these are not productive sectors to society.Though it is amazing to see someone actually call for INCREASED Social Security spending, a jobs program, higher wages and a true single payer health system. What a breath of fresh air.
     
     
4. Geoff Coventry | December 7, 2014 at 4:03 pm |Excellent. I also like the concept of consumer choice in health care. I.e. single payer, but not single provider. Give HSA accounts to all and let consumers “buy” the health care they need should help increase customer service and lower costs. For #2, a national high-speed electric rail system, plus electric transit in all major cities, will go a long way to addressing the transportation side of climate, assuming a wholesale shift to renewable energy on the grid.Now, how to get this message to the voters and to the elected…
   
   
5. Bill G | December 7, 2014 at 5:10 pm |What can one say but Amen!
   May any genuinely potent, benevolent deities in the vicinity take this and run with it.
   It’s good, at last, to read the thoughts/remedies of sane and grounded politicians and economists (I’m assuming there are others in the US whose understandings and vision are as clear as those expressed here)!
   
   
6. lrwray | December 7, 2014 at 9:38 pm |Thanks for comments. Amazing, five comments in a row and not one said all this is politically infeasible.Of course it is. I know that. Bernie Sanders knows it. But someone has to say this stuff. Senator Sanders is probably the only elected rep who would say what he said. Congress never leads. The most we can hope for is that Congress will follow. It is up to you to lead.
   
   
   • Brian | December 7, 2014 at 11:38 pm |Yes, let’s hope he runs in 2016.Us youth need a voice, many of us have no faith in government or the private sector, how could we?, and so many of my friends seem to alternate between the need for a Ron Paul and the need for a Bernie Sanders. I think there’s simply no coherent alternative out there, so there’s no person or platform to turn to. We need these ideas out there.
     
     
7. Brian | December 7, 2014 at 11:28 pm |Bernie is possible the only person in Congress willing to tackle these issues head om, or even aware what the real issues even are!
   He should run for President to get these ideas out there. It’d be a long shot of course, but it’d at least get these thoughts out there and people talking about it. Just amongst friends of mine and conversations I’ve had, people are more open to the ideas than one may imagine, though of course there’s lots of hostility. However, it needs to get out there, I fear my generation (25 and under) has bought into the Ron Paul ideals…since he was the first alternative voice and dedicated Congressperson most of us knew, we need Sanders to try and start a counter wave!
   
   
8. Macrocompassion | December 8, 2014 at 3:18 am |Let us consider the repair infrastructure situation in full.
   1. Money for paying for these improvements will result in the workers having more to spend and consequently there will be greater demand for goods.
   2. Greater taxation or inflation or national borrowing, all to provide this additional national spending power will take from the current employee some of his earnings either directly or indirectly, with the result that the associated demand for goods will fall.
   3. Consequently the (Keynesian) claim for pump-priming by activity 1. will not work and all that it will do is to redistribute the money circulation not raise it in terms of actual goods or the activity needed to make and consume them (even if the money sums may be greater).
   4. As pointed out by Henry Hazlitt in 1946, to understand how our social system works we need to examine all the related aspects. Thus a little scientific logic should replace the intuitive approaches of the past.
   
   
   • entreposto | December 8, 2014 at 9:32 am |You haven’t accounted for the existence of the output of these extra employed workers. It isn’t “pump-priming”. It is production. It is building infrastructure and providing services that people will use today and far into the future. No one in this country needs to drive very far to see the output of the CCC, to use that output, and to realize that that output is still in use. We can organize the economy to build the mansions of the super-rich and staff their bunga-bunga parties, our we can organize the economy to provide an abundant and moral lifestyle for the many.
     
     
   • John Casper | December 8, 2014 at 9:54 am |Macrocompassion,You wrote:“2. Greater taxation…”Dr. Wray wrote, “… The issue is not “lost” tax revenue. Uncle Sam has the magic porridge pot—he doesn’t need the revenue. …”Did you not read that part or did you not understand it?Thanks in advance.
     
