Published October 16, 2015 by Ryan Whitacker
Updated on October 22, 2015
The WSJ estimated (badly) that everything Bernie Sanders wants would cost an astounding $18 trillion – but the WSJ did this analysis in some kind of time vacuum with no supply or demand forces. Medicare, for example, was apparently multiplied over 10 years (though the $15 trillion figure doesn't seems supported by the source), while college costs were uncited and apparently estimated based on a single year. Sanders and several analysts have slammed the WSJ as being sloppy, but it made us wonder, though, what it would really cost per year if Bernie Sander were able to push through every proposal he's made during his campaign.
Our final analysis shows that we'd need an additional $1.7 trillion per year for the first 5 years, which means we'd need to raise national tax revenue by about 54% to avoid increasing deficit further. Sanders has already outlined $319 billion in new taxes, but we'd need to increase individual tax burden from 31.5% of income to 45% if tax mix stays the same. Read on to see what that would mean for the country.
Democrats appear to be “Feeling the Bern” particularly in one of the most important early-primary states: New Hampshire.
For those using tiny screens, Sanders is the brown line.
Sanders is probably best known for his sweeping promises like full government-paid college and healthcare for everyone. We had to wonder how much these things would cost. Here are the proposals and promises we've pulled together and verified. Not all of these were phrased as “promises,” but more as “things Bernie Sanders would like to do.”
Universal single-payer healthcare: –$1.3 trillion per year
Universal healtcare explanation: This is complicated because you need to factor in increased demand, already-stressed supply (doctors and nurses), volume discounts, waste, and oh so much more. Expert estimates range from saving us $300 billion on taxes to costing $15 trillion more. As we mentioned, the WSJ said $15 trillion, but they seem to have badly misunderstood the expert source. In reality Gerald Friedman is a staunch supporter of universal healthcare, and was (somewhat optimistically) arguing in favor of savings.
Rather than adding to the complexity by trying to understand every hypothetical program that would be created or destroyed, we just looked at the best real-world example we could find. We looked at Norway, which spends about 6% more per person with combined private and public spending. Then we looked at government spending: the Norwegian government spends almost twice what the U.S. government does per person on healthcare. 85.4% of health care costs were paid by the government in Norway, and the USA is currently paying 47.1%. Per person the government would need to pay just under $4k more from the public sector. We then multiply the difference by the estimated 325 million Americans. This is all according to the World Bank.
I know: proponents have said this would save us money and cost nothing. It may be true that it would save money, on average, for the overall cost of healthcare. It's simply not true that it would cost nothing. Anyone selling that story is working for a politician.
Of course, the devil is all in the details. Does the system encourage cost cutting, or does it allow people to go crazy with “the government's money”? The argument from universal healthcare supporters is that the plan would save Americans money in the end by eliminating corporate middleman markups. This argument is not without merit, but we're just crunching the increase in taxes. It's worth noting the WHO ranks our health care 37th – 26 spots below Norway.
Government-paid college tuition: (Conservatively) –$230 billion per year
The average cost for a public college is $15k. Let's assume that the states continue to pay the same amount for college education, and that they don't let their funding slide as the federal government steps in. We subtract the 33.3 billion in pell grants the government already pays. Now there are two ways to go from here. The lazy and most conservative route is to assume that no one changes their behavior based on the law. If everyone in private schools continues to go to private school and no one else goes to public school, we'd have to pay for 13 million students in the undergraduate programs at public institutions. Sanders has said he wants to pay for room and board, so we're left with $176 billion.
The more realistic thing to do is to assume that private enrollment would fall somewhat and public enrollment would skyrocket if the cost barrier were removed. Money is the #1 reason given for not going to college, so paying for low-income groups would absolutely increase demand. We have a parallel to look to here: the GI bill. 72% of Vietnam veterans took advantage of the GI bill for college, where only 50% of the population as a whole enrolled. That's a 42% increase in demand versus the regular population. When you add 42% onto current enrollment you end up at $264 billion for current likely students. The real number could be twice as high or more until older people had been given a chance to attain degrees. But let's assume that this is for young people only.
College enrollment rates are already much higher now than they were in the 60s and 70s, so let's be generous and slice the increase in demand by 20%. Our final (very conservative) figure is $230 billion more per year. We assume the rich won't be paying into the system while being denied the benefit for their children.
Infrastructure development: –$1 trillion over 5 years
This one is pretty straight forwards since the figures were listed in the bill, and Sanders himself called it a $1 trillion project. Sanders claims the infrastructure bill would replace America's aging transportation infrastructure while creating 13 million jobs.
Early child development: –$12 billion per year
Sanders introduced legislation in 2011 that would “award grants to states” [for] … “providing children, from the age of six weeks until they reach kindergarten, with universal access to high quality early care and education programs.” We don't see families sending kids to pre-school for more than a year. If we assume that every parent in America sends their children to preschool through the government program for a year at $6,000 per year times 4 million children of pre-school age, we come to 24 billion. The exact amount is hard to pin down, because the bill never got into the details of how much it would pay. It could theoretically be more (if parents used services every year) or less (if only low-income groups were reimbursed). But if we assume that only half of children's families would qualify for a full year of payment we have somewhere to start. Sanders hasn't yet provided enough details to get a more accurate figure.
