This transcript was generated using AI automation and may contain minor formatting or transcription errors. Please refer to the original audio to verify specific quotes or context.

Opening montage

The episode opens with a fast-cut montage of clips (news footage/​soundbites) on the DSA’s platform and “tax the rich” rhetoric. Individual speakers in this montage could not be confidently identified from audio alone and are not named below — see note at the end.

[Montage clip]: The Democratic Socialist of America’s platform includes many big ticket proposals. There’s a lot of things. Public health care and state-run banks and grocery stores, raising the minimum wage, hiking taxes on the rich, and then… Independent estimate is 9 billion a year for universal child care. The free buses, independent estimate, $1.1 billion. City-run grocery stores, $70 million. He’s going to start about five… Socialism has proven to deliver on the values of the Declaration of Independence more than capitalism has. Yeah. You know, when we talk about capitalism… But how much would that really cost, and who would pay for it? They say for too long, the millionaires have had it too good, and they don’t pay their fair share. Out of every dollar these so-called evil rich people make, how much should they be able to keep in their pocket? For billionaires, I think that billionaires should be taxed out of existence. As I’ve said across this campaign, I am for taxing billionaires their wealth. Could we just, per their suggestion, tax the rich and make up the difference?

Interview

Rikki Schlott: I’m Rikki Schlott, and this is the Cato Weekly Podcast. Today, I’m joined by Adam Michel, Director of Tax Policy Studies at Cato. He’s also the author of the paper, “Who Will Pay for Democratic Socialism’s $200 Trillion Cost,” which is currently available on Cato’s website. Welcome, Adam.

Adam Michel: Thanks for having me on.

Rikki Schlott: So the current federal budget is about $7 trillion right now. How do you get all the way to this $200 trillion number?

Adam Michel: Currently, we spend about $7 trillion. Over the next 10 years, that total number is about $95 trillion, because inflation, the budget keeps increasing beyond that. On top of that, the DSA proposal, if you just go to their website, they list all of these things they want to do. Free healthcare, free housing, sort of replacing all of the energy infrastructure. The list is pretty expansive, and there are estimates for what many of these big proposals will cost. I found the low bound and the high bound, sort of what the reasonable range of these things are, and you add them all up and you get somewhere between 70 and $212 trillion over 10 years of additional federal spending. I think that’s one way of putting in context just how massive these proposals are.

Rikki Schlott: Sure. Let’s zoom out for a moment and just talk about what the DSA’s vision of the role of government is. Within that vision, what are the most expensive items on that list, and how does this stack up to this massive number?

Adam Michel: The DSA’s vision is they start with, imagine a world without bills. The premise is the government pays for, or owns and provides the services for, everything — from healthcare to housing to electricity, education. The list is everything that you could imagine. The most expensive pieces are healthcare. You can go back and look at some of the Medicare for All proposals, put them in today’s dollars, and we’re somewhere between $40 and $70 trillion of additional spending. Reparations are also on their list. That’s another big-ticket item, something between $14 and $28 trillion.

Rikki Schlott: And just for a listener who might not be familiar with what that proposal actually means, how would that work?

Adam Michel: That is a good question. The DSA’s agenda is admittedly very vague. It’s just sort of, here are the nice things we want to do, with no details. I’ve gone out and found proposals that sort of fit what they’re talking about, and often we still don’t have good details about what this means. For reparations, these estimates are more or less trying to close the wealth gap between white and black households, or something like that. The other big one is a national jobs guarantee. It’s the one that, in my estimates, has the biggest range — somewhere between $4 trillion and $60 trillion, depending on the assumptions, sort of how many Americans the government is now employing permanently. I think the ranges tell you almost all you need to know, in that there’s just so much uncertainty here when the government takes over entire segments of the economy. Anytime you’re trying to model these things, you’re really just throwing darts.

Rikki Schlott: You know, that it’s big and expensive — the question is, how big and expensive? In this sort of world that the DSA envisions, where the government basically does everything, what does that actually look like for regular Americans, or how does that impact our daily lives?

