In my Bernienomics article, I lamented the current fashionableness of socialism, formerly a subject that people would not discuss in polite company. I placed a lot of the blame on Democratic Socialist Senator Bernie Sanders and his rising popularity. I received several comments from readers which you may read along with my replies.
My Bernienomics article was republished in a local newspaper, the Santa Barbara Sentinel. I regularly get comments from Progressives and socialists objecting to my content and I usually choose to ignore them. But, I took the bait on two letters to the editor and you can read them and my replies. These letters were published in our sister publication, the Montecito Journal.
Letter from Robert Bernstein, “Why Not the Best of Both: Socialism and Markets?”
Jeff Harding “The Capitalist” offered a critique of Senator Bernie Sanders and his followers in the Sentinel of 29 June 2018. He accused them of supporting a system of socialism that is a known failure. He said they just want free stuff.
Do you like public schools? Public safety services like fire departments and police? Are you happy we had a military to help win World War II? Do you use the Internet? Public roads? Do you appreciate having Medicare and Social Security?
These are all “socialist” programs that operate outside of free markets.
On the other hand, do you agree that free markets can generate wealth and can improve efficiency and offer a range of choices?
If you said yes to both sets of questions, congratulations! You are like most people in this country. You recognize the value of government and of markets.
In 2014, Bernie Sanders laid out a twelve point agenda that drew wide support across the political spectrum.
- Those issues included:
- Investing in public infrastructure
- Reversing climate change through investments in sustainable transportation and energy
- Universal healthcare through Medicare for All
- Strengthening unions through a democratic “Card Check” system
- Expanding public education to include college
- Restoring the progressive tax system to increase wealth equality
He chose these issues because they will improve the lives of all Americans. And because they all poll at 65% or higher, regardless of party affiliation. Corporate media endlessly covers “wedge issues” that divide us. But on most issues that really matter to most Americans there is broad consensus.
But I would like to say a bit more about “socialism”. Sometimes great wisdom comes from the court jesters of our society. A couple of years ago Amtrak had some terrible accidents, mostly caused by a lack of funding for well-established safety systems. This funding repeatedly had been blocked by Republicans.
Bill Maher asked why do Republicans hate trains so much? He explained that it is because trains are funded in part through tax money. “Whereas freeways are natural geological formations.”
The fact is, government has always picked winners. Jon Stewart pointed this out as well in 2012. Not only does government subsidize private motor vehicles and air travel far more than bicycles and public transit, he noted. He also noted that he was glad we picked a side to win in World War II.
Most people have no idea how much winners are picked in our supposed “free market”. We often hear of Americans’ “love affair with the Automobile”. Using bikes and public transit is for weird people in Europe.
Do you have any idea how much we subsidize people to use automobiles?
This Sierra Club fact sheet “America’s Autos on Welfare” compiled a variety of public and private studies.
The numbers are on the order of $500 billion to over a trillion per year. The equivalent of $5-10 per gallon of fuel that we pay people to drive. Or about $5,000 to $10,000 per year per household. All so we can sit in traffic and crawl at speeds lower than bicycling speeds in many situations.
We can’t even have a debate about free markets vs. socialism until we know the facts of how far we are from free markets. I would totally give up the billion dollar a year subsidy for Amtrak if the 1,000x bigger subsidies for private motor vehicle use were abolished.
If we are going to subsidize transportation, how about if the government just gave people that $5,000/year subsidy and then let true free markets choose our transportation system?
But sometimes I do want government to pick winners. Markets are amoral. They have no human values. Markets prioritize profit. A wealthy person’s dog has more access to health care than a poor human being in a “free market”. In a democracy, it is one person, one vote. A market offers one dollar, one vote.
In engineering terms, this is called runaway positive feedback. Those with more money have more market power. Wealth flows to those who already have wealth. That was the point of the Monopoly game. What happens when all the wealth is concentrated? Game over.
I will offer a positive solution: How about if we take the best of socialism and the best of markets? Socialism can provide the infrastructure that allows markets to thrive. That might include universal health care. Public education through university level, including medical school for those who qualify. Good public transit. Public parks. Support for sustainable energy. Ensuring that climate change does not destroy large parts of our country and create international conflict.
Meanwhile, let the market offer an array of goods and services to build on that infrastructure. I don’t need or want government to grow my food, make my computer or decide which shoes I should wear.
