It is bizarrely comforting to know that the majority party in the House of Representatives can have as little understanding of successful economics as the African National Congress.
A holiday in the United States casts in relief some approaches to politics – as unedifying as our own – that may have some interest for us South Africans.
One is the trajectory that the progressive left in the Democratic Party is trying to take. With all its faults, America is spectacularly successful. Poverty, here, would be unrecognisable by South African standards – one car, a house and a TV, and an unemployment rate that, at 3%, is essentially zero. It can’t practically get lower.
As Noah Rothman sees it (Democrats go wild – a decade in the wilderness is leading to some bizarre policy proposals, Commentary, May 2019), since the 2010 mid-term elections halted former president Barak Obama’s aggressive legislative agenda, the Democrats have been in the wilderness.
A newfound confidence about the 2020 elections, he writes, has seen ‘the emblematic policy’ which is ‘a smorgasbord of desiderata called the Green New Deal’. Not all of it is dedicated to environmental improvement, as one would imagine. The idea is that a successful counter to climate change can be achieved by radically transforming the economy.
The plan’s sponsor was the extraordinarily vocal, politically naive and unbelievably ignorant Representative Alexandria Ocasio-Cortez (or ‘Occasional Cortex’, as commentator Andrew Klavan would say). 60 House Democrats supported the plan through co-sponsorship of legislation supporting it.
It goes something like this: America would reduce its fossil-fuel emissions to zero while eliminating nuclear-power generation, notwithstanding the fact that that would be impossible to achieve within the envisaged 10 years, as it is beyond the capacity of current technology.
High-speed rail would be used ‘at a scale where air travel stops becoming necessary’. When the inevitable issue of the extraordinary cost this would require was raised, the response was: ‘The question isn’t how we will pay for it, but what we will do without new shared prosperity.’ The Deal was derisively called a manual on how to ‘tear down modernity’, a recipe for ‘economic Armageddon’.
On the millions of fossil fuels-related jobs that would be lost, the Deal promises a federal plan of ‘guaranteeing a job’ to ‘all people of the United States’. Rothman points out that a federal jobs guarantee has been the progressive left’s hope for generations, but the plan outlaws most of the productive economy.
According to the think tank, The Brookings Institution, the most aggressive jobs programme would need $5 trillion over ten years. This amount would not include the necessary job training, educational resources or access to college to support the programme.
For some Democrats, ‘economic security’ means a government-guaranteed income, which would in one fell swoop raise everyone above the annual poverty threshold. Ray Dalio of hedge fund Bridgewater Associates estimates that providing everyone with $12 000 – just over the poverty threshold – would cost about $3.8 trillion annually, which is 21% of GDP or about 78% of tax revenues.
Finland discovered that a guaranteed income for its population of 5.5 million people would require income tax hikes of over 30%.
And then there’s health. In 2017, the eternal youth, Bernie Sanders, started pushing for a single-payer healthcare system. One third of the Democratic caucus supported the Medicare-for-all single-payer system. Half want to open the system up to all Americans, which would virtually do away with private health insurance.
Essentially, Sanders’ programme would nationalise the health-insurance industry – every employer-sponsored health insurance would be illegal; the rest would be crowded out of the market, leaving them with an unsustainable risk pool.
Many Democrats did baulk at the idea of legislating a $900 billion industry out of existence. Sanders’ plan pegged the costs of the plan at $32 trillion over 10 years. Most of the savings would come from the assumption that doctors and hospitals would make do with a radical reduction in payments – up to 40% less – without affecting the quality or availability of care.
Ocasio-Cortez has suggested higher marginal tax rates ‘as high as 60% or 70% on your 10 millionth dollar’. Only 16 000 Americans showed that they had that much taxable income in 2016. The hike, however, would raise only about $720 billion a decade, a little more than what is spent annually on discretionary non-defence items.
If all of this sounds eerily familiar, consider Senator Elizabeth Warren’s proposal to levy a ‘wealth tax’. She proposes a tax of 2% on households worth more than $50 billion and 3% on households worth more than $1 billion. Rothman says it’s unconstitutional. Federal income tax permits the government to levy tax on incomes, not to expropriate private property when the government wants it. The government can tax the transfer of wealth, not the wealth itself. Warren proposes a 40% one-time ‘exit tax’ on those who try to avoid her tax by renouncing their citizenship.
Rothman – surprise, surprise! – recommends that a bigger pool of money to tax can most readily become available through economic growth.
It is bizarrely comforting to know that the majority party in the House of Representatives can have as little understanding of successful economics as the African National Congress. A fair number feel that it is proposed policy of this nature that ensures that President Donald Trump can secure a second term in the White House.
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A trip by a Jewish American organisation to Cuba a couple of years ago to provide relief to Jewish Cubans confirmed the deprivation often experienced in the totalitarian communist society. There is very little in the shops, for which people have to queue for hours.
Everywhere you go, virtually the only meal that Cubans eat every day is rice with beans, and sometimes chicken. Hotels are provided with a much greater variety of food so that tourists are not similarly deprived.
The much-vaunted health system provides for the ongoing training of doctors and nurses for which the Cubans are so revered by the South African government. The problem for Cubans in 2019, however, is, first, that they constantly experience severe shortages of drugs and equipment vital to treating patients.
Second, Cuban hospitals do not have the sort of technology that even South African public hospitals rely on as a matter of course. Consequently, treatment of most conditions is inadequate, even in this most hallowed of communist health meccas.
Sara Gon is head of strategic engagement at the IRR.
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