By The Numbers: Why Ocasio-Cortez's Socialism is A Pipe Dream and Plain Ignorant of Reality

We have had a great time talking about the ignorance, verbal gaffes, and lack of historical context of newly elected Congresswoman, Alexandria Ocasio-Cortez:

• Despite having an economics degree, she did not know how to compute the simple unemployment rate.
• Despite being elected to Congress, she did not know what the three branches of government are.
• Despite having a college education, she somehow thought that she alone had found $26 TRILLION in wasted Pentagon spending over a ten year period when the ENTIRE Pentagon budget over that same time period was a fraction of $26 TRILLION.
• She says she would rather be morally right than factually right, in other words she would prefer to live in a fantasy world than reality.
• She is a hypocrite since before being sworn into office, she chastised those in Congress that were accepting their salaries during the government shutdown but once in office and drawing that salary she refused to donate it to needy Federal workers or forego it altogether.

We could go on and on but you get the idea. Tough to believe anything this politician says.

She has big, socialistic plans for this country, plans that would make us all poorer and less free. But as always, she never thought through her plans to see how inane they are. For instance, she wants of implement such socialist programs as Medicare For All, the New Green Deal, free college, guaranteed Federal jobs, etc.

And she proposes to fund these massive government bureaucracies by taxing income made by Americans over $10 million at a 70% tax rate. But we did the math for her, something she obviously did not do, and proved conclusively that her plan to fund these idiotic programs with a 70% tax on earnings over $10 million could fund only a tiny fraction of a single program, Medicare For All, never mind using high earners to fund the other socialist programs listed above. That complete analysis can be seen at:

https://loathemygovernment.blogspot.com/2019/01/january-2019-part-8-political-class.html

Do not like my math? Consider a much more detailed analysis by someone smarter than me, as laid out in a recent National Review article by Brian Riedl on January 8, 2019, “Why 70 Percent Tax Rates Cannot Finance Socialism.” His entire article can be accessed at:

https://www.nationalreview.com/2019/01/alexandria-ocasio-cortez-70-percent-tax-cannot-finance-socialism/

The highlights, or lowlights for Ocasio-Cortez, are as follows, with Mr. Riedl reaching the same basic conclusions that I did: the country is not nearly rich enough to support the socialistic programs of this Congresswoman [Note: there are a lot of numbers here but Mrl. Riedl lays out the numbers and the reality they represent logically and simply so bear with the numbers, they are quite eye opening and necessary to understand how stupid these Ocasio-Cortez ideas are]:

