How is the US Going to Pay for That Spending?

Top Democratic contenders are suggesting $22.25 to $47.2 Trillion in spending with no significant cuts to anything other than private sector wealth.

September 23, 2019

By: Bobby Casey, Managing Director GWP

US Tax Spend

I’ll ask the Democratic candidates the same question I asked Trump regarding his tariffs, wall, and military spending: How are you planning to pay for that exactly?

Trump said Mexico is paying for the wall, China is paying tariffs, and military funds would be redirected toward immigration control.

He was dead wrong on the first two, and his efforts have push the US deficit over $1 trillion in 2019.

While Americans might disagree on the political policies and priorities, there’s little room for debate on how tenable and sustainable this sort of spending is.

The question is what gets cut? That’s not one of the choices being presented this election season. Spending gets approved, but rarely does it ever get reeled in.

For better or worse, the US knows what they are getting with Trump. He lacks any social grace or diplomacy and he’s a spender and protectionist. But is he as BIG of a spender as the Democratic hopefuls? He certainly isn’t keen on taxing as much, that’s for sure.

Democrats will get stuck with an establishment candidate they believe can beat Trump. That rules out the likes of Gabbard and Yang, who are direct threats to that establishment.

Kamala Harris is too coppish. In the wake of all the police brutality and disapproval of drug prohibition, her “tough on crime” record will not be well-received.

O’Rourke, Williamson, Buttigieg, Booker are all too small-time and would be too weak to stand up to Trump.

That leaves the Democrats with Warren, Sanders, and Biden.

Biden is the Democrat version of Trump. He’s a gaffe machine, with an uncomfortable record when it comes to displays of affection. Policy wise he’s not much different from Trump. He’d take the country back to the Obama era, which won’t be great tax wise, but the tariffs and border obsession would go away.

In the end, when pitted against Trump, he might not stand much of a chance since he has no qualitative factors that set him above Trump.

Then there’s Warren and Sanders. These two are a stark contrast to Trump, which at least offers a greater illusion of choice on the surface. They would have to move toward the center on other issues to win the general election, and the office itself has a way of tempering the grandiose ambitions of every candidate.

When it comes to Medicare for All, Sanders openly admits there will be tax hikes even on his precious middle class, but in the end, they will not have to worry as much about the costs of healthcare so it sort of evens out. That’s the pitch. It’s not true, but it is the pitch.

Warren is reluctant to say Medicare for All entails tax hikes across the board. She’s trying to preserve the “eat the rich, and only the rich” rhetoric through the primary, so she’s obfuscated on the direct question of whether the middle class will see a tax hike to pay for this.

Here’s how the Sanders plan shakes out:

Even Sen. Bernie Sanders, America’s foremost proponent of single-payer, admitted in June that “there will be pain” if the nation adopts the government-run system he favors. The plan he touted on the presidential campaign trail in 2016 would have cost $1.4 trillion per year, according to his own estimates. To pay for it, he called for a new 2.2% income tax, a 6.2 tax on employers, and higher taxes on the wealthy.

An independent analysis of Sanders’s plan conducted by the left-leaning Urban Institute estimated that it would cost $32 trillion over 10 years.

Medicare right now is not solvent. How is this level of expansion going to be any different? Whether Warren wants to admit to it yet or not, the numbers won’t be much different for her plan.

This fixation Democratic politicians have with Scandinavian healthcare is not at all qualified by the reality of how they pay for it. Johan Norberg, a Swedish historian, explains that the healthcare coverage (and other generous welfare programs) offered in Sweden is more like a voucher program, and requires the poor and middle class pay much more in taxes than they do in the US.

This isn’t the only promise they are making either. There’s the student loan forgiveness and the Green New Deal. That is looking like another $7 to $13 trillion by 2030. So far, the only plan to pay for something like that is from Representative Ocasio-Cortez who suggested printing more money.

Warren backs the idea of a GND, and Sanders is an open advocate to go forward with one.

Finally, there are the student loan forgiveness plans. I gotta give it to Bernie, he is all-in on his free stuff. Again, the way he pays for it, while it targets people he thinks can “afford it”, affects others who are not rich. Sanders proposed the College for All Act, and this is what it entails:

The College for All Act would cancel the student loan debt of nearly 45 million Americans who pay an average of $3,000 per year and subsidize college tuition for low-income individuals underrepresented in certain districts. In total, this plan would cost $2.2 trillion, paid for by new taxes on Wall Street: A 0.5% tax on stock trades (or 50 cents for every $100 stock value), a 0.1% fee on bonds, and a 0.005% fee on derivatives. According to Sanders, these taxes would raise more than $2.4 trillion in the next ten years.

Elizabeth Warrens plan looks more like this:

Warren estimates the cost of student debt cancellation would cost approximately $640 billion, and universal free college would have a price tag of $1.25 trillion over 10 years. The Democratic presidential hopeful argues that the plan would be paid for by her wealth tax proposal. The tax would apply a 2% rate on the wealth of households with over $50 million in assets, and 3% on those with over $1 billion, paying for the college plan in addition to the universal childcare proposal released earlier in the campaign.

Elizabeth Warren’s plan is more need based… which inevitably will create a welfare trap. If I need to meet certain criteria to reduce my monthly burdens and qualify for full forgiveness in ten years, I will make sure I don’t cross that threshold until the loan disappears.

This is what happened in Seattle when the minimum wage went up and people became ineligible for certain welfare programs.

The biggest moral hazard to come from debt forgiveness is its inherent divisiveness. There will be a clear line between those who were more fiscally responsible in their decision-making and those who were not.

It is irresponsible to allow young poor people with no collateral to borrow tens of thousands of dollars. But there’s nothing responsible about them signing up for it only to buy a worthless degree either.

  • Medicare for All: $14 – $32 Trillion over ten years
  • Green New Deal: $7 – $13 Trillion over ten years
  • Student Loan Forgiveness: $1.25 – $2.2 Trillion over ten years

Anywhere from $22.25 Trillion to $47.2 Trillion over the next ten years to have an Elizabeth Warren or Bernie Sanders as POTUS is what Americans are looking at. Trillions in spending is on the line with these establishment Democrats, but noticeably missing from the discussion is where spending will be CUT.

Pamela Anderson was on the View not long ago defending whistle-blower Julian Assange. Joy Behar accused Assange of getting Trump elected. Anderson clapped back saying, No Hillary got Trump elected. She wrote those emails.

A sobering reminder that Trump won’t get himself elected. The Democrats will do that for him.

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