Tuesday, June 13, 2017

Socialism Rises From The Ash Heap of History: The Improbable Story of Bernie Sanders and Jeremy Corbyn

Socialism, the bastardized version of Communism, once consigned, along with Communism, to the ash heap of history is now seeing a resurgence thanks to two avuncular self styled crusaders. Bernie Sanders and Jeremy Corbyn are selling bromides and what Friedrich Hayek memorably called 'Road to Serfdom'. What is the true nature of this resurgent evil that once plagued more than half the world from Moscow to London to Latin America?

Make no mistake, Sanders and Corbyn are repackaging Communism in Socialist garb and presenting it as not just palatable alternative but as panacea to every societal illness. That Sanders and Corbyn do not call for abolishing private property, the cornerstone of Marxism, should not lull us into complacency about the true evil nature of socialism which, compared to communism, is more sinister due to the very innocent noble sounding promises that it is wrapped in. What could be wrong with 'free college for all' or 'free healthcare for all'?

Bernie Sanders (Picture Courtesy Politico)
Last year I wrote of Jill Stein, the nominee of Green Party:
Jill Stein's interview with Cenk Uygur of the ultra left wing channel Young Turks is revelatory in a Freudian sense. Launching into a lengthy monologue that can be picked line by line for half truths and playing loose with facts by any fact checker Dr. Stein lays out why her campaign should be appealing to "43 million young people, and going into middle age and beyond, who are trapped in predatory student loan debt" (transcript from Slate). The appeal, Stein says is simple, "there's only one place that they can put their votes in order to cancel their debt". Yep. As simple as that. I come from India, where politicians promise illiterate farmers that hundreds of millions of dollars in farm loans can be written off. They win, they write off the loans and of course it does nobody any good.
Jill Stein went on to equate loan write offs to the GI bill. The GI Bill, god bless the Greatest Generation, was not a loan write off or a hand out, rather, it was the debt of gratitude paid by a nation in 'EXCHANGE' for services rendered, the ultimate sacrifice, by the youth of this country. If Dr. Stein proposes free education in exchange for military service then that is already in vogue and nothing revolutionary but any such suggestion on a large scale would have her brood of peaceniks puking, not, lapping up. Uygur's reaction to all this "you are definitely to the left of me". To be left of Uygur means it is lecturing Marx on how to do redistribution better than what the Communist Manifesto said. 

Both Sanders and Corbyn have attracted the committed support of legions of millennials who, having escaped the sting of socialism and never been instructed on the ideological debates of communism versus free market, don't know the true nature of what they're cheering.

Andrew Cuomo, governor of New York and Presidential aspirant for 2020, seeking to cover himself in progressive credentials and seek the mantle of Sanders, has promulgated a 'free college' scheme. Independent estimates, according to New York Times, peg the cost in a wide range, $138-$232 million. No one knows the true cost which depends on number of enrollees and many other factors. Other analysis points out that, as Hillary Clinton repeatedly said in objection to Sanders during campaign, the plan does nothing for the poor students, from families earning less than $50,000, as they are already covered for tuition fees by existing programs. On the other hand the program is a largess for the middle class, earning unto $125,000. Most importantly the program does nothing for part time students, which most poor students are but rewards only full time students and insists that students should graduate in 4 years, most poor students graduate in 6 years. A little known provision in the proposal insists that students, upon graduation, should serve the state of New York for the number of years they received funding. 'Road to Serfdom'.

What could be wrong with giving free kindergarten to all children of New York City, mind you, just the City not the State? A price tab of $400 million for 65,000 children and that's just for 4 year olds. This is a program that NPR points out is not means tested and, again, benefits all, without demarcation of who needs it and who doesn't. An expansion of the pre-k program to all 3 year olds in the city would cost, New York Times says, $700 million to cover 62,000 children per year. The expense could grow to $1 billion. If there ever was a ponzi scheme this is it. Why not just deposit the money spent per children into a mutual fund and the child may never have to go to school or have to earn a penny by working when it reaches adulthood.