• His overall conclusion is that the country cannot fund her programs without “hammering the middle class.”
• He believes, and we have proved it already, that, “A 70 percent tax bracket would raise very little (if any) revenue, while damaging the economy and sending income and jobs overseas."
• Of course, as with most Ocasio-Cortez ideas, there are no details about her plans, just pie in the sky pontificating, since, as we discussed above, she would rather be morally right than factually right.
• Regarding Ocasio-Cortez’s socialistic “New Green Deal” program, a comparable program proposed by Green Party Presidential candidate Jill Stein would have cost between $700 billion and $1 trillion a year for ten years, requiring anywhere from a 20% to 29% increase in taxes for the Federal government to fund.
• As we calculated in the post above, taxing those Americans’ earnings over $10 million would fund less than 10% of Stein’s program.
• Stein’s proposal would have eaten up 4% of the entire nation’s GDP.
• But this is just for the New Green Deal, Ocasio-Cortez also wants to fund Medicare For all (annual cost = $3.2 TRILLION), Federal jobs guarantee program (cost = $6.8 TRILLION), student loan forgiveness (cost = $1.4 TRILLION), free public college ($270 billion), Social Security expansion (cost = $188 billion), family leave (cost = $270 billion), and infrastructure improvement (cost = $1 TRILLION).
• These programs alone would eat up 21% of the country’s GDP, twice what it is now.
• Additional Federal budget deficits would bring the total up to 28% of GDP.
• Since taxing the rich at 70% would pay for just a fraction of one program, either these program would have to go unfunded or ALL Americans would have to pay SUBSTANTIALLY more in their taxes, so much so that they would be wage slaves to the Washington bureaucracy.
• The article’s analysis shows that if ALL income over $1 million was taxed at 100%, IRS data shows that would raise government spending by 3.8% of GDP, which would not even balance the budget never mind fund the New Green Deal and all of the other programs listed above.
• And that assumes that Americans would still work just as hard to earn what they earn now which is a stupid assumption since who would work hard to earn more than a million dollars if the government was going to get all of it.
• Rather than a 100% tax rate, what if Ocasio-Cortez and the rest of the socialists in Washington doubled the top two tax brackets, 35% and 37%?
• This doubling would raise 1.6% of GDP, even further away from funding the New Green Deal and all of the programs above,
• What about Ocasio-Cortez’s example of taxing income over %10 million at 70%, the analysis I did in the post above?
• According to the article, it would raise only $50 billion annually, a pittance that would be used to finance the New Green Deal, Medicare for all, free college, etc.
• Note: my analysis showed that her 70% idea would raise about $105 billion, still not nearly enough, but twice what this article predicted.
• The difference is that the $50 billion estimate realized that half of what these high earners usually earn is from capital gains which would not be subject to the 70% nonsensical tax rate and thus is more accurate, and smaller than my $105 billion estimate that assumed all of these high earners’ income was wages.
• The $50 billion is also probably too high since as the author points out, people this rich would have super smart accountants and lawyers working to shield their income taxable income from the 70%, something regular Americans could not afford.
• For instance, “Jeff Bezos [founder and chairman of Amazon] may be worth $160 billion, but in 2017 he reportedly paid himself an annual salary of just $81,840, with total compensation (including deductible expenses) of $1.6 million. Taxing 70 percent of all salary and wages above $10 million (or even $1 million) would not even touch the Amazon founder.”
• The article then moves on to other tax raising schemes, all of which come nowhere close to funding Ocasio-Cortez-s socialist pipe dreams: “Realistically, additional income and payroll taxes on families earning $400,000 or more could raise at most 1 or 1.5 percent of GDP. So, let’s move outside the income tax. Popular liberal proposals to impose a 30 percent minimum tax on “millionaires” and to more aggressively tax banks, hedge-fund managers, and oil and gas companies would raise a combined 0.1 percent of GDP, according to CBO data. Doubling corporate tax rates would add 0.7 percent of GDP until the entire Fortune 500 moves its headquarters to the Cayman Islands or Ireland.”
• All of these tax schemes would raise taxes equivalent to 2% of GDP, not close to the 4% needed to fund the annual cost of the New Green Deal before talking about the other programs.
• And this 2% assumption does not take into account how Americans would take tax avoidance steps, be it to stop working as hard, hiring accountants to shelter their income, or move their companies overseas to avoid the onerous business tax increases.
• Mr. Riedl then goes about killing the liberal fantasy that the country and economy survives 90% marginal tax rates in the 1950s and 70% marginal tax rates in the 1970s.
• In reality, the rich paid LESS in effective income tax rates during those eras than today, where the marginal tax rates are half of the high rates back then, since there were so many exclusions and shelters that Americans could use to avoid these slavery level tax rates.
• An interesting reality that I didn't know is that in 1960, eight American taxpayers paid taxes at the 90% level, not 800, not 8,000, but just 8 in the whole country.
• Today, Federal income taxes are equivalent to 8.2% of GDP while in the 1950s it was 7.2%, in the 1960s it was 7.6% and in the 1970s it was 7.9% despite tax rates in the 70% and 90% levels.
• Another reality is that no developed country in the world has anything close to Ocasio-Cortez’s 70% nonsense including socialistic Norway and England and Germany.
• These European countries finance their socialism with steep value-added taxes, i.e. a sales tax like mechanism that is added to everything purchased, a tax that savages not just the rich but every citizen.
• And finally, since the top 5% already pay 42% of ALL Federal income taxes, that tax well would get quite dry really soon since they already pay a lot despite what Washington socialists claim.
• The Congressional Budget Office did some analysis that showed that to fund this inane socialistic programs ALL Americans would have to endure a 55% increase in their tax burden or there would have to be a 115% value added tax implemented, e.g. that car that costs $20,000 would now cost over $40,000, which would mean a lot less cars got bought which means a lot less cars would be built which means a lot of Americans in the car industry, and every industry, would be out of a job which would further reduce the tax stream and the death spiral is underway.

Great article with some brutally honest and reality based numbers. There is just not enough wealth generated in this country, the greatest wealth generating country in the history of the world, to fund stupid Ocasio-Cortez fantasies. The economy would be ransacked, every American, not just the rich, would end up paying tremendously more in taxes, and the benefits would be minimal.

And consider this reality: name a Federal Government program that ever came close to being right from a budget estimate perspective? The Big Dig highway program in Boston is a classic Federal government budget example: it was supposed to cost a few billion dollars and ended up costing over $20 billion dollars. The Washington political class has shown time and time again that it can not properly budget upfront or manage a budget during the implementation of a program. Thus, while the above numbers are definitely unreachable, history tells us that the above budget estimates are likely to go higher and be even more unreachable.

Oh, and one other thing. We have previously shown that the Federal government and the state governments already have a huge $109 TRILLION revenue shortfall problem with budget deficits and unfunded liabilities. $109 TRILLION! This comes out to a debt burden of about $870,000 for every American family BEFORE trying to fund Medicare for All, the New Green Deal, free college, etc. The good news is that we are probably heading for an economic collapse long before these socialism program get much underway, these programs would only hasten that collapse.

But as always with people like Ocasio-Cortez, they never do the math. In fact, they have no idea what reality is and/or have little experience with reality, which is probably her problem on both counts. The numbers don't lie even as politicians continue to do so. 

The article points out this following reality: if the socialists in Washington knew how to fund these programs, why have they not laid out their plans and funding levels and tax mechanism already? It is either because they know these are pipe dreams that would never be possible but use them as political points, i.e. they lie, or they really are that ignorant. Until they prove they can fund these program without destroying the country they are out of integrity and/or plain lazy, not doing their homework before opening their mouths with tripe.

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