Government also offers solutions where markets utterly fail. Big Pharma does not invest in drug research and development where it helps the most people. It will prioritize a “lifestyle drug” that makes billions in rich countries. While directing little or no funding to treat the ills that threaten billions of people: Malaria, tuberculosis or even finding new antibiotics in a world of growing antibiotic resistance. Those things are not as profitable.
But government can do so much more than that: Long range visionary investment. Investment in pure science and exploration.
Neil deGrasse Tyson is famed as an astrophysicist and as a science educator. People assume he would prioritize funding for science education. He said that is not actually his top priority. If you increase spending for science education, you might get a new generation of engineers who make a new version of smart phone. But if you invest in visionary projects like space exploration? You will inspire a new generation of scientists and engineers who will solve problems we never even thought of before.
Instead of creating a false dichotomy between socialism and free markets, why not harness the best of both for a better future?
[Mr. Bernstein’s letter is pretty typical of those who favor socialism and welfare statism as a solution to all what ails us. These people want utopia and they believe government will be able to deliver it. There are too many errors in his assumptions about how the world works and his views of the laws of economics for me to address them all and my reply was limited because of publication requirements.]
My reply to Robert Bernstein: “Why Not the Best of Both? Because it Won’t Work”
In my article I decried the rise of the appeal of “socialism” thanks to politicians like Bernie Sanders. I laid out an argument of why socialism is a bad way to run a country. Mr. Bernstein disagreed with my views and says that government contributes much to the economy and that we should embrace the best of socialism and capitalism.
The quick answer to his best-of-both-worlds proposition is that the negative outcomes of socialism far outweigh any positive benefits. And history proves me right.
He says that we already have “socialism” to the extent we have things like public roads, public education, public fire and police services, Medicare, and Social Security. As I said in my article, Bernie’s programs are more welfare statist than socialist. Socialism is where the government runs the economy from the top down. Welfare states redistribute income but largely let businesses run themselves.
While government-run schools and public safety districts are beneficial, they are mostly run at the local level and users more or less pay for these services through taxes. They also face competition. Many public schools are not doing a very good job educating our kids (Montecito Union and Cold Springs schools being outstanding exceptions) and voucher systems, charter schools, and private schools provide effective alternatives. Police have “competition” in that private companies provide tandem security services and private ambulances operate alongside our fire departments. In other words, we have choices.
Aside from these local services, there are no programs run by the federal government that operate efficiently, effectively, or without political interference. It is these welfare statist programs that I oppose. I oppose them not because they provide some benefits to certain folks; I am against them because they will break the bank while doing a bad job. And in every case, there are better alternatives.
Mr. Bernstein cites Medicare and Social Security as “good” socialist programs. Medicare is running huge deficits while driving doctors away from serving older patients. Obamacare is an ill-conceived failure. Social Security will go broke because it operates politically, not on market and actuarial principles as do competing private pension funds. Mr. Bernstein and Bernie want to double down on failure by having things like universal health care and free college education.
What galls me about liberals and Progressives is that they completely ignore the laws of economics and the historical record. They argue with “facts” that aren’t facts, they cite “history” that isn’t history, and they ignore the unseen consequences of their policies.
The history of government-run programs in welfare states is that they become too expensive and wasteful and provide inferior services. Canadians say they love their health care system, but if they can afford it, they jump the queues and come here for surgery and treatment. The reason these government-run programs fail is precisely because they are monopolies with little or no competition and are not run for profit.
Mr. Bernstein mentions Amtrak and properly points out that they operate poorly because of political considerations. That should give us a clue as to how all government welfare programs operate. The United States Postal Service is a better example of how the government fails to efficiently operate a delivery service. Somehow UPS and FedEx manage to do the same thing profitably.
Bernie’s solution for paying for all his “free stuff” is to increase taxes on the rich and corporations. You could tax away all the income of the rich and there still wouldn’t be enough to pay for them. The money must be borrowed. Progressives and Democratic Socialists like Bernie Sanders ignore our huge and growing national debt generated by these programs. It will burden our children and grandchildren for many generations. Who is speaking for them?