Adam Michel: I don’t know if you or the viewers remember that one of the Obama campaign seasons had this “Life of Julia” ad, where they showed someone going through life and the government is there at each stage to help. It’s there to take care of your healthcare costs when your kid is born, and there to put you through school, and there to give you a loan for when you want to start a small business and become an entrepreneur. I think the reality is quite the opposite of that. What’s being proposed here is the government as rationer. Right now you choose what to purchase based on its price, and everything in our world is limited — we don’t have an unlimited supply of everything. So if you put the government fully in charge of everything, and charge everyone zero dollars for healthcare and education and housing, we still have to ration the limited resources out there. And so if the price system isn’t doing it, government’s doing it. It’s a bureaucrat in Washington telling you how much healthcare you get, when you get it, where you can get it, where your house is, what type of house you’re living in. And that’s the trade-off, right — when the government is fully involved, they are fully involved, and they are making these decisions for you.

Rikki Schlott: As you stack up all these numbers and look at all these various proposals, do you ever get a sense that the DSA has actually done their homework at all and talked about or analyzed how much this would cost, or is it just free to keep layering on the promises?

Adam Michel: No, you don’t get the sense when you read their platform that they’ve engaged in any of the trade-off debates, right — the idea that the world is full of scarce resources, and that’s the fundamental tension of economics: how do we distribute scarce resources? There’s none of that in this proposal. It’s simply just everything is free and the government is providing it for you.

Rikki Schlott: So at the low end, we’re talking about a 57% of GDP spend. So what does that actually do to an economy?

Adam Michel: At the low end, there are countries in Europe that have this — Finland, France have spending about this share of GDP. They don’t have entirely free healthcare and entirely free housing. People still get bills in those countries. So I see the low-bound estimate as an incredibly generous version of what the DSA is proposing. And even in these other places around the world, people are still getting bills for these services, but there’s still a cost of having a government that size. If you look at your average European country, their consumption per person, per capita, is about 70% lower than that same number in the United States. That’s one way of saying that these places are a lot poorer, largely because of the governments they’ve chosen to burden their economies with.

Rikki Schlott: And so I imagine if the DSA were in the room with us, they’d be saying that we’ll just tax the rich, and that will make up the difference, and that the math will work out on that somehow.

[Montage clip]: We do believe in taxing the hell out of millionaires. Yeah, absolutely.

Rikki Schlott: Well, what does taxing the hell out of them mean?

[Montage clip]: Yeah, you know, again, I don’t have like a solid [number], but I think—

Rikki Schlott: But shouldn’t you?

[Montage clip]: I think that a lot of this is still a case to be made — whether it’s the corporate tax or the personal income tax on those who make more than a million dollars a year, I think that these are the clearest ways. I’ve also said—

Rikki Schlott: Does the math work?

Adam Michel: It doesn’t. The slogan of “just tax the rich” is just that — it’s a slogan. There’s not nearly enough resources at the top end of the distribution to pay for $70 trillion, let alone $200 trillion, of new spending.

[Montage clip]: I think the richest people do not pay their fair share.

[Montage clip]: I believe we should be charging billionaires their fair share in taxes. They use every loophole available and pay nothing. They’re capped at Social Security, they’re capped on Medicare, all of that. It’s just nuts for billionaires to not be paying a fair share of taxes.

[Montage clip]: I think those who have benefited the most from capitalism should give their fair share back to it.

Adam Michel: It’s kind of — you have to tread the line carefully, because if you tax them too much, they’re just going to put their money elsewhere. They’re going to leave their city, or whatever. In the piece, I walk through sort of what this could look like, making the fanciful assumption that you’re not going to change people’s behavior when you raise these taxes: you could confiscate every dollar of wealth on the Forbes 400 list, you could tax at 100% every dollar of domestic corporate profits, and raise top marginal income tax rates on the wealthiest Americans to their revenue-maximizing rate — and you still don’t cover the cost of this.

Rikki Schlott: So you make a really great point, which is that if you were to take the entire $6.6 trillion that the 400 wealthiest individuals have in this nation, we would barely even be covering a fraction of this bill. So what does that say about the viability of all these proposed wealth taxes, whether they’re one-time taxes or a consistent tax over time?

