The latest free stuff to be offered by Democrats is free university education (add this to health care, pre-school, smart phones, broadband internet, etc.). Not to be outdone by Bernie Sanders, Hilary Clinton, in a recent debate, said she supports debt-free college education. While Sanders supports free college for everyone, Clinton said the “rich” would still pay for college, but for everyone else it would be free. She also said she would keep the costs down (how exactly?) and that if you study a degree that doesn’t get you a job, you would get your money back (I wanted a follow up question asking if this means she wants to get rid of philosophy and gender studies, among other degrees).
All of this of course is completely ludicrous. Even my 9-year old son can understand this. When I told him that Hilary Clinton is saying college should be free, he responded by saying, “but who will pay all of the people that work at the colleges?” Exactly. I understand that free stuff sounds great. But someone, somewhere, has to pay for this stuff. Estimates of the cost to pay for free public education in the U.S. are between $60 billion and $100 billion a year, and this is in addition to subsidies already coming from state governments. If you wanted to pay for this from the top 1% of taxpayers as Clinton claims, you would have to increase the top marginal rate by approximately 7%.* The top 1% of the country already pays close to 50% of all taxes in the country (and the people in the bottom 50% of income pay close to nothing). This change would increase their tax burden by an additional 20%. Where does this stop?
As Margaret Thatcher so famously said, the problem with socialism is that eventually you start running out of other people’s money. Haven’t we learned this countless times, from Greece to Venezuela to Zimbabwe to Nicaragua, and of course the Soviet Union? Free stuff gets you votes, but also bankrupts nations.
*The top 1% of the income distribution has a combined adjusted gross income of approximately $1.9 trillion. Taxing all of this at 5% would generate $95 billion, but not all of this income is taxable at the highest rate. The average AGI at that level is $1.4 million, so perhaps 70% of the income is taxable at the highest rate. Thus a 7% increase to the top rate is likely necessary.