David Koch.

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Sanders and the Kochs Could Work Together

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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Senator Bernie Sanders evokes the Koch brothers as the enemies of everything he stands for. Charles Koch, chairman and chief executive of Koch Industries, has responded, spelling out where he agrees and disagrees with Sanders. The two clearly need to have a face-to-face conversation because I'm not sure they understand each other well.

Koch agrees with Sanders that the U.S. is a two-tiered society in which a privileged few reap a disproportionate share of the benefits. But Koch says he and Sanders part ways when it comes to a solution:

I disagree with his desire to expand the federal government’s control over people’s lives. This is what built so many barriers to opportunity in the first place.

Rush Limbaugh likes to say that "under capitalism, the rich get powerful, and under socialism, the powerful get rich." I was born and raised in the Soviet Union, so I know where he's coming from. I'm not sure, however, that Limbaugh, Koch and Sanders are talking about the same kind of socialism.

As far as can be deduced from Sanders' public statements, he advocates a modern European kind of socialism, with two specific benefits guaranteed to all: health care and higher education. Providing these doesn't really require a"big government" -- at least not a bigger one than the U.S. already has.

Government employees accounted for about 14.6 percent of the workforce (in 2008, the latest official data). That share is not so much smaller than France's (about 20 percent in 2014, according to the International Labor Organization) or Germany's (15.4 percent), yet those countries have comprehensive health care and almost tuition-free public universities. 

Another way to compare government sizes is to look at government expenditure as a share of economic output. The U.S. spends less, but not much less than some European countries that provide "socialist" services. The Heritage Foundation puts the U.S. public expenditure at 38.9 percent of gross domestic product, compared with 44.3 percent for Germany and Spain. (However, France spends 57 percent).

What Sanders proposes -- which his audiences seem to like -- is within the realm of possibility for the current U.S. government size. The experience of European countries offer a path. Koch either doesn't realize this or prefers to ignore it.

Koch is correct, however, in another respect. The reforms Sanders wants aren't radical enough. He says he wants to find free college education with a financial transaction tax and free health care by closing tax loopholes for corporations. That would entail making the government bigger in terms of expenditure as a share of GDP.

Instead, he should be talking about replacing the patchwork quilt of social programs and entitlements with more streamlined and modern systems, perhaps even clearer and more logical ones than those in Europe. The U.S. chaos of regulations is the result of decades of legislative battles, lobbying and public pressure -- in other words, politics. That makes it inefficient and convoluted; Koch is right about that.

Sanders, however, cannot talk about coming up with a system that is more efficient and transparent, because it is politically difficult. His talk of swapping Obamacare for a newly designed "Medicare for all" system gives his Democratic rival Hillary Clinton her strongest arguments against him. Many voters believe that incremental improvement is the only way forward. They don't see radical change as feasible, and they are insecure about their own benefits: What if a new system took them away?

Socialist Sanders and libertarian Koch could find common ground. If they worked together, they could apply a "regulatory guillotine" to the current system, cut wasteful programs, kill off the "corporate welfare" that both sides dislike -- and the richest economy of the world might find the resources to make health care universal and education free, without seriously boosting the tax burden.

This may sound utopian. It's true that in emerging economies where attempts have been made to redesign systems from scratch, the results have been uneven at best. Some experiments have been rather successful, however. Poland, one of the least socialist countries in today's Europe, has universal health care and free college education. Its government spends 42.2 percent of GDP.

Koch and Sanders already agree on some important policies, such as criminal justice reform, an area where the government could get "smaller" benefiting everyone. Other such areas could be identified if the U.S. adopted the same approach to reforms as emerging economies sometimes do: The old system is dysfuctional, and a new one is needed.

That would require input from both socialists and libertarians, both Sanders and Koch. A level playing field and basic benefits for all are not opposing concepts.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor responsible for this story:
Max Berley at mberley@bloomberg.net