Why aren’t Progressives and socialists willing to consider effective alternatives to government-run programs? There are free market fixes that offer choice, stability, and long-term durability without increasing taxes. Instead they, like Mr. Bernstein, scorn free markets as being “amoral” when it is the most moral system ever conceived. Free markets, private property, and a just and impartial legal system based on natural law have brought about the greatest rise in wealth, health, and happiness in all of human history. Socialism has done the opposite.
What I don’t understand is why socialists would put faith in politicians and bureaucrats, the same folks whom they disparage as being greedy and amoral in the private sector, yet when they are in the public sector they would give them great power and expect them to act nobly for the “public benefit”. They don’t.
Mr. Bernstein’s solution to take the best of socialism and capitalism will fail, because the socialism side of the equation will eventually fail. To fix those failures, politicians inevitably pass more laws restricting capitalism, enlarge welfare programs, and increase taxes. These are dead ends as Sweden and the UK have discovered. In many countries it has led to tyranny.
There are too many errors of economics, history, and data in Mr. Bernstein’s letter to address here. It would be nice to think that we could sit down and rationally discuss things, but my experience with Progressives is that would not be productive. I just don’t believe in utopia.
[I also looked into Mr. Bernstein’s claim that automobiles are being heavily subsidized. He cites a Sierra Club fact sheet “America’s Autos on Welfare” to support this claim. The “facts” cited by the Sierra Club are not subsidies at all and are misleading cost suppositions about what economists call “externalities” (e.g., noise, congestion, trade deficits (?), lost property taxes from land converted to roads, parking costs, sprawl, etc.). But then, the Sierra Club is all about politics, not economics.]
Here is a letter from Leoncio Martins responding to my above reply to Mr. Bernstein:
[Mr. Martins has been a long-time critic of my articles. He, like Mr. Bernstein, favors most Progressive and socialist programs. He is criticizing my above response to Mr. Bernstein.]
Jeffrey Harding suggested in his letter to editor, “Why Not the Best of Both? Because it Won’t Work” that he only believes in his own economics data and fake history. And all “liberals and progressives completely ignore the laws of economics and historical record”.
However, an analysis of economics performance since World War II under Democratic versus Republican presidents shows that claims that republicans are better at managing the economy are simply not true. Data show that economy has performed much better during Democratic administrations. Economic growth, job creation and industrial production have all been stronger.
In fact, a 2016 paper by economists Alan Blinder and Mark Watson states: “The superiority of economic performance under Democrats rather than Republicans is nearly ubiquitous; it holds almost regardless of how you define success.” Fact-checking groups have investigated similar statements and have found time and time again that they are true. Moreover, past research shows that stock market returns are also higher under Democrats.
The findings for private-sector job growth are even more striking: businesses have added jobs at a nearly 2.5 times faster rate under Democrats than under Republicans, on average. In fact, the private-sector job grown gap between Democrats and Republicans is even greater than the gap when including government jobs.
Economists generally tend to support policies at least as liberals as the policies the Democratic Party supports.
– 71% of economists favor using government to redistribute wealth. In fact, the concept of the diminishing marginal utility of wealth is very well established and non-controversial economic principle. Even Adam Smith expressed the view that the government should redistribute wealth.
– Only 12% of economists take the views that the costs of the stimulus outweighed the benefits – a view passionately held by nearly all Republicans.
– 75% of economist favor government tuning the economy with monetary policy – and idea often vehemently rejected by the Republican Party.
– Zero percent – not a single economist in the entire sample- of economists agree with the central tenant of Republican fiscal policy that cutting tax rates would boost the economy enough to cause revenues to increase.
– 94% of economists support taking action to address climate change.
In terms of specific policies, economists consistently and overwhelmingly either support the Democrats’ policies or to be to the left of the Democrats. This stance on policy issues unsurprisingly translates into which party economists support.
So a fairer characterization of this new global economic age isn’t one of relentless decline; it is one that acknowledges workers have been able to prosper and make gains, but that two recessions – one the second worst in the past century – wiped out many of those gains. Or to put it another way, when the right policies and team were in place. Americans have been able to prosper in this new age. And the opposite has been true as well. So perhaps it isn’t globalization or bad trade deals that have caused the struggle of far too many of late, but policies and leaders not capable of navigating a vastly changed economic, demographic, technological and geopolitical landscape.
