The U.S. is home to some of the world's wealthiest families and corporations. It is a land of opportunity for many; however, among developed nations, the United States has the highest rates of income inequality. Income inequality has been rapidly rising in America since the late 1970s. Income inequality has a host of social-economic consequences, and the topic has become a cornerstone issue for the independent senator from Vermont, Bernie Sanders. His 2016 presidential campaign was focused on the economy, but more than that, his economic policies focus on reversing the upward trend in income and wealth inequality.
The Wealth and Income Gap
Sanders has made it clear that tackling income inequality is an issue of critical importance: “Are we prepared to take on the enormous economic and political power of the billionaire class or do we continue to slide into economic and political oligarchy?” Sanders states on his website.
Empowering the 99%
Sanders contends that the current federal minimum wage of $7.25 an hour is entirely inadequate, calling it “starvation pay.” Adamant that no one working more than 40 hours a week should ever be forced to live in poverty, he supports a “living” minimum wage of $15 an hour that would be introduced over a few years.
Throughout the past century, union membership rates have declined; moreover, the modern corporate and political environment discourages union participation. Sanders supports strengthening the labor movement as a way to help reduce income inequality. He also supports increasing workers’ influence and strength by promoting more worker-owned cooperatives.
Inequality between the rich and poor is not the only type of inequality Sanders wishes to focus on. He also aims to eliminate the pay gap between men and women performing similar work. Sanders also seeks to highlight issues of racial inequality.
Other reforms Sanders supports that intend to help the lowest income earners include providing Medicare for all Americans, eliminating tuition at public colleges and universities, and reducing interest rates on student loans.
No Free Lunch for the Super-Rich
A plank in the Vermont Senator's presidential platform introduced a number of tax reform policy ideas that would raise rates on the wealthy and eliminate loopholes.
He has proposed lowering the estate tax exemption level, increasing the estate marginal tax rates, creating a billionaire surtax and ending loopholes that allow billionaires to avoid taxes by setting up dynasty trusts or avoid estate taxes. Further, he has supported raising the cap on taxable income that goes towards Social Security. Sanders has also proposed a financial transaction tax aimed at reducing different forms of risky and unproductive speculative trading.
A central prong of Sanders' economic policies seek to ensure that the wealthy do not have grossly unfair economic advantages. In short, he wishes to challenge Wall Street’s current status of being “too big to fail”. His proposals to reform Wall Street have included: breaking up big banks, limiting huge financial institutions from being able to make risky speculations with insured deposits, capping credit card rates at 15% and limiting bankers’ abilities to benefit from taxpayer bailouts.
Possible Economic Impacts
While Sanders’ policy proposals will help to reduce economic inequality, his political opponents have argued that these reforms may have negative implications for the economy. They argue that increasing tax burdens on the super rich punishes the nation's most productive class and might lead to lower investment and overall production. In short, they argue that extending benefits to the poorest means rewarding the least productive class, dis-incentivizing hard work.
Proponents of Sanders' work argue that tilting the balance of economic rewards slightly in favor of the poor might benefit the overall economy rather than hurt it. They argue that the rich tend to have much lower marginal propensities to consume than the poor. Thus, for every extra dollar of income the rich earn, they spend far less of it than the poor. In an economy that often struggles with a lack of aggregate demand, redistributing incomes from the wealthy to the poor may spur economic growth, which benefits all.
The Bottom Line
Bernie Sanders has built a platform as a congressman, senator and presidential hopeful that has promised to empower the poor and middle class through minimum wage reforms and strengthening the labor movement while increasing taxes and eliminating tax loopholes for the super rich, among many other proposed economic reforms. With income inequality reaching highs not seen since before the Great Depression, Sanders aims to champion the 99%.