The GOP: The Party of Free Stuff

Bernie Sanders’ policy program includes a whopping $15+ trillion of new new government expenditures over 10 years, due in large part to his plan for Medicare for all, but also through his commitment to spending on infrastructure and youth employment, free college, increases to Social Security benefits, and expanded family leave. This remarkable cost to the federal government has led many — especially on the right — to condemn Sanders supporters as just wanting “free stuff”. A selection of examples of this can be found in several places [here, here, here], but in the most notable example I’ve heard comes from the radio show On Point. They reported from New Hampshire that during the primary there were skirmishes between lines of Trump and Sanders supporters, where one side would shout to the other that they support a fascist, which would later be met with the retort that the feckless Sanders supporters just wanted “free stuff.”

Is there anything to this claim? Well, one the one hand, college education, family leave, and healthcare are things that many people would not otherwise have access to, or they are things that people might have access to, but would have to pay for out of pocket. So, to the extent that these people will have access to these things without paying for them out of pocket, then, these things seem to be free stuff. But, we have to note that Sanders' plan also comes with a proposed 2.2% broad tax increase, so people will pay for at least some of these services, just in a different way. Additionally, there is a reasonable suggestion that Sanders’ plans will stimulate the economy to some degree (exactly to what degree is up for debate, and I will have more to say on this later), so although they may cost $15+ trillion this will be offset by economic gains, thereby reducing their cost. Over all, I’m less inclined to see this as free stuff giveaway, but, instead, like any policy change, I’m disposed to read these policy suggestions as expansions of government services and government institutions that will have to be paid by some who will pay more and others who will pay less than they otherwise would (for example, I’ve already paid for my education, so I’m not going to experience Sanders’ free college education program as ‘free stuff,’ but might get a net benefit to me from medicare for all).

However you cut the numbers above, it’s notable that this notion that the democratic candidate is offering ‘free stuff’ in exchange for support is not unique to Sanders. Those with a memory beyond the latest news cycle will recall the brouhaha surrounding the “Obamaphone,” as an attempt to win the support of low-income citizens. Similarly, Mitt Romney attributed his loss in the 2012 presidential race to Obama’s willingness to give out “big gifts” and new programs like Obamacare in exchange for support. So, Republicans like to accuse Democrats of offering free stuff! Why is this?

Let me suggest that much of these Republican accusations can be explained by the concept of psychological projection, in which people accuse others of doing the things they themselves do as a self-defense mechanism. In order to demonstrate this, look at the tax proposals of the top three Republican candidates for the presidential nomination. The Tax Policy Center projects the decade long costs of their respective tax breaks in ascending order: Rubio would increase the budget by $6.8 trillion, Cruz by $8.6 trillion, and Trump by $9.5 trillion. To be sure, this is less than Sanders’ $15 trillion, but tax reform is just one plank of the Republican presidential candidates’ platforms, where as Sanders’ $15 trillion covers far more. It would certainly help his budget numbers if Trump could get Mexico to pay for his wall, but his other proposals — such as, most recently, expanding Guantanamo Bay — are expensive and would cause further holes in his budget pushing him closer to, and possibly surpassing Sanders’ figures. Getting back to the tax breaks: although each of the plans costs different amounts, each of these would put money in people’s pockets. Stuff is being given to people! The question remaining, then, is whether this is free stuff. Is this free stuff people are getting, or, by contrast, are these people merely keeping their own money, rather than giving it away to the government? Let me give two responses to this question: one quite general and abstract, the other specific to our current political and economic situation.

First: It’s helpful to think of politics — as thinkers from Socrates, through to David Hume and John Rawls have — as the attempt to bring about social cooperation in circumstances of moderate (but not extreme) scarcity, in which people can work together for their mutual benefit (and, one hopes, further ideals like justice). As Francis Fukuyama describes in The Origins of Political Order, people throughout history have come together for safety, security, and to improve the quality of their lives, and that’s no different today: “most people around the world would strongly prefer to live in a society in which their government was accountable and effective, where it delivered the sorts of services demanded by citizens in a timely and cost-effective way” (2011, p. 11). The upshot of this is that the wealth and income that each of us wins for ourselves through individual effort is also contingent upon the efforts of others and the actions, institutions, and policies of government. This notion played out publicly in recent years, with Obama’s “you didn’t build that” gaffe, and Elizabeth Warren’s similar speech in which she said: “There is nobody in this country who got rich on his own — nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate… part of the underlying social contract is, [if you make a lot of money] you take a hunk of that and pay forward for the next kid who comes along.” [Video

