Senator Bernie Sanders (I-VT) possesses a troubling record of praising authoritarian regimes and acting as an apologist for communist governments that committed atrocities. The socialist senator did not make these remarks as a college freshman, but as a middle-aged politician who honeymooned in the Soviet Union and delivered speeches that celebrated Nicaragua, Cuba, China, and Venezuela. Instead of denouncing these views from 30 or 40 years ago, Sanders dismisses any question relating to his past because he espoused these positions a long time ago. Perhaps he wants to appease the extremist youth serving in his campaign, or maybe he does not want to expose his intellectual inconsistency. It sounds like he is trying to have his rationed 35 grams of kasha and eat it too.
A Line in the Sanders
A cornerstone of the senator’s presidential campaign is to raise the federal minimum wage to at least $15 per hour. He asserts that it is a panacea for all of life’s problems. The studies show that most Americans endorse this proposal, too. But what if he suggested introducing a maximum wage? While this has not been a key plank of his White House bid, Sanders’ refusal to denounce this pernicious economic policy could serve as a warning sign of things to come.
Jake Tapper and his CNN team discovered that Sanders thought it should be illegal to make more money than someone could consume in his or her lifetime. In 1974, he went as far as proposing a maximum wage cap on the highest earners. He refrained from giving a clear answer when confronted, choosing to instead flippantly ask: “Did you go back to my third-grade essay when I was in P.S. 197? We could go back to things I said in the ’70s; I don’t think it’s productive.”
According to newspaper stories from his time as a member of the Vermont Liberty Union Party, Sanders proposed making “it illegal to amass more wealth than a human family could use in a lifetime.” A recommendation was to introduce a 100% tax on income over $1 million per year so that every cent earned beyond that threshold would be revenue transferred to the government and used “for the public need.” He even flirted with this idea as late as the 1990s when he submitted “How About a Maximum Wage,” a Los Angeles Times op-ed, to the congressional record.
In recent years, he has scaled back his communist-like proposal by lowering his demands for a top marginal tax rate of between 50% and 90%. He correctly pointed out that his plan is comparable to the tax structure of the 1950s and 1960s, though he stopped short of conceding that nearly everybody was exempted. Perhaps he changed his mind when he became a millionaire with three properties and first-class airfare.
So, what’s the deal with a maximum wage anyway?
Maximum Wage: A Primer
Bernie Sanders (Photo by Bastiaan Slabbers/NurPhoto via Getty Images)
It may or may not be surprising that the U.S. government nearly introduced an income cap in the 1940s when former President Franklin Delano Roosevelt championed the idea. The plan was backed by unions and a plurality of Americans, according to Gallup polling at the time. Congress was not as enthusiastic over the idea as congressman rejected FDR’s recommended cap on net income of $25,000 ($365,000 when adjusted for inflation). The White House and lawmakers did compromise, instituting a 94% levy on incomes over $200,000 – again, there were plenty of exemptions in the tax code.
The idea has gained momentum in the last few years. The most prominent example came when British Labor Party’s Jeremy Corbyn mused on the concept. He noted in August 2015 that “there ought to be a maximum wage. The levels of inequality in Britain are getting worse.” This might explain why he got trounced in last year’s general election.
Cuba maintains a maximum wage law as individuals are prohibited from earning more than $20 per month. Egypt passed a similar measure in 2014. Venezuela implemented salary caps for public employees. Switzerland applied common sense as voters overwhelmingly rejected the policy. In the U.S., only fringe candidates and a small number of celebrities, like Bill Maher, have gone on record endorsing a wage cap.
An Economic Lesson
The world has witnessed the devastating consequences of price controls on commodities. Anytime a government attempts to fix prices for milk or bread, a shortage follows. Politicians and bureaucrats trigger several unintended consequences, including the emergence of black markets, the impairment of rational investment, the insolvency of businesses, and greater state interventions.
An obvious ramification of a wage ceiling is a disruption to labor markets. Companies would find it difficult to hire and retain impeccable employees, either in leadership roles or within the organizations. Many valuable workers may pass on bringing their talents to a firm for a capped fee, causing problems related to productivity and profitability.
Egypt served as a case study in the maximum wage discussion, despite a lot of confusion regarding exemptions. Ultimately, the data revealed that the finance, technology, and telecommunications industries either suffered a “brain drain” or failed to attract competitive talent. Also, many public agencies and departments skirted the law by complementing a fixed salary with bonuses. (It is worth noting that executive compensation shifted to stock options in the 1990s when the U.S. government limited cash compensation to CEOs at publicly traded companies to $1 million.)
The other problem is that a maximum wage would trigger capital flight – both financial and human. Businesses, wealthy individuals, and highly educated or experienced professionals would emigrate to free nations with economies that pay everybody what they are worth. Think of the intelligent folks in Silicon Valley relocating to Canada or overseas to take advantage of the far more lucrative earning potential.
Overall, a maximum wage would cause market inefficiencies by removing profit incentives, distorting labor price signals, and sending capital outside the country.
Never Sanders Democrats?
In the crusade for fairness, policymakers and the public usually agree on price setting, from rent to wages. Let the record show that manipulating prices leads to a myriad of problems for the average person, such as a paucity of housing or the loss of jobs. If anyone without a modicum of economic understanding agrees that price-fixing a loaf of bread or a vine of tomatoes can produce shortages, then why could the same result not affect employment?
The real harm is that anytime the champions of the impecunious initiate their journeys for fairness, they metastasize into tyrants, whether they intend to or not. The most dangerous type of progressive politician is one who is genuine in his or her beliefs. It is the fatal conceit of community activists, elected officials, and talking heads on network television to suggest that their philosophy of eroding freedom and expanding the Leviathan will serve as panaceas rather than the nostrums they are.
In the 2016 election, a group of Never Trump Republicans swarmed the political race to reject the rise of President Donald Trump, accusing him of everything under the sun. As Philip Klein of the Washington Examiner opined, why is there an absence of Never Sanders Democrats? Whether it is his glowing reviews of dictatorships of yesteryear or his support of questionable individuals, such as Rep. Ilhan Omar (D-MN) or Rep. Rashida Tlaib (D-MI), the passive-aggressive silence of the left may spawn deadly consequences.
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Read more from Andrew Moran.