     
9. Mitch Shapiro | December 8, 2014 at 11:59 am |Reading this post (as well as Joe’s take on Sanders’ proposals), following shortly after your Lakoff-informed post the other day, underscores to me the value of getting an MMT-informed policy-advocacy book published before the 2016 election cycle.As I see it, an underlying theme and purpose of the book would be the appeal to bi-conceptuals discussed in your earlier post. The substance would be a layperson-friendly, bi-conceptual-targeted explanation of MMT’s policy relevance, followed by MMT-informed chapters describing the progressive possibilities that MMT tells us are (yes, really and truly, and without causing inflation, insolvency or other imaginary horrors) achievable in high-profile policy arenas like jobs, education, healthcare, energy/climate change, infrastructure, housing and perhaps a few others (including “reinventing democracy” as discussed below).I’d love to see you and/or Stephanie take the lead on this, with input from other leading MMT thinkers like Bill Mitchell, Pavlina Tcherneva, etc., backed up by a team of non-academic editors/reviewers whose main job would be to increase readability for the non-expert target audience (consider me a volunteer for that second group).One of the phrases that stick in my head from reading MMT-related material is that an understanding of MMT “expands public policy space/options.” A key goal of the book would be to present an inspiring yet realistic picture of what that expanded policy space could look like…essentially a New Deal for the 21st Century/Information Age.While the book would include sufficiently meaty and well-informed substance covering each policy arena, it’s most important goal would be to provide a compellingly and realistically positive alternative to the sorry state of today’s policy debate which, even at its best (e.g., Sanders’ proposals), is weighted down by chronic, wrongheaded and ultimately paralyzing deficit fears.Though the prospects for progressive political success in 2016 don’t look especially good to me, it seems that the best prospects for shifting the tide are to have this kind of book available later this year. And for its author(s) to be on a physical and virtual book tour, sharing a concise, well-honed and potent message designed to elicit an MMT “aha” realization among those who hear it, opening their minds and hearts to that “expanded policy space” and the much brighter future it makes possible…and to rekindle their faith that this future is worth voting, organizing, working and fighting for.In retrospect, Obama’s “Yes We Can” seems (sadly) to apply mainly to getting him elected. Once in office, he never was able to explain how his rousing speechmaking actually applied to our nation’s many problems and policy challenges. Among other things, his misunderstanding of economics made this virtually impossible. This book would make clear that, yes, we REALLY can (afford to) achieve the better world Obama seemed to point to in his campaign speeches, but largely abandoned in his policy proposals and strategies.And, to flesh out the picture even more fully from a political perspective, I’d include a chapter focused on something Joe Firestone and Nancy Bordier have written about here-an Internet-based platform to support healthy bottom-up democracy, so that “we the people” could tell our politicans to either join the growing MMT-informed progressive policy bandwagon, or be replaced by “we the people” acting as informed, empowered and responsible citizens employing 21st century tools for exercising their sovereign powers in a democratic republic.
   http://neweconomicperspectives.org/2014/09/re-invent-democracy-platform-mmt.html#more-8625While development of such a platform could be funded by private investors, I think a strong argument can be made that enhancing democracy is an extremely valuable public good, and that it feeds a virtuous cycle of healthy political processes feeding healthy policies and vice versa. That suggests to me that federal funding to support “reinventing democracy” efforts could be a core plank in a truly progressive political platform (though that funding should not have any strings attached to enable the government to control these platforms).
   