In light of this, lowering one’s tax burden isn’t a straightforward case of keeping one’s own money. Because much of that income was only made possible due to the presence of social goods paid for through taxes (such as public education), much of that money is not, strictly speaking, 'your' own. To put it in other words, if your tax rate is reduced to the extent that it impoverishes the federal government so that it is less able to spend on the public goods that are necessary for your and everyone else’s economic success, then you’re placing an externality on the whole system; you’re benefitting through a lower tax burden, but placing the cost of that on others, particularly future generations who have to live with a diminished social infrastructure and a similarly curtailed economic potential. 

How do we know when we have crossed this line between keeping my own money and placing an externality on others? I imagine there’s no clear cut line, but a strong indicator will be when the tax cut leads to a massive increase in the national debt. Debt isn’t always a bad thing (and I have more to say on that below), and an increase in the debt and annual deficit doesn’t just mean that tax rates are too low, as it could mean that the government is inefficient and spending too much (maybe the military budget is too high, overheads are out of control, or transfers to the poor are economically infeasible). This government spending answer doesn't seem particularly attractive though, as government spending as a proportion of GDP is about the same as it was in the 1950s and 60s, suggesting that if govt. is inefficient, it's no more so than usual, which doesn't justify a large tax cut now, in the present. Notably, income tax revenue as a percent of GDP is also about the same over that same period, so if income and spending have remained fairly constant, and if the debt and annual deficit explodes when income taxes are cut, then we should conclude that we’ve crossed that line, and the tax cut beneficiary isn't keeping her own money, but is placing an economic burden on others. So, these proposed Republican tax cuts are an example of getting free stuff!

Second: We, in 2016, are in a peculiar economic situation. The 2007/8 crash led to a massive drop in stock markets around the world, a sharp fall in GDP, and mass unemployment, which has given way to an anemic recovery and lagging growth. While the US has recovered to its pre-crash GDP levels, it’s below where it could have been had there been ‘catch up growth’ to make up for all that lost economic potential. What is going on here? Why are we still lagging? Amongst the best explanations for this is that we’re suffering from a lack of economic demand. As Lawrence Summers argues in the most recent Foreign Affairs, companies are flush with cash instead of investing it and people are saving rather than spending, leaving us with a shortfall in economic demand (March/April 2016. p. 3). Ian Morris and J Tomlinson Hill pick up on this argument in their contribution to the same issue by noting that as “inflation has remained below target rates strongly suggests that the problem is weak demand” (p. 12). What is needed, then, is a fiscal economic stimulus to boost demand and kick start the economy. How can we do this? 

Well, one way to boost demand is to put more money in people’s pockets, as people with extra money are likely to spend it on goods and services from other people, thereby stimulating the economy. This can be achieved through tax breaks, as the Republican candidates are proposing. In this case, one might argue that such tax breaks are not free stuff as they will boost the economy and thereby pay for themselves in large part. But how large will that part be? The tax rate is already low so the benefit to each citizen relative to their previous tax rate is diminished. Furthermore, the tax plans proposed by the Republican candidates are slanted towards the rich, giving greater breaks to those with more money. As richer people spend a lower proportion of their income than poorer people, a sizable chunk of the proposed tax breaks will simply be saved or invested, thereby failing to boost demand. Consequently, the Rwpublican tax plans look more like free stuff than reasoned economic stimulus. 

Is there another way to boost demand? Yes! As Summers notes, “federal infrastructure investment, net of depreciation, is running close to zero, and net government investment is lower than at any time in nearly six decades.” In addition to this, other structural policies that would promote demand include steps to accelerate investments in renewable technologies… and measures to raise the total share of income going to those with a high propensity to consume, such as support for unions and increased minimum wages” (Summers, 2016: p. 7). Notably, these are precisely the kinds of policies Sanders is proposing, suggesting that, contrary to handing out “free stuff,” it is he who is making the economically prudent proposal that will pay for itself to a far greater degree than the corresponding debt exploding proposals on the Republican side.

All should lead to you question why Republicans are swift to denounce the democrats as the party of free stuff. The lady doth protest too much, methinks!