Bernie Sanders and the Socialist Unicorn

We've been through this before. What began as the Inevitable March to the Coronation of Queen Hillary is turning into Hillary's Worst Nightmare: an attractive candidate, Bernie Sanders, is running in the Democratic primaries that is campaigning to Clinton's left and cutting into her popularity. In 2008, it was Barack Obama, the candidate who convinced Americans that through simple but forceful political will, he would rescue the American economy from recession and transform this country into an oasis of economic "fairness."

While Obama pretty much has governed as he promised, the economy languishes, a tiny fragment is able to snag whatever real gains the anemic economy is producing, and it is abundantly clear that a stagnant economy for most people is in the foreseeable future. That Obama has been able to convince the majority of Americans (with lots of help from his sycophantic media) that the entire bout of economic stagnation is wholly the fault of George W. Bush is nothing short of amazing, but there it is. In fact, he claims that the only reason the economy is not booming is because the Republicans (who get to take on the role of Emmanuel Goldstein) are blocking prosperity, not that Republicans are exactly the soul of responsible governance.

Now, there is nothing good I have to say regarding the Republicans and the economy. The Bush administration really did manage to move the economy from the collapse of the tech bubble (which fell apart in late 2000) almost seamlessly into the housing bubble, all with a bit of help from Alan Greenspan at the Federal Reserve System, who not only provided the low interest rates, but also promised "liquidity" to those financial entities that might run aground pursuing the near-worthless "investments" of "mortgage securities" and their companion "sub-prime" paper.

If President Obama, Clinton, Sanders, and the obscure contender, Gov. Martin O'Malley, were denouncing the triggering of a financial bubble as a cover for a weak economic policy during the Bush years, that would be one thing. Instead, they denounce what they believe to be a mystical characteristic of capitalism in which wealth always accumulates to a tiny group of people (at the expense of the general public), and then call for more of the same policies that are driving the U.S. economy to ruin and creating the very results they claim to condemn.

The modern American character seems to demand more of whatever is currently damaging the economy. For example, since Obama took office in 2009, the Federal Reserve System has pushed down interest rates to near zero, taxes have risen sharply, government spending has exploded, the regulatory state has advanced as though it were on steroids, and the president has escalated attack rhetoric against American business in general and entrepreneurs in particular. Not surprisingly, the economy has not recovered well from the 2008 crisis. And, not surprisingly, the president's attacks on private enterprise are immensely popular.

No candidate does a better job of simultaneously promising to wreck private enterprise and promising to increase our economic standard of living than Bernie Sanders. While Obama and Clinton have given lip service to capitalism, Sanders wants no part of it. Instead, the once-Trotskyite True Believer actually believes that we can have both complete state control over the economy and a more robust economy than what currently exists, with the "re-creation" of the American middle class.

How does Sanders propose to carry out this plan to create the socialist paradise that none of his ideological predecessors could construct? His campaign has created an 11-step "plan" that has been put into a simple meme, courtesy of the hard-left Occupy Democrats:

This is the sort of things that would make modern Americans excited, as it creates a number of promised "benefits" in which others will be sent the bill, most notably the so-called One Percent. (Sanders already has endorsed the 90 percent marginal tax rates of the 1950s as an ideal place to start over with tax policies.) Furthermore, even though Americans lead the world in per-pupil spending in government school systems, the only "acceptable" plan to a socialist like Sanders is to spend even more, and if that does not work, spend more.

As one looks through the list, a few things seem to stand out. First, and most important, the Sanders "plan" depends heavily upon the government forcing up real production costs for businesses. To put it another way, Sanders seems to believe that if government makes the creation of goods to be more expensive, that will raise real standards of living for people who already are not wealthy. He hardly is alone here; the U.S. Government has been doing everything possible to force up real business costs in the name of "increasing incomes" for owners of factors of production.

Second, Sanders advocates the expansion of services that would be "free" to Americans with, of course, the "One Percent" paying for everything. No doubt, he would claim (and he has the company of Paul Krugman here) that all of these new expenses would "stimulate" the American economy because, after all, someone will be forced to "spend money."

The idea seems so simple and so straightforward that even opponents like me can understand the logic behind it. Socialists believe that owners of capital (see Thomas Piketty and others) over time receive increasing returns to capital while individual laborers, over that same period of time, receive diminishing returns to their labor. In the vernacular, private ownership of capital and means of production in general create a situation in which, scientifically speaking, the "rich get richer, and the poor become poorer."