Pension fund worker protection: -$29 billion
Sanders indicated he'd like to set up a fund for retirees who had their pensions raided. At current rates of depletion that money wouldn't even last a year, but the bill didn't call for any ongoing funding. The pension fund was actually not slated to be paid for with new taxes, but by closing loopholes and increasing estate taxes in some cases. We've calculated these savings separately.
Youth training and jobs program: -$5.5 billion
The youth training and jobs program is aimed at helping young people in disadvantaged communities find jobs. The idea is that young people in poor communities are most likely to go to jail, so the bill might even pay for itself by keeping people out of jail. We don't see good evidence for this claim, but Sanders threw it out as a potential benefit, not an absolute claim. The $5.5 billion price tag was specified by the bill, with no ongoing plan. Payment structures are often settled much later in the bill, so it's not uncommon to see “TBD” on the timeframe or even cost.
Jail fewer non-violent offenders: +$17 billion per year
Sanders advocates cutting back on the number of people we put in jail for nonviolent crimes – especially drug use. Non-violent offenders make up about 60 percent of the prison population, and cutting that in half would net about 17 billion in reduced storage and staffing requirements. We put it in this section because no new taxes are involved. This figure does not include any change to law enforcement budget, which might yield additional savings.
Total cost of proposals: 1.7 trillion per year for the first 5 years, and 1.5 trillion after that assuming no new proposals. Additional bills with no specified time period would add 35 billion – a drop in the bucket compared to other proposals.
The Taxes to Pay for Everything
If we assume we leave other government programs in place – and Sanders hasn't proposed cutting anything that we could find – we're obviously going to need to find some new revenue sources. Closing loopholes does not pay for a trillion dollar program, so what would the shortfall be?
2015 tax revenue is expected to reach $3.2 trillion. Adding these programs into the budget while maintaining the same projected deficit would require an overall tax rate increase of about 54% from all sources. Sanders has already outlined a few new sources of tax income and government savings.
Flatten social security tax: $130 billion per year
Current tax on social security is about 6.2% for the first $250,000, but the rest is exempt. Sanders wants to maintain current levels of payment (an average of $16,000) by taxing all income at the same rate. The United States currently generates 48.9% or $580 billion in taxes from those who make over $250,000 (the top 2.4% or so of Americans) from 2.8 trillion in adjusted gross income. So 6.6% of that is $183 billion, minus the amount they do pay on the first $250k, which is about 53 billion (figuring 2.4% of 136 million returns). To be clear, we're looking at the additional tax needed to implement this policy, not of keeping social security payouts at a set level.
Closing art sale and certain estate tax loopholes: $29 billion per year
Sanders feels that rates and caps on taxes for the super wealthy estates are too low. He would fund some spending by increasing these taxes, which many proponents see as one way of preventing rich families from becoming American royalty. The pension fund was actually not slated to be paid for with new taxes, but by closing loopholes and increasing estate taxes in some cases.
Closing tax haven loopholes: $160 billion per year
Sanders has said he wants to close foreign tax haven loopholes. A U.S. Senate report estimated that $150 billion in taxes are lost to overseas tax havens, while $9.5 billion go to Delaware -which is apparently a good place to move the headquarters if you don't want to pay taxes owed to other states where you do business.
These programs yield 319 billion in new taxes, but we still need 1.4 trillion. Most of this will need to come from existing tax sources. If we kept the current tax mix the same, that's an average tax increase of about 14 percentage points (from 31.5% to 45.4%) on the individual tax wedge (personal income tax plus payroll tax). On average the US would go from the middle to low end of individual tax burden to the among the highest taxing countries in the world.
|Country||Personal tax wedge|
Sanders has made it clear that the wealthy would pay more of this increase than the average American.
Would Sanders Spend America Into Oblivion?
That's a point we'll let the partisans debate. What we can say is that taxes would need to increase dramatically, but there would also be benefits. Many have argued that a single payer healthcare system would save money overall, and the data to back single payer being cheaper than a government-private hybrid (like the ACA – AKA Obamacare) is compelling. We'd also see an increase in education, which proponents argue would increase the US's long-term viability and GDP. You need to decide whether that price tag is worth it for you, but hopefully we've provided some data to help you decide.
What's clear is that Sanders would drastically change the mechanics of the country. Specifically it would take away the burden of paying for health care and college from the individual and put it on the government. It would also shift the balance of benefits away from the old and towards the young in a way we've never done. Those in the higher income brackets would definitely end up paying more, while those in lower income brackets would receive more services.
Proponents of Bernie Sanders point out that if elected, he wouldn't be able to pass every piece of legislation he wanted. Congress (especially if it remains in Republican control) would in fact allow very little to pass, thus tempering his spending. Interestingly, libertarians have made a similar argument for Ron Paul in the past, but in reverse: that congress wouldn't have allowed him to cut as much spending as he would like. These pragmatic arguments are probably true, but we've just taken the candidates at their word to run the data.
Join us next time, where we'll take a data-dive into the potential economic impact of Donald Trump's proposals – including what deporting all illegal immigrants would do to the U.S. economy.
[author] [author_info]Ryan Whitacker is a data freak, Excel ninja, and open data fanatic. He combines these skills to put together analysis in hopes it will help you make a better decision.[/author_info] [/author]