The last two presidents who argued for aggressive military action abroad and regressive economic policies at home brought us recession, income losses and a larger annual deficits. Those who argued for investment at home, an embrace of this new global age and its opportunities and a restrained multilateralism abroad saw long, sustained periods of growth, lower annual deficits and rising incomes.
No matter how one looks at the data- by relying on the findings of economists, by looking at states level or looking a federal data, and no matter which economic measure one looks at, the answer is the same: Democratic policies are performing better. And not just better- drastically better.
We have real data to guide us going forward. Americans have prospered and succeeded in this new age, and can do again – but only if we follow policies that look far more like the Democratic than the Republican party policies.
So when it comes to talking about the American economy in this new age of globalization, less pessimism, please, and far more attention to learning from and doing more of what has worked. Facts are facts and history is history Mr. Harding.
My reply to Leoncio Martins:
Hi Leoncio. It has been quite a while since I‘ve heard from you. You have been a long-time critic of my pro free market articles. This time you challenge my response to a letter from Robert Bernstein who in turn was challenging my original article in the Santa Barbara Sentinel (and on this blog) criticizing Bernie’s democratic socialism (“Bernienomics”). Mr. Bernstein thought we could blend socialism and capitalism and I made the case of why that wouldn’t work. (See Montecito Journal Vol. 24, Issue 36, Sept 6-13, 2018.)
Your argument for why I am wrong is that the economy has done better under Democratic administrations than under the Republicans. You get this from a study done by Alan Blinder, a Princeton economist, former adviser to Bill Clinton, and a former Fed official. You also cite data that “most economists” favor government intervention in the economy. Your information was obtained from the leftist-oriented Politics That Work website.
I will address Prof. Blinder in a moment. But first, my answer to your “most economists” argument is, so what. I concede that “most economists” are neo-Keynesian econometricians who favor government intervention.
I say they are wrong. And, I believe they have been proven wrong on both theoretical and empirical (data) levels. I believe that government intervention has been the cause of most of our economic woes. I believe that capitalism has been a boon to mankind. And, it’s not just me: most free market economists agree with me.
Because “most experts” say something doesn’t make them right. A few years back “most scientists” attacked Darwin on his ideas about evolution. Most “experts” persecuted Galileo, Copernicus, and their brethren. In Eastern Europe and much of Western Europe and Asia, “most intellectuals” thought Karl Marx, socialism, and communism were the inevitable waves of the future. We know how that turned out.
So, instead of making an argument that “most economists” think I’m wrong, it would be better if you argued specific facts, theories, and policies to support your belief that government intervention rather than capitalism has been the motivating force behind America’s prosperity. Then we could have a proper discussion.
Getting back to Professor Blinder and his study, “Presidents and the U.S. Economy: An Econometric Exploration” (an NBER Working Paper, July 2014)—I actually read it; you didn’t. If you had read it you would have discovered that it doesn’t say what you think it says.
Yes, he found a statistical correlation that “better” economic outputs occurred during Democratic presidential administrations. He then looked at these data and tried to explain the outcomes by examining certain events that may or may not have caused the differences. He concluded that the causes of the differences between Republican and Democratic administrations are mostly a mystery (p. 36). He admits that luck may have the most to do with the outcomes (p. 17) and that while “Democrats would no doubt like to attribute the large D-R growth gap to macroeconomic policy choices, … the data do not support such a claim.”(p. 35). In other words, there is no correlation between Democratic economic policies and the “better” outcomes. Thus you are misinterpreting this study.
Leoncio, I believe what you are really trying to say, using the Blinder study, is that Progressive policies are superior to free market policies. You can’t prove that as Blinder admits. So, it gets back to specific policies and economic theories.
I will stand by my statement to Mr. Bernstein that socialism doesn’t work and it would be a mistake to adopt such policies. For example, wealth redistribution through various welfare policies so favored by Progressives hasn’t reduced poverty in America.
Without arguing the definition of “poverty”, despite Lyndon Johnson’s Great Society “War on Poverty” welfarism and the trillions spent on those programs, poverty levels have not changed since 1965. According to the U.S. Census Bureau the poverty rate has remained at 12% to 15% for more than 50 years.
Please don’t tell me that we need to spend more or have better programs. Why don’t you admit that these programs don’t work and that the only force that has raised the standard of living of all Americans is capitalism.