Last week, Senator Bernie Sanders (I-Vt.) unveiled his plan (or half of one — more on that later) to create a new federal program guaranteeing “Jobs-For-All.” Sen. Sanders’ proposal would guarantee that every American worker could receive a government job that pays at least $15 an hour and includes health care benefits.
It would seem easy to brush aside Sen. Sanders’ plan, knowing that his socialist utopian fantasy has no chance of being enacted this Congress. But would it be wise to do so? Let’s not forget that Sanders made a very strong run for the Democratic Party’s presidential nomination, and some believe he would have won if he had greater support from the old guard in his party. Additionally, the timing of the release of his plan serves to position Sanders as an intellectual thought leader for the Democrats during this year’s midterm elections. Senators Kirsten Gillibrand (D-N.Y.) and Cory Booker (D-N.J.) have also shown some support for this idea.
So as out of touch with reality as this plan is, it cannot be ignored. This is the current direction of the Democratic Party.
With that said, here is a summary of the reasons why Sen. Sanders’ plan would be disastrous:
- The government is not nearly as effective at allocating labor towards productive means as the private sector. That’s why innovative companies like Amazon, Apple, Google, etc. don’t emerge from government. Paying people $15 an hour to dig holes and fill them back in may give them a job, but it’s not going to drive America’s economy towards greater productivity and dynamism. How many jobs or leaps in innovation does President Obama have to show for his massive stimulus package?
- Who is going to pay for this plan? Some Democrat supporters clearly believe in a magical money tree that does not exist. Sen. Sanders has not yet produced a cost estimate for his plan (hence why it’s half a plan), but a fair bet is that it will be paid for in higher taxes. In Sanders’ utopia, you get to go to your job every day and then pay to support somebody else’s.
- If the plan is “Jobs-For-All,” does that mean the government can’t fire people? Are they really “guaranteed” a job? What if a person constantly shows up late? What if they put in little effort at work? What if they are on Facebook group chat all day? Furthermore, what is the incentive to do a good job if, no matter what, the job is “guaranteed”?
- If the government promises $15-an-hour jobs to anyone who wants one, obviously there will be a tremendous drain of labor from the private sector. Industries such as restaurants will be forced to close, lay off workers, or automate in order to remain competitive. The private sector cannot compete with a government jobs guarantee when the government can print money to hire workers at wages divorced from actual costs of labor.
Lastly, Sen. Sanders’ scheme to redistribute income in order to facilitate his massive jobs program calls to mind a recent interview that supply-side hero Arthur Laffer did with Barron’s. In the interview, Laffer stated:
By redistributing income, you take from someone who has a little more, and you give to someone who has a little bit less. By taking from someone who has a little bit more, you reduce their incentive, and they produce a little bit less; by giving to someone who has a little less, they suddenly have an alternative source of income, and they, too, will produce a little bit less.
The more you redistribute, the greater will be the total loss in income. The limit function here, which is really interesting, is if you were to redistribute income totally, if everyone who made above the average income, you tax them 100% of the excess, and everyone who made below the average, you subsidize them up to the average income … Everyone would have the same income. If you actually did that, I will stipulate, today … everyone will end up equal, at zero. At zero. No one will work.
As Arthur Laffer’s example shows, Sen. Sanders’ “Jobs-For-All” plan really means Prosperity-For-None. Is this really the direction the Democratic Party wants to go?
Photo credit: Gage Skidmore