Questionable Assumptions Behind Critiques of Sanders' Economic Plan

It's "Neoliberals Gang Up on Bernie Sanders Week" along the corridor of Washington establishment think-tanks that include the Brookings Institution, the Urban Institute and a Brookings offspring, the Tax Policy Center. Out of this corridor came not one, but two reports this week that give negative reviews to Sanders' health care and tax plans.

Both reports essentially reinforce one of Democratic presidential candidate Hillary Clinton's chief attack lines against the Vermont senator running to her left: that Sanders' "numbers don't add up" and that he is making promises "that cannot be kept."

But in reality it's the reports themselves that make questionable negative assumptions about the effects of Sanders' proposals.

This is a continuation of an argument that broke out earlier this year when economist Gerald Friedman concluded that the Sanders' spending and tax proposals would provide a "significant stimulus" to the sluggish economy, boosting annual economic growth from around 2 percent a year to above 5 percent a year. Friedman was attacked by a group of former Obama and Clinton administration economists, but also won considerable support from people like economist James K. Galbraith and financial reform expert William K. Black.

"To count all of the imagined pitfalls of a policy but not count the real benefits is intellectually dishonest."

A similar theme runs through the Urban Institute and Tax Policy Center reports. Both say that federal deficits would become stratospheric because the federal government could not possibly get enough tax revenue to cover the cost of Sanders' expansive proposals, and in particular his plan to provide universal health care to every U.S. resident.

But to make that conclusion, both reports make significant assumptions about what Sanders' proposals would actually look like in practice as well as how people would respond once those policies were in place.

The health care report, for example, says that national health care spending would increase by an average of 17 percent over the next 10 years if Sanders' single-payer health plan went into effect. Savings that the Sanders plan envisions would come about by eliminating private sector administrative costs and profit-seeking, and by the ability to bargain down the costs of prescription drugs, would be overwhelmed by the costs of more people accessing health care. For example, the report says "the Sanders plan would increase demand for health services by eliminating individuals' direct contributions to care (i.e., by
eliminating deductibles, copayments, and coinsurance)," and that the one thing that would keep costs from spiraling even higher is that there would not be enough doctors to care for all of the people who would demand free health care once such a system were put in place.

The health report is full of assumptions like this, largely because the Sanders plan for Medicare for All is a broad blueprint, not a detailed rendering of every nook and cranny of America's complex health care system. Because it is a broad blueprint, the writers of the Urban Institute made guesses about how the details would be filled in. And, of courses, those guesses could be flat wrong.

The co-founders of Physicians for a National Health Program, David Himmelstein and Steffie Woolhandler, called the Urban Institute and the Tax Policy Center out on this in their column in The Huffington Post. "They project outlandish increases in the utilization of medical care, ignore vast savings under single-payer reform, and ignore the extensive and well-documented experience with single-payer systems in other nations - which all spend far less per person on health care than we do," they wrote.

For example, the Urban Institute assume administrative costs under Sanders' health care plan of 6 percent of costs, "based on the Centers for Medicare & Medicaid Services measure of Medicare's administrative expenditures in the National Health Expenditure Accounts," the report said. But Himmelstein and Woolhandler point out that those administrative expenses include the overhead for Medicare Advantage, the expensive private supplemental insurance program. Overhead expenses for the traditional Medicare program, they point out, is less than 3 percent, and under Sanders' plan would likely fall closer to what administrative costs are in single-payer Canada - less than 2 percent.

What both the health care and tax papers ignore is the positive effects on the economy of changing health care from a private, profit-maximizing enterprise into a public good, and from channeling more national resources into putting Americans to work rebuilding the nation's shared assets and positioning the country for broader-based and sustainable economic growth. We know, with hard numbers based on real experience, that investments in infrastructure, for example, yield concrete economic dividends. We can predict with significant certainty that dollars freed from the rent-seeking capture of the private health care industry will mean dollars that individuals and businesses can invest in themselves. To count all of the imagined pitfalls of a policy but not count the real benefits is intellectually dishonest. What's worse, these reports offer a not-so-veiled message to the progressive movement: Changing the status quo is too hard and too perilous. Let's not do surgery to eradicate the cause of our economic pain. Take an aspirin instead. Four hours later, take another.

This, of course, is unacceptable. These Washington neoliberal think tank reports reveal what we're up against in making the intellectual case for the kind of revolutionary reordering of the economy that many of the people voting for Bernie Sanders are calling for. But they should not be allowed to be deterrents.