Senator Bernie Sanders recently published an op-ed in the Huffington Post where he zealously charges numerous claims about the economy. In typical political theater, all of these claims are either grossly misrepresented or outright lies.
From “stagnant middle class” and “income inequality” to “child poverty” and “evil corporations”, his analysis employs one step thinking and over-generalization to draw incomplete conclusions. I will directly address some of his specific claims, but these are the general positions of Bernie Sanders.
Income inequality is one of today’s most popular economic myths derived from the misconception that wealth and income are fixed pies. Sanders makes the usual claim of the “1%” having a disproportionate amount of both.
Economic inequality is largely overstated through aggregate statistics, nor is there a connection between inequality levels and overall economic well-being.
In a paper for Columbia University, economists Emmanuel Saez and Wojciech Kopczuk analyzed wealth shares from 1916 to 2000 using more inclusive and exact definitions of income and wealth. They found that “there has been a sharp reduction in wealth concentration throughout the 20th century”. Around the 1920s, the top 1% held about 40% of wealth, but that has fluctuated between 20% and 25% in the last few decades. Saez, who worked with Thomas Piketty at one point, postulates that, in 2004, the top 1% held about 18% of total wealth, which is a historic low.
Robert Haig and Henry Simons developed the Haig-Simon metric. Their metric includes: wages/salaries, transfer payments (such as employer insurance), gifts of inheritance, income in-kind, and net increases in the real value of assets.
In a 2013 paper, economists found that Haigs-Simon is an attractive standard for calculating wealth and income because of its inclusive definition. By employing Haigs-Simon, observed growth of income inequality within tax brackets is dramatically reduced.
Based on the inclusive metric, top income shares have not significantly increased in the last 20 years and most income growth has been in the bottom 80% of earners. Also, by incorporating accrued capital gains and not just IRS-realized capital gains, economic inequality quickly dissipates.
Leftist pundits, such as Sanders, often cite the Gini Coefficient, which is the measure of a country’s inequality. The United States ranks next to different African countries, while egalitarian Norway ranks next to Afghanistan. The Gini Coefficient might measure inequality to a degree, but, if anything, proves that income inequality is not associated with economic well-being.
Bernie Sanders must not care to read further. Instead, he bases his claim off incomplete data by adjusting the CPI for inflation, which overstates it, and then excludes fringe benefits, which have doubled since 1970. For Sanders, pandering the base is more profitable.
“Income inequality” is expectedly followed by claims of “shrinking middle class”. In reality, however, the middle class has “shrunk” upwards to higher incomes.
According to Census Bureau data compiled by the American Enterprise Institution, 61% of families qualified as middle-class income in 1967. They define “middle class” as $25K to $75K per family per year. In the same year, upper-income families, or over $75K, only made up about 16% of families.
Fast forward to 2009 and things have dramatically changed. We have 43% of families in middle class incomes and 38% of families in the upper class. It’s also worth mentioning that lower incomes declined from 22.8% to 17% in that same time period.
A well-respected paper published by NBER further illustrates the increasing wealth and income going to the middle class. According to their findings: “using our broadest measure of available resources – post-tax, post-transfer size-adjusted household income – median income growth of individual Americans improves to 36.7% from 1979 to 2007”.
In other words, by expanding the definition of “income” and “wealth”, much like in the Haig-Simon metric, the narrative changes dramatically. Such a narrative, however, doesn’t make for vote-inducing rhetoric.
Sanders also claims that alongside the “decline of middle class”, there has been a decline in overall economic mobility. Nothing could be further from the truth.
A recent study published by Harvard measures the long run trend of economic mobility over the last twenty years, which has been difficult to accomplish due to data constraints. Michigan State economist Gary Solon said the Harvard study is the most comprehensive and in-depth research on the subject.
According to their findings, “percentile rank-based measures of intergenerational mobility have remained extremely stable”. They even address income inequality and note that the “top 1% income shares are not strongly associated with mobility”. Measures of social mobility have remained stable in the second half of the 20th century. The rungs on the ladder have grown further apart (wealth and income have increased), but the chances of climbing the ladder have not changed.
In Sanders’s own words, “children go hungry every day”. We have another misrepresentation of reality.
According to a USDA survey, only 3% of Americans do not have enough food to eat or express concern over their next meal. Interestingly enough, 93% of people living in low income areas reported taking a car to the grocery store, either as driver of passenger. That, however, does not coincide with the Senator’s narrative.
“Child poverty” is grossly inflated by how it is defined. In 2013, the income threshold for public school lunch programs was $43,567 for a four person family, or 185% above the poverty line. Sanders claims that “children go hungry” when they only appear to be going hungry simply because their families qualify for lunch programs. The details in a Southern Education Foundation study note that the $43,567 income level is used to measure “child poverty” in public schools, thus grossly embellishing the Senator’s rhetoric.
From Bernie Sanders’s article, he finds it “absurd” that, in 1952, corporate taxes were 32% of federal revenue and, in 2013, are only 11%. This, however, only states the share of revenue from corporations and has nothing to do with the actual corporate tax rate. During that time, federal revenue has obviously increased.
By digging further, the amount of corporate tax revenue has increased 46.5% during that time – from $186B to $273B (2013 USD; adjusted for inflation). Furthermore, by imposing such a high rate, the U.S. is really encouraging money to leave the U.S. for more financially appealing countries. In fact, the worldwide corporate tax system forces corporations to pay twice – first to a foreign country and second to the IRS. If Bernie Sanders wants money to stay home, he should reduce the corporate tax rate and simplify the tax code.
Sanders makes other unsubstantiated claims. He slams the student debt, despite most of it being held by the federal government. He repeats the minimum wage narrative with no regard for the voluminous empirical evidence to the contrary. He fears “seniors cannot afford their medication” when seniors are fourteen times wealthier than the younger generation. In his view, a job lost to China is a job lost at home. His narrative does not coincide with scholarly research showing that domestic employment actually increases from offshoring due to increased access to goods. He claims the rich don’t pay their “fair share” when, according to the CBO, the highest quintile of income earners pay almost 70% of federal taxes.
Much like Elizabeth Warren, who I have debunked in the past, Senator Bernie Sanders perpetuates numerous economic myths that are wholly disingenuous. Although observable on the surface, a more in-depth analysis provides substantial evidence that these supposed victimized groups have benefitted from economic growth.
If Bernie Sanders wants to help the people he claims to represent, I recommend strengthening economic freedom in order to promote economic growth. By repealing many of his favorite policies, the American economy would be a much more lucrative environment for all of us.
Originally Appeared on The Libertarian Republic HERE