Democratic Socialism is a Hit with Millennials - is it Good for Your Paycheck? - Paycheck

Democratic Socialism is a Hit with Millennials – is it Good for Your Paycheck?

  • What even is democratic socialism?
  • Would popular socialist policies like national rent control do more harm than good?
  • What’s it like living under a socialist President?

With Bernie Sanders currently at the top of his game in the Democratic primary, we’re hearing a lot more about “democratic socialism.” Most of the conversation out there lands on Bernie being called the new “Stalin” or being treated as the superhero who will save the US from all its woes. Candidate aside, let’s take a look at how democratic socialism affects Paychecks.

What even is Democratic Socialism?

Let’s define some terms that are all mixed up in the conversation…

Two kinds of economy are at the center stage:
Socialism: a kind of economy in which control over the production and distribution of goods and services is put in the hands of the people, either directly or (usually) through the government.

Capitalism: a kind of economy in which the production and distribution of goods and services is determined by what company owners find most profitable, which in turn is (generally) determined by the people who consume the goods and services.

Two kinds of political systems are also being discussed:

Democracy: a political system in which the whole population, and their representatives, vote on everything.

Communism: a political system that controls all aspects of economic production and distribution, with the ideal that it is “the people” who collectively own all things. If you struggle to separate “communism” from “socialism,” it’s understandable, as communism is a more rigid structure that takes socialism to the extreme.

Put them together and what’ve ya got?

Democracy + Capitalism: We vote with our voices, ballots, and with our dollars. This is the US.

Democracy + Socialism: We vote with our voices, ballots,… and depending on your perspective, either:

  1. many of the essential things we need, such as housing, medical options, transportation systems, and food production, are all perfectly taken care of by the government.
  2. many of the essential things we need, such as housing, medical options, transportation systems, and food production, are all mismanaged and tightly controlled by a massive government that moves slowly and increasingly restricts our options.

Communism + Socialism: A bit redundant to put these together, as you can have socialism without communism, but you can’t have communism without socialism. China and Cuba would be two key examples of this scenario.

All that being said, in practice there has never been an absolutely pure communism, socialism, capitalism, or democracy. China does have its fair share of capitalism. The US has some socialism already.

So how much democratic socialism are we talking for the US?

“Democratic socialism” can cover a very wide spectrum. In the US, we already have a few systems that could fall under the democratic socialism umbrella: Medicare, Medicaid, Social Security, and Amtrak.

So just how socialist is the US that Bernie Sanders, the democratic hopeful, and his friends are discussing?

The estimates come in around $50-60 trillion for what Sanders is proposing in increased government spending over the next ten years to enact several new social programs.  Everyone agrees that this would grow the federal government to levels that are unheard of outside of wartime. Sanders says about half of it will come from raising taxes. The other half… no idea.

Here’s what he proposes our Paychecks pay for:

National rent control

According to his website, Bernie Sanders wants to “end the housing crisis by investing $2.5 trillion to build nearly 10 million permanently affordable housing units.” One of the ways he plans to do this is by implementing a national rent control policy to keep rents from increasing faster than wages. 

At first glance, that does sound pretty awesome!

Bad news it is hard to make it actually work out that way in practice.

Take San Francisco for example, where lawmakers tested a rent control policy. When given a limit on the amount they could raise rent prices, many landlords with expensive properties on their hands simply converted their buildings into ready-to-sell high-end condos or commercial spaces for businesses to lease, since then they wouldn’t have to abide by rent control rules. This drove DOWN the supply of rental housing. In the end, rents across the city increased by 5.1 percent

Stanford University found the experiment to be a failure. In the end, rent control left renters worse off than when they started.

Affordable housing in rural America

Sanders has also vowed to invest $500 million more into building affordable housing units in rural areas, where people are also experiencing the housing affordability crisis.

That seems like a perfectly reasonable and kind priority!

The messy part is always in the details. As we’ve seen in Washington, government agencies rarely great at timely and efficient service, and it’s hard to know what kind of quality we’d get if the government became a gigantic new housing builder. The total cost is likely to be much higher, which could burden taxpayers more than help them.

Teacher salaries starting at $60,000 

In addition to ensuring affordable housing as a right for all Americans, Sanders also wants to ensure every teacher in America makes at least $60,000 (which would be higher than the average teacher salary in 37 states). 

Teachers are shaping the future of our children and youth, heck ya they should make good money. But as Newsweek points out, “a hefty pay raise across the board for the nation’s teachers would mean local taxes would most likely rise as well.” 

While most all of us agree that our teachers deserve to be paid well, it’s unclear how some states will pay for it… especially in places like Mississippi where the average starting salary for a teacher is $34,390 and a $60,000 salary would represent nearly a 75 percent pay raise.

The bottom line: are government programs the best place to send our paychecks to fix every problem we face?

Government programs may actually be a good place to send our money to solve big problems that we can’t find any other way to tackle. 

We do already send a good chunk of our paychecks to Washington, where that money is divided up and spread out over the existing hundreds of government programs to house and feed those in need, provide access to quality education, take care of our veterans, and many more worthwhile programs.The 60 trillion dollar question is – how do we stretch our Paychecks to cover more

These policies definitely have good intentions, but good intentions can mean bad outcomes for regular Paychecks.

Tell us your thoughtsWe’re here to get your Paycheck through the 2020 election season. Sign up for our newsletter to stay updated on these policies as they unfold!

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