In 2000 NYC's pension costs were just 2% of the city's budget. A 2014 New York Times article said that in 2015 NYC pension costs would comprise, $8 billion, 12% of the city's budget, fueled by union contracts. In city after American city, in State after State pension costs of public employees are budget busters with sickening regularity. Police, Transit, Teachers, Firemen unions are the combined single biggest drivers of pension costs. Unions lobby and campaign for politicians who'll promise rosy pension benefits like retiring at 55 with full pension and 'cost of living adjustments' forever and lump sum cash equivalents of rolled over sick leave over decades of service all the while with measly contributions from employees. Greedy politicians agree to those demands by playing creative accounting on pension returns. Over estimating pension returns politicians put less than required money into the system because if they put in what is needed there would be only pennies left for services to the taxpayer. Add to this luxurious overtime pay that unions negotiate and the miserly premium they pay for the ballooning healthcare costs. Bernie Madoff is a picture of fiscal sanity in contrast.

Is it any wonder then that the last census confirmed said most New York City residents are either rich or poor and very little middle class. New York City has only those who can afford the taxes and those who need those taxes.

What could be wrong with 'free healthcare' for all? Bernie Sanders's own home state Vermont tried what is popularly called 'public option' and abandoned it when it almost consumed the entire state budget. California is now flirting with a public option for all Californians, including illegal immigrants at a cost $400 billion. California's entire budget is around $180 billion. While America's notoriously expensive healthcare surely needs to be tamed but the much lauded public option proves to be a fiscal disaster. The California experiment is being spearheaded by the Nurses union which touts a study funded by it that says that the extra cost can be mopped up by, what else, more taxation that includes raising the already high sales tax to nearly 10%. When sales tax rises that affects every citizen, rich or poor.

Bernie Sanders raved and ranted about breaking Big Banks and sending CEOs to jail on the campaign trail. Asked during a debate as to why he'd not ask for jail time for government run EPA (Environment Protection Agency) that literally muzzled evidence that the water in Flint, Michigan was poisoned he hemmed and hawed. This is the problem with Sanders and his worldview. Private enterprise is held to a much higher standard whereas incompetence and plain villainy by a government entity is par for the course. Faced with mounting evidence of corrupt ineptness at government run Veterans Affair Sanders, a New York Times article said, was reluctant to admit wrong doing until the evidence was clearly beyond ignoring.

Jeremy Corbyn
Contrast how Obama administration dealt with Volkswagen and BP on the one hand and big time union shop GM. The Obama administration skinned alive BP for the Gulf oil disaster, an accident. BP almost became bankrupt. Volkswagen cheated on emission standards and was slapped fines that eventually came to $30 billion. General Motors management systematically hid evidence of faulty ignition switches that had resulted in nearly 124 deaths. The penalty on GM was a paltry $900 million. The number of deaths due to VW scandal was 0, the number dead in BP accident was 11. I guess the tens of thousands of union workers in GM or that they were a democratic voting bloc had nothing to do with Obama's decisions.

Bleeding heart liberals cried hoarse about BP oil spill but did not give a squeak about an entire river polluted for generations to come by the EPA. The EPA, against advice, triggered a mining accident in a Colorado river leaving it polluted with toxic waste and then refused to pay the damages that were estimated at $1.2 billion, according to CBS News, citing 'sovereign immunity, which prohibits most lawsuits against the government'. The poor American citizen living in Colorado suffering toxic waste have no recourse to any largesse as settlement because their polluter is the government unlike the residents of Louisiana where an 'accident', not intentional act unlike the EPA, resulted from the actions of a corporations.

The story of Bernie Madoff, the ponzi operator, and the racy story of a few guys who shorted the housing market are often cited as evidences of a 'rigged system' and how more regulation is needed. This is laughable. Employees of the SEC were watching porn at office while the financial crises swirled. Tipsters tried contacting SEC regarding Madoff but to no avail. One of the 'Big Short', Mark Baum, tried telling regulators, to no avail, how he figured out that the housing market would crater. I'm not arguing for dismantling regulations but regulations are not a panacea.

Bernie Sanders rails about the rich not paying their 'fair share'. This is baloney. Pew research center shows that 51.6% of US Income Tax is paid by the top 2.7 % (AGI $250,000+). The bottom nearly 60% that includes AGI unto $50,000 pay just 5% of the  total tax receipt.

Pew Research center sums up for 2015, "analysis confirms that, after all federal taxes are factored in, the U.S. tax system as a whole is progressive. The top 0.1% of families pay the equivalent of 39.2% and the bottom 20% have negative tax rates (that is, they get more money back from the government in the form of refundable tax credits than they pay in taxes).

Trump was not the only one playing the fool with facts in the 2016 election. Bernie Sanders was equally guilty. Sanders grandly claimed that the humongous bill for his free tuition would be paid for by a tax of Wall Street. Politifact rated that claim as 'mostly false'.

