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If Socialist Candidate Bernie Sanders Was President, Here's What Would Happen to the U.S. Economy

NEW YORK (TheStreet) -- Would you want a socialist in the White House? If the polls are accurate, very few people would. But it's closer to happening than almost ever before, with self-avowed socialist Bernie Sanders running a close second in the early going to Hillary Clinton to win the Democratic nomination for President of the United States.

The Vermont senator has shaken up the Democratic presidential field, igniting crowds all over the country and giving front-runner Clinton a run for her money in the polls. Many Americans will get their first good look at him in action at the Democratic presidential debate on CNN Tuesday evening (which TheStreet will be covering live). And while Sanders as president remains an unlikely scenario, it's worth pondering what the U.S. markets and economy would look like with the Democratic Socialist at the helm.

"The great thing about Bernie Sanders is that there's no guile about him. His authenticity is pretty much based on him saying what he believes," said Middlebury University political science professor and expert in presidential politics Matt Dickinson. In other words, Sanders would probably be much better off in the polls if he used the "s-word" less.

While the U.S. economy would certainly look different under a socialist Sanders presidency, it might not be as crazy as you'd think.

Of course, a Sanders presidency would face a number of hurdles to enacting its proposals -- ahem, Congress, which is controlled by Republicans, who don't love socialists. But taking legislative hurdles out of the equation, we can glean much of what a U.S. economy run by Sanders would look like.

Among Sanders's most significant proposals are implementing a single-payer health care system, breaking up big banks, raising the minimum wage to $15, and ending free trade agreements NAFTA, CAFTA, permanent normal trade relations (PNTR) with China and the recently-signed Trans-Pacific Partnership.

Thus far, most of the senator's ideas -- economic and otherwise -- have been focused on spending, without a clear picture on how he would pay for his proposals. However, one can infer that paying for his programs would require one of two things (or a combination of both): an increase in the deficit, and higher taxes.

"He doesn't really detail the impact of taxes on the overall aggregate growth of the economy. He basically just says, 'Well, we'll just raise more money by raising taxes,' but he doesn't really discuss the impact on productivity," Dickinson said.

Well, let's take a closer look.

Single-Payer Health Care: Sanders' Fat-Wallet Proposal

Sanders' single-payer health care system would cost the U.S. federal government $15 trillion, and seven of his other programs -- including increased spending on public infrastructure, expanding social security and making tuition free at public institutions -- would cost an additional $3.5 trillion, according to Gerald Friedman, a professor of economics at the University of Massachusetts at Amherst.

The good news? Friedman also says the health care overhaul would enable up to $10 trillion in savings for the general public. And the other programs? Another $1.1 trillion in additional savings over 10 years. And excluding the issue of likely higher taxes, the programs could mean seven million more jobs and a nearly $4 trillion increase in economic activity in 2026.

The bad news? Regardless, the programs could spook the markets.

If Sanders' policies deepen the budget deficit for many years down the road, that could impact the bond market and creditors, who in the face of uncertainty often drive up interest rates or simply stop giving out loans at all. Essentially, it could mean it would be more expensive to run the government, which could exacerbate any cost issues a Sanders budget might face. Former President Bill Clinton learned this lesson the hard way early in his tenure and was forced to prioritize deficit reduction instead of fulfilling his spending promises. In the Bob Woodward's 1994 book on Clinton The Agenda, the President is described as saying, "You mean to tell me that the success of the program and my reelection hinges on the Federal Reserve and a bunch of f------ bond traders?"

Friedman points out that a single payer health care program would also negatively...