This was the idea behind Marx's views on capital, and modern generations of economists and politicians have taken it to new levels. Because of this unequal situation, over time capitalists gain larger and larger shares of income while workers become impoverished. Capitalists, however, are not able to spend enough money to keep the economy afloat and workers are too poor to spend much, so over time the economy falls into the doldrums, which is where things stand today.

Whether one is examining this situation through the eyes of a Marxist or through a Keynesian (and Keynesians pretty much believe that when an economy is in the infamous "liquidity trap," it will implode in the same manner socialists believe will occur unless government intervenes through more spending), we see pretty much the same recommendation: redistribute income and spend, spend, spend. This "doctrine" is self-evident in the eyes of the Left, and the leftist lack of understanding of capital is so complete that it almost is impossible for people who believe these things even to acknowledge that there could be an alternative explanation for the boom-and-bust cycles, and for this economy's pathetic performance the past seven years.

This is Bernie Sanders' world, too. In Sandersland, capital is useful only in the spending that occurs in building and maintaining it, and the interests in capital are contrary to the interests of labor. As for the production of goods themselves, in Sanders' socialist world, goods automatically appear on the assembly lines and in even greater abundance if those assembly lines either are owned or at least heavily regulated by government. Furthermore, the quality of those goods is identical to anything produced by private enterprise.

There are lots of reasons as to why this is not true -- certainly Ludwig von Mises and F.A. Hayek showed why during the so-called Economic Calculation Debate -- and none to "prove" they are true, but Sanders has chosen to be a True Believer, anyway, so any economic plan a Sanders administration would hatch would be pointed toward governmental activities aimed at measures whose implementation would result in shrinking the U.S. economy. No doubt, Sanders would claim his vision is "expansionary," but no economy can expand by having government force up real costs of factors of production.

So, why the appeal? One explanation has been that Sanders is the "Ron Paul of the Left." At one level, I can understand why people might be attracted to his candidacy. Like Ron Paul, Sanders has not used his office to seek personal financial gain. When he was mayor of Burlington, Vermont, Sanders sometimes slept in his office and was famous for working hard and being available to his constituents.

However, Sanders' so-called honesty does not render him an economic expert, and it is clear to anyone with a whit of understanding of economics that Sanders has no idea how wealth is created, or why creation of wealth is an important thing. Instead, he seems to believe that if government forces up the cost of producing goods (and especially if government forces up labor costs), then society is better off because factors are receiving higher incomes.

(Likewise, Hillary Clinton also is running on a platform of "cracking down" on the "sharing economy," which is a nice way of saying her goal is to force up real labor costs. Thus, she joins Sanders in believing that government "creates" the middle class through transfer payments and by forcing up real costs of production.)

There is no other way to say this: Sanders, and, by association, Hillary Clinton, are under the delusion that the economy improves when the State engages in practices that slow economic growth. When the State interferes with the ability of entrepreneurs to move resources from lower-valued uses to higher-valued uses, as ultimately determined by consumer choice, then the government by definition is impeding the economy and preventing the economy from growing.

Yes, transfer payments will make a relatively few politically-connected people better off, but ONLY at the expense of the greater population. Look at Sanders' list; there is not one item that will result in the economy being able to produce more than it is producing now. Not one.

Unfortunately, most Americans and, I suspect, most American voters, do not see things this way. They apparently believe that government on one hand can impede economic growth through taxation, regulation, and outright intimidation of business owners, and then, on the other hand, increase growth via an "easy money" economic policy.

This cannot work. If either Sanders or Clinton is elected and is able to carry out the policies that define their campaigns, then the U.S. economy will sink further down. There is no other possibility. None.

Most people know the unicorn to be a mythical beast, an animal that looks like a horse, but has a single horn growing out of its head. No one has seen a unicorn, but most likely if someone were to come upon one, that person would recognize the beast immediately.

Likewise, the economy being promoted by Bernie Sanders is a unicorn. No one has seen it or experienced an economy that grows rapidly and creates higher standards of living across-the-board, yet has the government simultaneously suppressing production of wealth. Such an economy is a mythical entity. However, the difference between sighting a unicorn and a growing and healthy economy run by the likes of Sanders is that failure to find the former hurts no one, but a sluggish and backward-sliding economy places the lives of many in peril.

Of course, when the economy does engage in its inevitable slide, Sanders (or Clinton) will blame capitalism and claim that the way to prosperity is through even more state control. And, most likely, the American voters will go along with the scam.