Sanders's healthcare proposal, scored by left leaning economists cited by New York Times, would cost $2-$3 Trillion in 'additional' spending 'per year'. Sanders extolled Denmark for its welfare programs. What he left out was that the average tax rate of Denmark, that includes the middle class, is 49% compared to the US average of 25%. Further taxes in Denmark, according to liberal online magazine Vox: VAT, a form of sales tax, is 25% ; 180% tax on car purchases, effective income tax rates are 35-48%. America is, thankfully, not Denmark.

Elections are won and lost for complex set of reasons and we should avoid the temptation to simplify electoral mandates. It is tempting to read into the Trump victory and impressive loss of Corbyn a simplistic story of revolt against a liberal international order built on the principles of free market and free trade.

Asked what would he consider a major threat to US Sanders singled out 'Climate change'. Sure, one could make the case for that but imagine how that answer would play to the coal belt of Ohio and Pennsylvania that gifted the Oval office to Trump. Those states did not tip to Trump only because of his anti-trade stance. Trump's deadly cocktail of xenophobia, racism, sexism and muscular rhetoric against trade pacts all rolled into one winning combination that, aided by wikileaks, delivered a stunning win.

I'm not a climate change denier. Global warming needs serious problem solving but solutions that, unlike those proposed by limousine latte-sipping liberals, should not be mere pabulums. Most prescriptions from the likes of Sanders are devoid of economic or scientific merit. Why do Tesla and Toyota Prius car buyers need a tax break? If there's a tax sop that has to be tossed it is molly coddling buyers of expensive hybrid cars. Why is Tesla subsidized heavily by taxpayers for their factory? An Obama administration official conceded in a congressional hearing that drivers of CNG powered buses are counted in 'green jobs'. If this is not boondoggle what else is? It is a myth that Solar power is 'clean'.

We're told that the youth of UK delivered a rebuke to Theresa May by rallying behind Jeremy Corbyn and that it is proof that socialism is once again hip. Nonsense. Theresa May ran a horribly arrogant campaign and promised a 'hard Brexit'. The last thing the youth wanted was a 'hard Brexit'. When Brexit happened these same pundits bemoaned that the worst affected were the educated youth. If that is true how did they rally behind Corbyn, who, for all practical purposes, was a Brexit proponent with his denunciations of international trade?

The Guardian, a trusted left wing newspaper, gave an unflattering review of Corbyn's proposals that were the template 'tax and spend' socialism of the 40s. Both Sanders and Corbyn like to downplay how their dragnet of higher taxation will spread far into the middle class and instead pretend as if they could deliver 'heaven on earth', as socialism was once called, at the cost of few. We're often sold stories of how income taxes on high earners were in the stratospheric 80s in the Eisenhower era and how all was well with the world. Truth, nonsense. One, not many really paid that rate. Two, in this globalized world of today high earners can migrate at will and money moves better across borders. One of the chief criticisms against Thomas Piketty's theory of high taxation was that he insufficiently factored how people would change their behavior in response to tax increases. If tax cuts are oversold for stimulating economy then it is equally true that adverse responses to tax increases are downplayed. When Sanders says that wealth 'flows' to the top 1% it is an obscene statement that does not even pay cognizance to the fact that the rich are also 'working rich'. Money did not 'flow' to Bill Gates or to people like me who are in the top 10%. Money doesn't grow on trees. Incidentally Sanders owns three homes including a beach home. So much for a guy who wants the government to decide how much is too much. Corbyn wants to tax those who earn 80,000 pounds at the rate of 45%. Try living with that salary in London or Oxford after that tax. It is more honest to call the tax as extortion racket.

George Orwell, like Corbyn and Sanders, loved the idea of capping salaries of CEOs except when it meant his own royalties. Orwell hated the idea of selling books cheaper than they should be if only to increase readership. His argument was it doesn't promote readership. Sure. Everyone loves to be a socialist on another man's dime. Just like Sanders Corbyn bristled when even sympathetic analysts pegged the costs for his programs as budget busting. Corbyn, Guardian said, had no way to pay for 90 billion pounds in spending.

The 2016 election saw the advent of the term 'low information voter'. It was used to refer to, primarily, Trump voters who voted for him while living off of welfare programs that he either planned to cut or had no intention of keeping intact. Sanders and Corbyn voters are no different. Many of their supporters had no idea of the hollowness of their programs beyond the fact they sounded good and were, economically speaking, utopian fantasies.

