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San Juan Mountains: Grenadier Range

Monday, March 28, 2016

Bernienomics

Bernie Sanders is a democratic candidate for the next King of the Socialist Democracy of Amerika.  I think he is the best qualified person for the job because he has committed himself completely to the socialist agenda.  He believes that all profit seeking businesses are evil.  He believes that everyone who works in and for government is a saint.  He believes that government is the source of all good in the world.  Bernie promises to dramatically increase government spending on a wide variety of welfare programs while, at the same time, enacting huge tax increases on businesses and the rich, whoever they are.  In a phrase, Bernie is the perfect socialist.
I would like to take some time today to do a brief economic analysis of Bernie's economics.  Since it is fashionable to create new words by combining the word 'economics' with some other word, I will call what follows below a classic example of Bernienomics.  Let me begin by giving you a series of economic truths.  I will apply these truths to Bernie a bit later. 
I begin with some information about the amount of money taken from the taxpayers by the federal government.  The chart below contains data about who pays how much of the federal tax bill.  Notice several things including: 1) the top 1% of the income population pays 38% of all federal income taxes despite only earning 20% of the income, 2) the top 10% of the income population pays 59% of all federal income taxes while only earning 35% of the total income, 3) the total amount of money earned by the top 10% of the income population comes to whopping $3.8 trillion and, 4) at a average effective tax rate of ~20% the top 10% of the income population ends up paying a grand total of $760 billion in federal income taxes.

Chart Of The Top Income Earners And Tax Contribution

Total federal revenues in fiscal year 2015 were $3.18 trillion. These revenues came from three major sources:
  1. Income taxes paid by individuals: $1.48 trillion, or 47% of all tax revenues.
  2. Payroll taxes paid jointly by workers and employers: $1.07 trillion, 34% of all tax revenues.
  3. Corporate income taxes paid by businesses: $341.7 billion, or 11% of all tax revenues.
King Obama has proposed a budget for this year totaling $4.1 trillion in spending.   With a shortfall of a little less than $1 trillion dollars the government will turn to the Fed and the Treasury to create that money out of thin air, thus allowing them to legally spend counterfeit money on their vote garnering socialist programs.  That annual deficit will be added to the total federal debt, raising it to around $20 trillion.  With a Gross Domestic Product of about $17 trillion the SDA now finds itself carrying a debt equal to about 118% of national income. 
 

Notice that, despite the many categories shown above, the federal budget can be divided into a handful of simple categories.  Government welfare programs constitute 60% of the federal budget.  With the growth of Obamacare this percentage is expected to rise, eventually consuming all discretionary spending which now accounts for 13% of total expenditures.  The warfare state consumes 20% of the budget and the remaining 7% is used to pay the interest on the federal debt. 
Bernie has proposed a series of welfare programs while on the campaign trail.  The Wall Street Journal took the time to analyze his proposals and come up with a cost analysis for all of the government goodies Bernie wants to hand out to his socialist supporters.  The graphic below shows just what Bernie wants to spend the money on and just how much it is going to cost the taxpayers.  Note that the figures are for a ten year period.  If we divide the total cost by ten years we arrive at an average annual increase in taxes of $1.8 trillion. 
GraphBernie

Bernie has been quick to respond to his critics and their position that his programs are untenable because there is simply not enough money to pay for them.  On the contrary, Bernie argues, there are gazillions of rich people and businesses in the Socialist Democracy of Amerika that are not paying their fair share.  He would raise taxes on both groups and, when the number crunching is finished, Bernie claims he will actually run a budget surplus since his annual tax increases will come to almost $2.0 trillion per year, far outstripping his annual cost increase of $1.8 trillion per year.  Here are his figures:



Now that all of the facts are on the table, allow me to take a moment to interpret them for you.  What follows is my analysis of Bernienomics.
  • Bernie believes he can extract an addition $630 billion from businesses each year by forcing them to pay the Obamcare premiums for their employees.  Then he believes he can raise an addition $300 billion per year by cancelling the tax deduction businesses presently take for the amount they pay in health insurance premiums.  In other words Bernie believes he can tax profit seeking businesses an addition $900 billion per year with no deleterious impact upon their business operations.  Bernie believes that businesses will continue to hire more people, produce more products and continue to prosper despite this huge increase to the cost of doing business.  
  • Bernie believes he can extract an additional $300 billion per year by taxing business activities on Wall Street with something he calls a "speculation tax," whatever that is.  Bernie believes it is possible to place financial burdens upon the economic process of capital creation with no negative impact upon that process.  Bernie believes that when speculators use their own money to create and expand business activities, that is an activity that should be punished by additional taxes.  Bernie also believes that entrepreneurs will continue to engage in the same, or more, amount of speculation despite being required to pay a huge tax for doing so.  
  • Bernie is going to raise taxes on the "rich," an as yet undefined group, by increasing their marginal tax rate, taking away the capital gains tax and taxing their estates when they die.  He believes that these additional taxes will have no negative economic impact upon the most productive members in the SDA economy.
  • For purposes of illustration I will assume that the federal government will spend $4 trillion in the coming years.  If Bernie wanted to raise those funds by taxing away 100% of the income of the top 1% of the income population he would raise only $1.7 trillion.  If he taxed away 100% of the income of the top 10% of the income population he would raise $3.8 trillion, leaving him still 200 billion dollars short.  
  • For additional purposes of illustration I will assume that Bernie becomes our next King and he successfully passes his new spending programs.  Total federal spending will grow from $4 trillion/year to $6 trillion/year under Bernie's government giveaway government.  If Bernie taxed 100% of the incomes of the top 25% of the income population he would still come up $322 billion shy of his goal.  To pay for all of his programs Bernie would need to take 100% of the incomes of the top 33% of the income population.  The annual income of the person sitting on the margin of 33% is about $50,000/year.  According to Bernie, a person making $50,000 is a rich person who is not paying his fair share of the federal tax bill.
Bernie is the right man for our times.  He understands that the majority of the citizens of this envy filled country believe that they have a right to take the money of their richer neighbors.  He is willing to stand in the gap between the people who make money and the people who want to take that money from them.  He praises the common decency and outstanding moral values of people who want nothing more than to steal things from others.  In a phrase, he is the consummate career politician for our times.  Go Bernie!   I hope you win.  This country deserves a King like you.


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