Politicians are often being blamed for making empty promises. When their promises after having been checked turn out not to be empty the new charge against politician is populism. It appears that this happened to senator Bernie Sanders, one of two candidates for nomination of Democratic Party in the presidential elections.
Senator Sanders early in the race has shown his potential to energise and motive large base of Democrats. His popularity was salt in the eye of senator Hillary Clinton who was convinced that her race for nomination will be road lined with roses. Obviously she thought about roses without thorns. It did not happen this way.
Sanders is not only twice more popular among the young voters of Democrats base but unfortunately for Clinton this man appeals more to almost all of women – registered and leaning to Democrats – except those over 70 and 80 years old represented by for instance former Secretary of State Madeleine Albright.
After senator Sanders economic program was analysed by Massachusetts University Professor Graham Friedman, who concluded that it will bring about enormous positive change four economists, former advisors to President Clinton and Obama protested.
“Sanders program is big, and when you run it through a standard model, you get a big result. That, by the way, is the lesson of the Reagan era – like it or not.”
Professors Alan Krueger, Austan Goolsbee, Christina Romer, and Laura D’Andrea Tyson, former members of Council for Economic Advisors expressed concern that the claims in Friedman’s analysis “cannot be supported by the economic evidence”.
Professor Friedman, in his analysis, used traditional research model and found that if Sanders became president — and was able to push his plan through Congress — median household income would be $82,200 by 2026, far higher than the $59,300 projected by the Congressional Budget Office.
In addition, poverty would plummet to a record low 6%, as opposed to the CBO’s forecast of 13.9%. The U.S. economy would grow by 5.3% per year, instead of 2.1%, and the nation’s $1.3 trillion deficit would turn into a large surplus by Sanders’ second term.
Not every economist shares opinions of four. In all likelihood they may be alone in their judgment.
What is the secret of likely success of senator Sanders program? Why does the standard model generate such impressive results for growth and employment?
Another economist Professor Jamie Galbraith explains that it does because Sander’s plan to spur the economy is far larger than current policies or anything program to spur the economy supported by Hillary. Galbraith says:
What the Friedman paper shows, is that under conventional assumptions, the projected impact of Senator Sanders’ proposals stems from their scale and ambition. When you dare to do big things, big results should be expected. The Sanders program is big, and when you run it through a standard model, you get a big result. That, by the way, is the lesson of the Reagan era – like it or not. It is a lesson that, among today’s political leaders, only Senator Sanders has learned.
It is evident that senator Sanders is not offering populist slogans. He is seriously considering socialist solutions that he calls democratic socialism.
Socialist solutions may bring positive results for an economy in theoretical model. It is probably the final limit of their potential. Socialist elite imposes oppressive political system, which controls centrally planned economy to prevent citizens from involvement in social and political life. Elite uses “socialism” as smokescreen for monopolising of every aspect of life in such state.
Monopoly of economic and political power in hands of state brought hundreds of millions into a tragedy and misery. In the age of automatisation and robotisation when disruptive forces are changing permanently labor market across every industry the dream about massive infrastructure plans must remain as… a dream. Full employment strategy cannot be solution when invention of the only one mobile telephone liquidated at least one million jobs.
“The vast majority of populations do not have sufficient means to support their families after their jobs were liquidated by automation”
The logic of economic growth, which becomes much more capital intensive requires debates about the methods of wealth creation. Transforming economies are in need of new capital.
Unfortunately the most important debate has not started yet. Politicians and opinion makers seem not be able to grasp the nature of current economic slowdown. The vast majority of populations do not have sufficient means to support their families after their jobs were liquidated by automation. They do not have access to the wealth-creation mechanism, capital credit, as corporate finance world, which would supplement their income and help to build stable financial foundation. The removal of legal and institutional barriers to ownership of productive capital for every child, woman and man would be the real source of increase of median household income.