A popular trope in US is about US defense spending, which, dwarfs other expenses.

The above graph slyly shows only 'discretionary spending'. Now, here's the full picture.

On the overall US budget 'entitlement spending' (Social Security, Medicare, Medicaid and Obamacare subsidies) totals 51%. Essentially half of US budget goes to welfare cost. Here's Nate Silver in New York Times statistically depicting US government spending over the post-war era.

Obamacare addresses a key American issue and expanded healthcare accessibility but truth is 80% of Obamacare enrollees depend on subsidies. In a stunning video that surfaced after the 2012 election Jonathan Gruber, one of the architects of Obamacare, admitted that while the program was sold on the basis of controlling cost it was planned solely for expanding care and that the American voter was practically lied to. Expanding healthcare was supposed to control costs by enabling access to preventive care but current studies show that access to healthcare actually increases costs because more symptoms are diagnosed. Sure, it is a good thing for a citizen BUT there is a price to pay.

Sanders and Corbyn were admired for their passionate espousal of causes with messianic fervor. They even strutted around with a halo compared to Clinton and May who were seen as being in the pocket of elitists and corporate interests. Little did it matter that Sanders and Corbyn were admirers of totalitarian thugs like Fidel Castro and were completely dishonest about the cost of their programs. If Trump voters were ready to overlook his faults Sanders and Corbyn voters refused to see any faults in their idols.

I asked a Bernie Sanders supporter if he can point to any statement or audio clip of Sanders praising any entrepreneur or CEO over the many decades he's been in public life. There's none. Zilch. Yet one can find him praising Castro. Then Corbyn is in a league of his own with his molly coddling of IRA. While Trump's love of totalitarian leaders was ridiculed these saints of socialism escaped rebuke for their own penchant for totalitarianism.

Sanders and Corbyn make a virtue out of their aversion to militaristic adventurism but their record is not only inconsistent but, especially for Sanders, plainly duplicitous. Sanders voted for both the Afghanistan war and the Libyan expedition. Corby amended his manifesto to voice support for NATO while having opposed Afghanistan war, after all 9/11 did not happen in UK.

Sanders's campaign was known for cold shouldering black and hispanic voters who were rolled up by Hillary Clinton. There was considerable opposition to Sanders's free tuition idea from the black voters. Black voters were deeply suspicious of Sanders's communism-lite economics since they had long memories of how FDR's New Deal, the high noon of socialism, institutionalized segregation in government projects. Black voters, like any democratic party worker, support big government but socialism is one step too far for them.

All of the above criticisms is not dismiss as invalid genuine concerns of income stagnation or income inequality or global warming. A Harvard study found that for every automation of a job six employees lost their job. Entire classes of jobs have been wiped out in the past 20 years thanks to technological innovation. While a college degree ensures a pathway to prosperity too many people are feeling compelled to attend college at great cost even when they would go into jobs which do not need a college degree. College tuition and healthcare costs are genuine concerns that need better solutions not a wholesale takeover by government.

From my obituary for Thatcher:

What was life in UK before Thatcher? A liberal writer writing in the staunchly liberal 'The Guardian' gives a glimpse: "But if today's Guardian readers time-travelled to the late 70s they might be irritated to discover that tomorrow's TV listings were a state secret not shared with daily newspapers. A special licence was granted exclusively to the Radio Times. (No wonder it sold 7m copies a week). It was illegal to put an extension lead on your phone. You would need to wait six weeks for an engineer. There was only one state-approved answering machine available. Your local electricity "board" could be a very unfriendly place. Thatcher swept away those state monopolies in the new coinage of "privatisation" and transformed daily life in a way we now take for granted."

In another curious parallel both Reagan and Thatcher faced down crippling strikes and broke down the unions. Thatcher had her miners strike in her second term and Reagan had the PATCO strike in his first term. Both strikes were led by greedy unions willing to prove they were militant unions. Reagan fired the entire PATCO union. The miners lost broad public sympathy with their arsonous streak. Organized labor never recovered from those death blows. Both countries, thanks to that, have since prospered.

Between Thatcher and Reagan it was Thatcher who found the words to taunt socialists: "you want to make the poor poorer as long as the rich are less rich". Asked if she would do a u-turn on her policies a stout Thatcher retorted "u turn if you want to. The lady's not for turning". "There is no such thing as public money" said she. Yes, its not a revelation or a discovery. But such truths had been forgotten for decades under the assault of liberal Keynesian policies. Truths needed to be re-told and thats what Thatcher did and for that the world owes her gratitude.

