Left-Leaning Economists Question Cost of Bernie Sanders’s Plans

Posted on February 17, 2016

THE NEW YORK TIMES
By JACKIE CALMES
FEB. 15, 2016

WASHINGTON — With his expansive plans to increase the size and role of government, Senator Bernie Sanders has provoked a debate not only with his Democratic rival for president, Hillary Clinton, but also with liberal-leaning economists who share his goals but question his numbers and political realism.

The reviews of some of these economists, especially on Mr. Sanders’s health care plans, suggest that Mrs. Clinton could have been too conservative in their debate last week when she said his agenda in total would increase the size of the federal government by 40 percent. That level would surpass any government expansion since the buildup in World War II.

The increase could exceed 50 percent, some experts suggest, based on an analysis by a respected health economist that Mr. Sanders’s single-payer health plan could cost twice what the senator, who represents Vermont, asserts, and on critics’ belief that his economic assumptions are overly optimistic.
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His campaign strongly contests both critiques, defending its numbers and attacking prominent critics as Clinton sympathizers and industry consultants.
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Mr. Sanders on “Fox News Sunday” defended his comment in a debate Thursday that critics have assailed: “A family right in the middle of the economy would pay $500 more in taxes and get a reduction in their health costs of $5,000.”

By the reckoning of the left-of-center economists, none of whom are working for Mrs. Clinton, the proposals would add $2 trillion to $3 trillion a year on average to federal spending; by comparison, total federal spending is projected to be above $4 trillion in the next president’s first year. “The numbers don’t remotely add up,” said Austan Goolsbee, formerly chairman of President Obama’s Council of Economic Advisers, now at the University of Chicago.

Alluding to one progressive analyst’s criticism of the Sanders agenda as “puppies and rainbows,” Mr. Goolsbee said that after his and others’ further study, “they’ve evolved into magic flying puppies with winning Lotto tickets tied to their collars.”

Unlike Republican presidential candidates who have proposed trillions of dollars in tax cuts for the wealthy and businesses without offsetting savings — Donald J. Trump’s plans could add $15 trillion to the debt over 10 years, the centrist Committee for a Responsible Federal Budget estimates — Mr. Sanders has proposed higher taxes on the wealthy and businesses to pay for his plans, besides the health care savings he counts on.

Mrs. Clinton has also proposed tax increases on the rich and corporations to pay for her agenda, which she estimates would cost an additional $100 billion a year, or $1.2 trillion over 10 years.

Mr. Sanders’s plan includes a new, across-the-board 2.2 percent income tax to help pay for his single-payer, government-run health plan for all. But progressive economists and business groups say middle-class taxpayers would pay more for the European-style social welfare state that Mr. Sanders envisions.

They dispute his contention that all but the richest Americans would be better off, on balance, with higher wages and benefits like expanded Social Security, free public colleges and, most of all, free health care. His policy director, Warren Gunnels, dismissed the critics in an interview, saying, “They’ve picked sides with Hillary Clinton.” The campaign has a list of 130 endorsees, including some economists.

“If, at the end of the day, people don’t believe that we can achieve the same savings as Canada, Britain, France, Japan, South Korea, Australia are achieving on health care, then we have a fundamental disagreement,” Mr. Gunnels said, naming countries with single-payer systems.

It is not just Mr. Sanders’s assumptions for health savings that critics contest. Jared Bernstein, the former economic adviser to Vice President Joseph R. Biden Jr. who is now at the liberal Center on Budget and Policy Priorities, examined a paper by the economist advising Mr. Sanders, Gerald Friedman of the University of Massachusetts at Amherst, that is circulating on the left.

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While calling Mr. Friedman’s work a good effort, Mr. Bernstein cited several assumptions as “wishful thinking.” Among them were minimal health-cost inflation, economic growth reaching 5.3 percent and, in that heated-up economy, no action from the Federal Reserve to apply brakes.

“We need a deep investment in infrastructure, more efficient health care and less student debt,” Mr. Bernstein said. “But when you put it all together, government’s role in the economy goes well beyond anything we’ve ever considered.” He said protecting the Affordable Care Act against Republican opposition should be a higher priority — a critique echoed by Mrs. Clinton.

Mr. Sanders has described his health care plan as “Medicare for All,” but it would be more generous, giving Americans broader coverage without premiums, deductibles or co-payments. It would replace not only Medicare but also Medicaid and the Children’s Health Insurance Program. A table in his economic adviser’s analysis shows that all public spending currently going to military, veterans’, American Indian and other health programs would be part of the financing for his single-payer plan, yet Mr. Gunnels said veterans’ and American Indian health programs would remain intact. That suggests double-counting, or financing the existing programs while claiming the sums to offset the single-payer plan. He did not address military benefits in an email exchange.

The critics — many of whom support the concept of single-payer plans, including Paul Krugman, the Nobel Prize-winning economist and Op-Ed columnist for The New York Times — note the difficulty that Mr. Obama has had in winning and putting into effect his less-ambitious law, which keeps the private insurance and health care sectors in place. They worry that Mr. Sanders, as president, would exhaust his political capital on what they call a fool’s errand, at the expense of other initiatives on education, infrastructure, climate change, worker benefits — and the Affordable Care Act itself.

“The single-payer idea has enormous appeal: coverage for everyone, some effort to use the government’s bargaining power to hold down overall costs, clean out the godawful administrative mess that the U.S. health care system is and save money there,” said Henry J. Aaron, a longtime health economist at the Brookings Institution in Washington.

But he called it a “fairy tale” in this political climate. Along with other economists in a “lefty chat group” he joins online, Mr. Aaron said, he believes that if Mr. Sanders were elected and fought for a single-payer plan, it “would rapidly destroy his administration by using up every ounce of political capital he’s got.”

On his campaign website, Mr. Sanders proposes more than $18 trillion in new spending over 10 years; he does not account for some ideas he favors, like universal prekindergarten and child care, that could put the total above $20 trillion. About $14 trillion of the total is for health care; the rest is chiefly for infrastructure, free college, Social Security, paid family leave and clean-energy initiatives.

Adding $20 trillion to projected federal spending would mean about a 37 percent increase in spending through the 2026 fiscal year — close to the 40 percent that Mrs. Clinton suggested. But Kenneth E. Thorpe, a prominent health policy economist at Emory University who advised the Clintons in the 1990s, recently concluded that Mr. Sanders’s health plan would cost $27 trillion, not $14 trillion, which would put total spending for all of his initiatives above $30 trillion through 2026.

Mr. Thorpe and Sanders aides and allies have been battling online. Their trillion-dollar disputes involve the amount of savings that would be achieved by reducing red tape and bargaining for lower-cost brand-name drugs, and whether states would pay what they currently do toward programs that would cease in a single-payer system.

Mr. Thorpe in recent years helped Gov. Peter Shumlin in Mr. Sanders’s home state of Vermont design a single-payer plan there. It was unsuccessful.

“The problem was that the price tag and the amount of disruption and redistribution was just so enormous,” Mr. Thorpe said of Mr. Shumlin’s efforts, “that he just had to drop it.”