Adam Michel: Wealth taxes are incredibly economically destructive. If you go back to Europe, Europe has actually tried this — in the ’90s, about 12 different European countries had wealth taxes, and they’ve actually repealed them because they have high economic costs. They don’t actually end up raising much revenue, and they’re really costly to administer. So we’ve tried wealth taxes — they failed around the world. That point, that they don’t raise a lot of money, is important here, because I said that if you confiscate the entire Forbes 400 list’s wealth, you’d get like $6.6 trillion. That’s a one-time revenue source — you could confiscate wealth once, and then you’re done. But the proposals from Bernie Sanders, for example — his wealth tax would raise something like $2 trillion over 10 years. That’s 1% of what’s being proposed here. They’re both really economically costly and get you nowhere near the actual revenue you need to fund these types of proposals.

Rikki Schlott: I think that part of the assumption of saying, well, we’ll tax the rich, or we’ll implement a wealth tax, or maybe we’ll go after corporations as well, is the idea that that will insulate regular Americans from feeling the impact of these expensive policies. But is that possible? How would a typical middle-class taxpayer be impacted, whether it’s as an employee or as a consumer of these corporations that are getting taxed in this DSA world?

Adam Michel: The person that writes the check for the tax is not always the person that bears the economic cost of a tax. There’s a long economic literature looking specifically at the corporate income tax that shows that workers end up paying most of it in the form of lower wages. This is because the tax falls on new business investment, and when businesses invest less, workers are less productive — they can’t command a higher wage. Ultimately, you see every time a country increases their corporate income tax, workers get fewer raises, fewer job opportunities. I think the bigger-picture point is that once a DSA-led government, for example, taxed wealth as much as they could, and corporations as much as they could, and wealthy individuals’ income as much as they could, they still have this gap they need to fill. The only place they can come next is middle-class and poor people. Ultimately, this agenda means higher direct taxes on Americans at every income level, beyond the incidence of these taxes on business investment and the companies that make up the stock of wealth of the billionaires on the Forbes list.

Rikki Schlott: So our colleagues at Cato did go out on the streets and asked Americans how they would feel about increasing their own taxes in order to pay for some of these policies, and here’s what they had to say.

Street interviews

[Unidentified passerby]: I don’t think I’m paying enough taxes. I would like to pay more if I could get those services. I think it’s well worth it.

[Unidentified passerby]: I would absolutely support free health care, education, all of the above. I think the government ought to be doing more for us. Our tax dollars at work, 100%.

[Unidentified passerby]: But I just think there’s a limit to the amount of taxation that we can tolerate, because I don’t want to be paying way excessive income taxes for stuff that I don’t need, don’t want, and don’t support.

[Unidentified passerby]: I would definitely want some data to back that up. What is this money really going towards? Because there’s also a lot of government inefficiency.

Interview (continued)

Rikki Schlott: I think it’s fair to say that there’s some openness from Americans to see their taxes go up to pay for some of these policies. But you also go through in your piece how other nations, in particular nations in Europe, make this work. How do they close the gap if corporations and wealthy people are not enough to do it all on their own?

Adam Michel: The way that every other large welfare state around the world covers the cost of their big government is with high taxes on the middle class. They do this with high income taxes — they reach much further down the income distribution. Our top rate starts at above half a million dollars; across Europe, that’s reaching into the middle class. They have higher payroll taxes, and they have high consumption taxes — value-added taxes, which are like a sales tax in the US — of almost 20% on average, higher in a lot of other countries. And what that means — I have another report I look at — what does it mean for the average American to move from America to Europe, for their taxes? Their taxes would go up by about $12,000 if they moved from the US to the average country. What the DSA is proposing at the lower end is more like doubling your taxes. That’s the thing — when you ask folks on the street, do you want all these free things, but your taxes are going to go up — it’s not that your taxes are going to go up a little bit. Your taxes are going to go up a lot, and that comes with its own costs.

Rikki Schlott: And have we seen, maybe in New York City or places where socialists have been more effective, any of these policies in action in the United States, or any real impact on Americans’ tax bills as a result of DSA-type policies?

Adam Michel: You see much higher taxes in places like New York and California, and you see people moving to get out from under those high burdens. And that’s the reality — people may say, when you ask them on the street, “are you okay with a little bit higher taxes for all these services,” but in the real world, the revealed preference of people is that when taxes are so high, the services are often not what are promised, and they vote with their feet. They move to places that have lower taxes.

