Trump Hurts the Economy. Sanders Would Be Worse.

(Bloomberg Opinion) -- Senator Bernie Sanders is leading in four of six recent Iowa polls as Democrats prepare for presidential nominating caucuses on Monday. The self-described “democratic socialist” from Vermont is at the top of all six of the latest polls ahead of the New Hampshire Democratic primary on Feb. 11.

For those who are hungry for a moderate alternative to President Donald Trump, Sanders’s surge raises uncomfortable questions. Because while Sanders would provide welcome relief from Trump’s corruption, nativism and volatility, when it comes to economic stewardship, he’d be worse.

In the almost inconceivable event that a President Sanders were able to enact his full economic agenda, the result would surely be much worse than anything that’s likely to happen under Trump. In an analysis published last October, Brian Riedl, a scholar at the conservative Manhattan Institute, calculated that the Sanders proposals would cost as much as $97.5 trillion over a decade, would more than double the size of the federal government, and would turn approximately half of U.S. workers into federal employees.

The Sanders agenda includes Medicare for All, a multi-trillion-dollar plan to address climate change, a proposal to guarantee every American a job with the federal government, forgiveness of all student loans, elimination of tuition at public colleges, expansion of Social Security, enactment of paid family leave and increased spending on infrastructure and education. Riedl concluded that this would push total government spending (federal, state and local) to 70% of annual economic output, well above social democracies like Sweden (50%), Norway (49%) and Finland (57%).

Sanders would institute a wealth tax, new payroll and investment taxes, a tax on financial transactions and higher rates on existing taxes. Even with all this new revenue, there would be average annual budget deficits exceeding 30% of gross domestic product, according to Riedl.

Suffice it to say that this would be a disaster for the U.S. economy. But that’s really just a hypothetical problem because Sanders’s ambitions are not tethered to political reality.

Take Medicare for All. It’s impossible to imagine that even a leftward-drifting Democratic Congress would vote to abolish private health insurance, as Sanders wants to do.

Its constituents wouldn’t allow it. A large majority of Americans consistently rate the quality of the health care they receive as excellent or good, give their coverage high marks and report being satisfied with their personal health-care costs. The majority of Americans favor a private health-care system, and that system wields enormous political power, regardless of who is president.

If Senator Mitch McConnell remains the leader of a majority Republican Senate, that’s a bigger obstacle for Sanders.

So let’s consider what Sanders might actually be able to achieve. Congressional Democrats might support an expansion of the federal role in health care, for example, or more generous subsidies for four-year college tuition, funded by higher taxes on the top 2% or 3% of income earners along with higher corporate taxes. The White House could also impose regulations to address climate change.

Even this comparatively modest combination of more middle-class entitlement spending and higher taxes would probably add to the national debt when it needs to be decreased, reduce incentives for entrepreneurship and investment when they should be strengthened, decrease the U.S.’s international competitiveness and slow economic growth.

Concern about Sanders does not mean that Trump’s record of economic stewardship has been stellar. The president’s 2017 corporate tax reform should still lead to stronger investment, higher productivity and higher wages. But the paralyzing uncertainty from his trade war has frozen investment spending in spite of strong new incentives. His refusal to reduce projected spending on Social Security and Medicare compounds the problem of high debt and deficits — a problem worsened by his tax cuts. And as I noted last Monday, his tariffs have not only hurt the overall economy, they have reduced manufacturing employment as well.

It’s important not to exaggerate any president’s influence on the economy, which is shaped by powerful global forces — peace, turmoil, technology, migration, geography — and by the daily, individual decisions of millions of households and businesses. But Trump and Sanders both stand to move the economy over the longer term in ways conventional presidents would not. Each would expand — in a damaging manner — the limits of permissible presidential stewardship. In many ways, these potential longer-term changes to the foundations of the U.S. economy and society seem most critical when comparing the two.

Trump has offered support to white nationalists on several occasions. That’s an economic problem as well as a social and moral one because social stability is necessary for prosperity. His support for protectionism and attacks on the post-World War II liberal international order directly threaten prosperity in a way that, if sustained, could persist by changing perceptions of the U.S. abroad.

By weakening the rule of law and the culture and norms reinforcing it, Trump has eroded the foundations of a strong economy. By attacking institutions — for example, labeling the Federal Reserve chairman as an “enemy” — Trump weakens public confidence in them. And the president’s hostility toward immigrants threatens the U.S.’s place as the global destination for many of the world’s best, brightest, and most ambitious people.

Sanders would normalize democratic socialism. As my Bloomberg Opinion colleague Ramesh Ponnuru has pointed out, in the U.S., socialism “has been an accusation, not a boast.” A Sanders presidency, even if legislatively ineffective, would change the boundaries of which policy ideas are considered extreme. It would move the policy debate — and, over the longer term, the shape of actual policy — considerably to the left.

It would bring a class warrior into the Oval Office, sending a corrosive message that the government aims to punish success and is willing to use legislation and executive action to do so. The senator’s position is clear: “Billionaires should not exist.” This is exactly the wrong message. A president should be rooting for more billionaires to exist. Sanders would be trying to make society more just and fair. But he would do the opposite.

Sanders’s default view is that the government is the solution to any problem, and by being so eager to redistribute income today, he endangers the future generations that would pay for his programs through slower economic growth. This change in the relationship between the individual and the state would reduce economic dynamism, dampen risk-taking and sap the energy of workers and businesses.

On balance, Sanders is the more significant threat to the U.S. economy, in part because the damage he would inflict is likely to be more difficult to reverse.

But here’s my real conclusion: The U.S. deserves a better choice.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Michael R. Strain is a Bloomberg Opinion columnist. He is director of economic policy studies and resident scholar at the American Enterprise Institute. He is the editor of “The U.S. Labor Market: Questions and Challenges for Public Policy.”

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