Millenials Will Vote for Sanders: Not Understanding Economic Growth

A 25-year old voting this season was born in 1991. Most likely, he has no personal recollection of a prosperous America. The last time the US economy grew by more than 3% was 2005, when he was nine years old. He has no knowledge of an America where you could apply for three jobs and receive two job offers in a few days. He knows nothing of automatic wage raises. He remembers only dimly how his parents confidently signed up for buying a car in installments at 6% per year. He wouldn’t dare. Given his own personal experience, he would be right to not dare.

Everywhere, I am surrounded by millenials who are taking active steps to become comfortable in lives that offer no real prospects of upward mobility. It seems to me that the vogue of micro-breweries is related: Beer is an affordable luxury. Even in notably laid-back Santa Cruz, many of these people are well dressed. They are better dressed than I have ever seen young people in the USA since the sixties. This too makes sense: No big car or no car, probably a renter for life, I might just as well look good. I know young men who work for retail wages whose neatly trimmed beards put this retired professor to shame. Those people are at ease with two things that are mostly new in American society. First, as I said, they are settling for a life of limited economic possibilities. Second, aside from a stray Economics class that probably did not take, they have every reason to believe that they prosperity will improve when the government makes the rich disgorge their unfairly big share of the pie. This makes intuitive sense: If my employer were less greedy, he could pay me more.

I think the conservative alternative to this viewpoint does not exist in their minds, or only vaguely. I believe the alternative mostly has almost no traction among young voters. Between 1971 and 2014 (when my comparable data stop), the Gross Domestic Product grew by more than 3% 22 out of 46 years. That’s GDP in constant dollars; so, figures are comparable across years in terms of their real purchasing power.

All the years of growth above 3% occurred before 2008. So, between 1971 and the first Obama election, GDP growth stood above 3% per year for 22 out of 36 years. In 1973 and 1978, the annual rate was 5.6, in 1984, it was 7.3 %. Economic growth was the rule then, not the exception.

I suspect that young voters don’t know that the rate at which the economy grows has big consequences for their own lives.

During the seven years of the Obama presidency for which we have data, the annual average growth was 1.41 %. The difference between a 3% growth rate and a 1.41% growth rate is significant in terms of human happiness. Suppose you earn a fairly modest $40,000/ year. Suppose further (just to simplify) that your income follows exactly GDP growth. Incidentally, this is not an absurd assumption. (Ask me.)

Try to follow this made-up example.

In 2017 GDP growth is 3%; your income is = $41,200
Compare: In 2017, GDP growth is only 1.41%. Your income is then only $40,564. The difference between the two incomes is due entirely to different growth rates in the national economy. It has nothing to do with your own efforts. You did nothing personally to earn it. That difference in your income between the two growth rates is a modest $630 for the year. Yet, if you invested this one-time unearned surplus, of $630 at 3% interest (not difficult in most cases). After 16 years, it would have turned only into $1011. I agree that it’s nothing to write home about.

Now, look at other ways to consider differences in GDP growth. Suppose again that the growth of your income follows exactly the growth of GDP. You don’t get promoted; you don’t get a raise. You are stuck at $40,000 per year. At 3% GDP annual growth, after 20 years, you will have earned $196, 650 more than you would have at 1.42 GDP growth ($1 179 900 vs $9 821 650). The difference is sufficient to buy a retirement home in much of the US. Even in pricey Santa Cruz, California, where I live it’s plenty enough for a down payment on a house. Think it through: If you begun working at 25 and have had a lackluster career, by age 45, you have earned enough for a down payment through no merit of your own. Under current rules, you still have 25 years of working life to make payments on your mortgage. This all happened because the annual growth rate of the American economy was a fairly modest 3% instead of the current 1.41% .

Conclusion: a 3% GDP growth rate is worth fighting for. And 3% is not a tall order. Rates of 5 % (1976 and 1978: 5.6%) and even over 6% have been known in the past of this country (1984: 7.3.) Ireland had a rate of 5.1% as recently as 2014. (I refrain from citing growth rates of less developed countries which are often much higher.)

Young voters don’t grasp the long-term happy consequences of high growth rates. It seems to me they are also not aware of how much influence the Federal Government has on determining national economic growth rates. That’s because – on the main- high schools don’t teach American Government anymore. The young tend to be somewhat aware of the respective roles of the presidency and of Congress. They often know that they jointly decide on what taxes will be. But they tend to think that there is always enough money to take from “the rich.” (Sen. Bernie Sanders conveniently call them “the top 1%.” The absurdity of this view requires its own essay. Another time, perhaps or see another essay on this blog.

You would surprise most of the young if you told them that federal agencies perform the bulk of the real policing of American companies. They perform this task pretty much unsupervised most of the time. Only rarely, does Congress grabs itself by the scruff of its own neck to threaten them with suspending their funding. One major, fundamental exception exists to the rule that federal agencies mostly are their own. In reality,they work for the president. The president, any president, can, with one phone call, interrupt the work in any area of any federal agency’s mandate. Thus, Pres Obama, or Pres. Rubio could order the Environmental Protection Agency to process 90% of all federal environmental permit in three days or less.

Young voters will vote for Bernie Sanders unless they really believe that taxes – all taxes – impede business formation and survival and thus, economic growth and thus, employment among other important processes. They will vote for whatever Sen. Sanders calls “socialism” unless they understand that government regulations -all regulations, including the most necessary ones – are always inimical to economic growth.

Conservatives have their work cut out for them. They don’t do enough in that area. They take too much knowledge for granted.

On the same topic: …American Peronismo