The Economic Impact of How We Vote
Because it’s an election year, we are being presented with false narratives, political messages that are little more that glittering generalities, and statements made to strike an ideological nerve or instill fear if the opponent is elected.
Democrats are not immune from these criticisms. Senator Warren proudly claimed that she is a capitalist, while failing to acknowledge that our economic system is now referred to as a “mixed” economy. Bernie Sanders acknowledges being a Democratic Socialist, and while he has many policy positions that appeal to liberals and young voters, he has never explained how his socialist leaning dovetail with a “mixed” economy.
Republicans, and more specifically, Donald Trump, have repeatedly claimed that the radical left will destroy the economy by leading us down the destructive road know as socialism, citing countries like the former Soviet Union, Cuba or Venezuela as proof. But it’s an election year, so these things are to be expected. The truth, as we’ll explain, is much more mundane, but the consequences of how we vote will have a serious impact on various segments of society.
When we talk about a “mixed” economy, which is exactly what our economy is, we’re talking about an economy with a significant public sector. In 2019, federal spending was more than 20 percent of GDP, with state and local spending be just shy of 17 percent of GDP, which means the 37 percent of our GDP is determined by forces outside what we typically think of as a market economy where supply and demand determines price and output.
But the pubic-private distinction is not as clear cut as you might think. The private sector produces 63 of output at a price in the marketplace, but the ability to afford products, in many cases, is assisted by government aid, for example, food stamps. Likewise, 37 percent of output is provided by the government, but this does not mean that all the goods and services are free, for example, admission to a National Park is many cases come with an entrance fee.
In the US, there is a bias in favor of privately produced goods and services at the expense of those provided by government. But the inadequate provision of publically provided or funded goods or services is inefficient, limiting our capacity to produce and unnecessarily harming many families. This election will give us the ability to correct some of the problems that an “over reliance” on goods and services produced by the private sector creates.
Starting in 2010, the majority of workers in the US labor force have been female. But, this past Thursday it was reported that more than 800 thousand women have dropped out of the labor force, compared to just 200 thousand men. The reason for the disparity in dropout rates was due to a lack of available childcare. For female headed families dropping out of the labor force is the biggest single contributing factor to family poverty.
In 2018, the poverty rate in the US was 11 percent, but for female-headed families of color, the poverty rate was more than 31 percent. In Denmark, where the government funds 75 percent of the cost of child care, it’s unusual for a child growing up not to have been enrolled in some form of childcare, and as a result, the poverty rate in Denmark is a fraction of what it is in the US.
In the US, according to the Kaiser Family Foundation, 49 percent of Americans have an employer provided insurance, which leaves them vulnerable when unemployment causes them to lose their health insurance. Twenty-three percent of home foreclosures are due to unmanageable medical bills, with some studies showing that 62 percent of bankruptcies are caused by medical issues. A public option, currently not available under the Affordable Care Act, would give families the option of staying with private insurance carriers or moving to the public sector.
What these two examples highlight are not that the US needs to eliminate private insurance or move to government run daycare centers, rather they make clear that we are not doing enough to provide support for families who have children or families who have medical costs that are unaffordable. A larger public presence in the economy is not a repudiation of the private marketplace, but an acknowledgment that many families are not thriving under our current economic arrangement.
The election will give the nation a vote, a voice, on how we want to move forward. As we mentioned in the past, a nation with its own currency, and significant idle resources, has no economic constraints on what it can provide its citizens. November’s vote could improve the economic outlook for many families for years to come.