To the Editor:
Senator Bernie Sanders is currently the most outspoken of the progressive left on the idea of taxing the rich, which ultimately will be defined as anyone who has a job, to provide free benefits to others. Persons he is addressing, whose after tax and inflation
adjusted income has been diminished over the last several years, are actually the victims of the very policy he is espousing.
My economics professor at Yale was Arthur Okun, who later was a senior economist with John F. Kennedy's Council of Economic Advisors. He came up with Okun's law which says for every 1 percent reduction in unemployment Gross Domestic Product increases 3 percent, based on actual data for the period between World war II and 1960. This finding was instrumental in creating the successful Kennedy tax cuts.
Arthur also came up with the "Old Okun Bucket Theory" in which he states "The money must be carried from the rich to the poor in a leaky bucket. Some of it will disappear in transit, so the poor will not receive all the money that is taken from the rich."
He attributed these losses to administrative costs of taxing and transferring and to incentives not to work that apply to both the rich and the poor. The rich will work at avoiding taxes or not work as much in order not to have their extra effort taxed away, and
the poor will have less incentive to work because their benefits are reduced as they make more money.
At Yale I used to argue with Arthur about the economic benefits of deficit spending. We did it for 10 years during the 30's and as Roosevelt's secretary of the treasury testified to Congress we created a big debt and still had high unemployment. A consequence of past deficit spending is the current huge national debt, $56,000 for every man woman and child in the United States. One reason the Federal Reserve is so reluctant to raise interest rates is that the country would have to start paying more interest on this debt when we are already running large deficits. These artificially low rates hurt the income from savings of every saver especially retired people. They also encourage borrowing by creditworthy people and corporations, the rich, to invest and speculate.
This is the Wall Street crowd that Bernie rails against. Perversely decades of progressive policies have had the effect of the very rich getting richer and everyone else getting poorer.
To paraphrase Margaret Thatcher, the trouble with socialism, even Democratic Socialism, is that pretty soon you run out of other people's money.