   
10. Calgacus | December 8, 2014 at 3:58 pm |Macrocompassion: As pointed out by Abba Lerner in his 1951 Economics of Employment, Henry Hazlitt’s Economics in One Lesson (1946) is a very good book that repeatedly and unconsciously makes the assumption of natural full employment. This assumption is nonsensical in a money-using society. #2 needs some clarification. It is not the current employee who may possibly be taxed, but the future employee. The possible taxation is not to provide the additional spending power, but to ameliorate the inflationary effects of the additional spending power which is already in existence. To speak otherwise is to reverse cause and effect, to reverse timing. One should consider the amounts, try to think quantitatively a bit. This later taxation may cause some pain – but much less than the current pain of mass unemployment caused by not spending. Lerner says something like – not spending for this reason is like avoiding rain by jumping in a lake. See Lerner’s chapter on the National Debt, particularly the illusory return to sound finance. Everything else equal (it never is), it is (a little) better for finances to be sound (to spend less, to have a lower national debt). But functional finance is sounder than sound finance! #3. This is not “pump-priming”, but government spending. There is no other way for a monetary economy to work. People have to have money to spend before they spend it. Money is not ab initio a commodity, but credit. No goods can be produced by the division of labor without credit. The inadequate foundations, defects of Austrian monetary theory are shown here. This also ignores the manifest success of “Keynesian” expenditure, as in the First New Deal. Paul Samuelson said that what finally convinced him to become “Keynesian” was the “Roosevelt upturn” of 1933-1937. (See Madrick’s Seven Bad Ideas) Which theories like Hazlitt’s were at a loss to explain, and which is why the plain fact that struck Samuelson, inconsistent with inadequate theories, has been airbrushed out of history ever since. 4. Yes – Hazlitt and other Austrians did contribute to debate, to sharpening of ideas. But people like Keynes & Lerner and their successors did a better job of “examining all the related aspects”.
    
    
11. Kyle | December 9, 2014 at 10:14 am |A question for Mr Wray. I’ve read the MMT primer and believe that I understand the implications presented in it’s arguments. My question is; Couldn’t the private sector deficit/public sector surplus also be represented as a lack of ‘sufficient means of exchange’ in the general economy?Thanks,
    Kyle
    
    
12. rhcaldwell | December 9, 2014 at 10:24 am |A nice, compact platform, with which I wholly agree. Now all we need is a fair vote on the issues, absent money-driven misinformation, lies, distortion, vote suppression, and fear-mongering. Hmmmm….
    
    
13. Brian | December 9, 2014 at 6:40 pm |To think, the “third rail of politics” cutting Social Security, has gained near mainstream levels of support, and in 2012 the GOP platform was, not so subtly, calling for the slashing of SS, Medicare and Medicaid. Amazing how things have changed from when Ike called opponents of Soc Security “stupid” and that any party attempting to eliminate them would not be heard from again….Shame my fellow 25ers and under have little appreciation for US history!I think calling for an EXPANSION of Soc Security is perhaps the boldest statement Sanders made. I actually think this could be one of the politically easier ones to achieve, since the public is so worked up about deficits, assuming they adhere to the wrong notion of “tax and spend” Soc Sec expansion is still an easy one to tackle, remove the limit on FICA contributions. It’s around $110,000 I believe? Simply remove that limit, AND add dividend/cap gains to FICA as well. Either of those two, especially the latter would be enough to “keep Soc Security going” in the public’s eye. I know of course there’s no need to raise the revenue, but still a potentially acceptable solution, especially if the finance sector is who has to “pony up” more dough.“They crashed the system and wrecked so many people’s retirement plans, it’s time to have them pay into Social Security now!” I can see it already!
    
    
14. LRWray | December 10, 2014 at 11:22 am |Kyle: instead of arguing there’s too few means of exchange, I’d put it as: lack of private sector income. This is probably what you mean but is less confusing.Brian: the problem is that linking tax increases (eliminating the cap, for example) just plays the losing game. While opponents of SocSec overstate the “financial problems”, if you just run the numbers on benefits and “revenues” for SocSec you will indeed get a shortfall. And if you run the numbers on “money’s worth” you find that SocSec retirement (narrowly defined) is a “bad deal” already for higher income earners and becomes a “worse deal” if you take away the cap. And I’d like to make it an even worse (relatively speaking) deal by raising incomes at the bottom. So we need to drop that wrong and dangerous metaphor that payroll taxes “pay for” benefits. It is a loser.