It is not for nothing that 'The Economist' called her a 'Freedom Fighter'.


1. https://www.nytimes.com/2017/01/03/nyregion/free-tuition-new-york-colleges-plan.html?_r=0
2. http://money.cnn.com/2017/04/08/pf/college/new-york-free-tuition/index.html
3. http://www.npr.org/sections/ed/2015/09/08/438584249/new-york-city-mayor-goes-all-in-on-free-preschool
4. https://www.nytimes.com/2017/04/24/nyregion/de-blasio-pre-k-expansion.html
5. https://www.nytimes.com/2016/02/14/opinion/sunday/how-new-york-made-pre-k-a-success.html
6. http://www.sacbee.com/news/politics-government/capitol-alert/article151960182.html
7. http://www.sacbee.com/news/politics-government/capitol-alert/article151960182.html
8. https://www.empirecenter.org/publications/nyc-pension-costs-will-go-even-higher/
9. https://www.nytimes.com/2014/08/04/nyregion/new-york-city-pension-system-is-strained-by-costs-and-politics.html?_r=0
10. http://www.huffingtonpost.com/2012/06/21/mta-workers-overtime-making-100000_n_1616921.html
11. http://nypost.com/2016/03/13/nycs-highest-paid-bus-driver-doubled-his-salary-with-ot/
12. https://www.nytimes.com/2016/10/21/us/epa-waited-too-long-to-warn-of-flint-water-danger-report-says.html
13. https://www.washingtonpost.com/news/energy-environment/wp/2016/10/20/epa-should-have-intervened-in-flint-water-crisis-months-earlier-watchdog-says/?utm_term=.6ebab3cfd880
14. https://en.wikipedia.org/wiki/General_Motors_ignition_switch_recalls
15. http://www.cbsnews.com/news/gold-king-mine-spill-colorado-rivers-epa-claims/
16. http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/
17. http://www.nbcnews.com/business/autos/judge-approves-largest-fine-u-s-history-volkswagen-n749406
18. http://www.politifact.com/truth-o-meter/statements/2016/apr/04/bernie-s/bernie-sanders-says-wall-street-tax-would-pay-his-/
19. http://www.politifact.com/truth-o-meter/article/2016/jan/13/how-much-would-bernie-sanders-health-care-plan-cos/
20. http://www.npr.org/2016/05/09/477402982/study-sanders-proposals-would-add-18-trillion-to-debt-over-10-years
21. https://www.nytimes.com/2016/02/16/us/politics/left-leaning-economists-question-cost-of-bernie-sanderss-plans.html
22. http://www.npr.org/2016/05/09/477402982/study-sanders-proposals-would-add-18-trillion-to-debt-over-10-years
23. https://www.vox.com/2015/10/16/9544007/denmark-nordic-model
24. https://www.theguardian.com/politics/2017/may/16/labour-manifesto-analysis-key-points-pledges
25. https://www.theguardian.com/politics/2017/may/12/labour-party-recognise-90bn-cost-deliver-manifesto-pledges-election
26. https://www.theguardian.com/politics/2017/may/30/corbyn-unable-to-give-cost-of-childare-pledge-in-interview
27. https://www.theguardian.com/education/2017/may/10/corbyn-needs-to-find-10bn-a-year-to-make-good-on-tuition-fee-pledge
28. https://www.theguardian.com/politics/blog/live/2017/jan/10/jeremy-corbyns-morning-interviews-politics-live
29. http://medialens.org/index.php/component/acymailing/archive/view/listid-1-alerts-full/mailid-350-the-guardian-readers-editor-responds-on-jeremy-corbyn.html
30. https://fivethirtyeight.blogs.nytimes.com/2013/01/16/what-is-driving-growth-in-government-spending/?_r=0
31. http://contrarianworld.blogspot.com/2013/04/thatcher-is-dead-long-live-thatcherism.html


Aram Pesu said...

Beautifully written.
Only nitpick is
"Contrast how Obama administration dealt "
There is no Contrast that you show in the next sentence. Not pointing it as a nitpick, just pointing in case i misunderstood it

Aram Pesu said...

Just a nitpick "Contrast how Obama administration dealt " I dont see any contrast you are pointing in that sentence.
pointing this to see if I missed anything

Wonderfully wonderfully written.