Rikki Schlott: So Abdul El-Sayed just won a really important primary in Michigan, and along the campaign trail, he said something that I think is pretty revealing about the DSA’s policies — that sometimes it’s fixing bad government policy and a ton of spending with more spending, and layering it on top of itself. So let’s throw it to him real quick.

Abdul El-Sayed (clip): So for the average person — when you look at your W‑2, if you’re an employee, you get paid every two weeks or four weeks. After you pay your taxes, the next biggest check that comes off the top of your pay stub is to your health insurance company. I would much rather pay for durable health care into a government. If I’m trading paying a CEO to make more money, or paying a government to guarantee me health care, I’m picking the latter every time.

Rikki Schlott: So what does this say to you about how the DSA is attempting to fix existing problems, and how is it potentially even more problematic?

Adam Michel: This is a really good example of a sector where the government is already heavily involved. The employer-provided health care system exists because we have a tax advantage for that system to exist. And so often, as in the case here, the fix is just more government intervention and more government spending, which is what’s being proposed by the DSA. The real answer is we should start by getting the government out of the way — we should stop the original distortion that puts your employer between you and your health insurance, instead of putting the government between you and your health insurance. If you look at most of the big issues that a lot of young people are concerned about — the cost of education, health care, you name it — these are sectors where the government is heavily involved. These are not free markets. Most of the problems we’re identifying, like high inflation, are policy choices, because of bad policies that have been implemented from Washington. And so our default should always be, let’s roll those back first, before we propose tens of trillions of dollars of new spending.

Rikki Schlott: When a voter hears a lot of these very alluring promises — all these free things, and someone else is going to pay for it — what should they be asking themselves, or asking the politicians who are saying as much?

Adam Michel: They should be asking the politicians, “how much is this actually going to cost me? Show me the math. How much is this going to cost, and where are you going to get the revenue for it?” But more importantly, on the service-provision side — when the government takes over these industries, as we’ve been talking about, do you want Trump, or RFK, or AOC in charge of your health care decisions, in charge of where you live and how much house you can buy, what your education looks like? When you start thinking about putting the government in the middle of each of those decisions, that’s where I would hope Americans would take pause, and instead either put themselves back in the driver’s seat, or at least push more of these decisions down to the state and local level.

Rikki Schlott: So as it stands, is the appeal of the DSA’s pitch that it comes with all the European-style benefits, but none of the European-style taxation consequences?

Adam Michel: That’s the sales pitch. You get a whole bunch of free stuff that someone else will pay for, or they don’t talk about paying for it at all. There are lots of things people want, and the government is there to provide them. And I think that’s disingenuous, at its most charitable — I wish we were having more of these conversations on the terms of: sure, you’re proposing all of this spending — how are you paying for it, where is it coming from? Let’s work in reality, rather than campaigning on platitudes that don’t actually work on paper.

Rikki Schlott: Well, hopefully in the future some of those questions will be asked on the debate stage. I imagine that kind of tees up whoever is running against a DSA candidate in the future.

Adam Michel: Yeah, you would certainly hope so. These have to be incorporated into actual campaigns on the ground, as people are running on them, as there’s debates. You’d hope that especially in some of the more competitive races, a lot of these ideas are challenged. And certainly, in the reality of Washington, we already have a $24 trillion budget deficit over that 10-year window. Any additional spending has to be traded off against other spending priorities, higher taxes, higher inflation — it’s all about trade-offs at the end of the day, and reality has to set in eventually.

Rikki Schlott: Absolutely. Well, thank you so much, Adam, for making the time today and sharing your research with us.

Adam Michel: Thanks for having me on.

Sign-off

Rikki Schlott: And thank you for listening to the Cato Weekly Podcast. If you enjoyed today’s discussion, please subscribe and leave a review wherever you get your podcasts. To learn more about the ideas and research discussed in this episode, visit Cato​.org.

[Announcer]: The Cato Weekly Podcast is a production of the Cato Institute, dedicated to advancing individual liberty, limited government, free markets, and peace. Join us next time for more insights and conversations on the issues shaping our world.