Warren's Problematic Policy Calculations

On February 18, Democratic presidential candidate Elizabeth Warren revealed a comprehensive proposal intended to provide free quality childcare to all parents with a household income under $50,000. The plan would also heavily subsidize healthcare for families outside that range, which would make medical bills far more affordable. According to Warren, the proposal would cost $700 billion over a decade, and would be funded by her much-publicized wealth tax on ultra-millionaires.

It should come as no surprise that her numbers were obtained through fraudulent accounting aimed at deceiving the American population and Democratic voters into believing that her sweeping proposal is more fiscally sound than it really is. Senator Elizabeth Warren's proposal to provide universal affordable child care relies on dishonest and unsound strategies to create the impression that the plan, if implemented with the rest of her platform, would benefit the average American voter.

In common electoral practice, whenever a policy involving large amounts of funds is proposed by an aspiring politician, that candidate must present sound calculations to prove that his or her plan would be both beneficial and feasible. Warren’s proposal aims to create a network of child care facilities, subsidized and regulated by the government, for all children too young to attend school. In the speech announcing her childcare proposal, Warren said that, under her plan, “[f]amilies would only be charged based on their ability to pay.” Warren’s proposal involved two key estimates: the cost of the program and the projected governmental income raised by a “wealth tax.” Both happen to be wildly distorted and inaccurate.

In order to figure out how to pay for her childcare plan, Warren hired economists Mark Zandi and Sophia Koropeckyj. Both Zandi and Koropeckyj are talented economists who provided with Warren with accurate numbers and projections. In order to create their projections, Zandi and Koropeckyj used a method of economic and financial analysis known as “dynamic scoring.” Financial analysis on a dynamic basis exclusively accounts for the positive economic impacts of the given proposal, meaning that Warren purposely ignored many of the negative impacts her proposal would have on the economy.

This usage of dynamic scoring by itself may not seem unforgivable, given that Republicans have done the same when pushing their own fiscal agenda. However, Warren undermines her entire plan’s fiscal legitimacy when she does not use a dynamic analysis on the economic projections on her wealth tax, despite knowing that dynamic analysis of her wealth tax would show that taxing wealth would have a negative impact on investment decisions and thus stunt economic growth. Her inconsistencies regarding her economic projections are troubling. Warren will do whatever it takes to further her own agenda, even going so far as to ignore the economic reality.

On top of the dishonest fiscal estimate used to procure her platform’s fiscal “proof,” Warren’s astronomically high wealth tax would force the rich to alter their spending, investment, and tax behaviors to a point where where industry would no longer grows, unemployment would rise drastically, and revenue collected by the federal government would, in fact, decrease significantly. A wealth tax would greatly limit the money consumers can spend and invest in the private sector, leading to a weakened economy and a government in economic turmoil. Another massive impact Warren neglects to account for is inflation: over time, inflation increases incomes to the point where the middle class is taxed by her tax, even though it was originally targeted for the “ultra-rich.” Her tax, just like any other massive tax recently proposed by the Democrats, shifts tremendous amounts of revenue from the private sector to the government. Numerous economic studies, including some done by Paul Krugman of the New York Times and Joseph Stiglitz of the Massachusetts Institute of Technology, have shown that a free market-based economy constitutes efficient investment and spending, while an economy excessively controlled by the government leads to a proliferation of special interest groups, an increase in taxpayer-funded electoral campaigns, and more tax dollars squandered in the dark jungles of government bureaucracies.

Zandi and Koropeckyj argued that the impact of high taxes on economic growth would be minimal: “Households with more than $50 million in assets will pay a two percent tax….Households with more than $1 billion in assets will pay a three percent tax….They still will have plenty of money left over.” In the footnotes to their proposal, however, the economists noted that "One complication is that we have not evaluated the budget or economic implications of the senator's wealth tax. As such, we instead assume that her child-care program is paid for by reforms to the estate tax sufficient to generate the needed tax revenue." Essentially, Zandi and Koropeckyj admitted that their fiscal proof for Senator Warren’s proposal for a wealth tax considered all its potentially positive economic effects while ignoring all the drawbacks.

Warren claimed that her wealth tax would successfully fund her $700 billion childcare proposal. She herself claimed that a wealth tax would raise “four times more than the entire cost of my Universal Child Care [Plan] and Early Learning Plan”. This could not be further from the truth, as a holistic analysis based on data from a variety of sources (including: the Federal Reserve Board’s Survey of Consumer Finances; the Forbes list of the 400 richest Americans; and an analysis of investment patterns under various tax laws) shows that her wealth tax would only raise $700 billion over a decade. $700 billion is no small amount by any means, but it’s far - very far - from the estimated cost of Warren’s childcare plan over 10 years. In fact, studies from economists at the University of California and the University of Pennsylvania put the 10-year cost of her childcare plan at around $2.8 trillion.

In recent years and electoral cycles, fiscal irresponsibility has become a trend, especially among the progressive left. Newly unveiled liberal projects, including a federal jobs guarantee and the highly publicized Green New Deal, would require billions or even trillions of dollars to fund. Politicians should stop relying on fraudulent accounting to deceive the American people into supporting a misguided progressive agenda. Instead, they should support pro-growth policies that have been proven to be effective. They should support policies that improve Americans’ economic conditions and don’t require deceptive fiscal practices. Doing so would foster a bipartisan movement pushing for lasting economic reforms, and would bring about to greater prosperity for decades to come.