The Great Big Fight Over Bernie Sanders’s Economics
The liberal policy wonks have their sights set on Bernie Sanders.
After Professor Gerald Friedman of the University of Massachusetts at Amherst published an analysis of Sanders’s economic proposals, projecting unprecedented levels of economic growth under a Sanders administration, he received plenty of flack for his numbers. He says — as do many other economists who’ve taken a look at his draft paper, “What would Sanders do? Estimating the economic impact of Sanders programs” — that the criticism is largely based on his results, not his methods:
“It’s interesting that I’m being criticized by people like Paul Krugman and the ‘Gang of Four.’ I used fairly standard economic modeling,” he said in an interview, referring to the letter posted by four former chairs of the Council of Economic Advisors (CEA). “Their criticisms are more of the outcomes of my analysis than the process by which I got them.”
Sanders, who has previously come under scrutiny for his apparent lack of foreign policy advisors, has been rebuked by many economists these past few weeks for the math used to support his economic proposals. In their open letter to Sanders, the former CEA chairs, all of who served under Barack Obama and Bill Clinton, said Sanders’s stimulus-minded plan “exceed even the most grandiose predictions by Republicans about the impact of their tax cut proposals.”
“We are concerned to see the Sanders campaign citing extreme claims by Gerald Friedman about the effect of Senator Sanders’s economic plan—claims that cannot be supported by the economic evidence,” the letter stated. In an interview with the Washington Post, Austan Goolsbee, one of the signatories of the letter, said his critique was of Friedman’s lack of “real economic data” — “To be clear, our letter wasn’t a critique of his study,” Goolsbee wrote. “It was a plea that we not invent a Vermont version of voodoo economics.”
Bernie Sanders’ policy director, in turn, told NPR that the CEA Chairs who signed the letter are “the establishment of the establishment.”
A few days ago, Paul Krugman piled on, saying of Friedman’s job growth numbers: “For wonks like me, it is, frankly, horrifying.”
Friedman’s write-up of the outcomes of Sanders’ plan does in fact sound ambitious: a 5.3 percent GDP growth rate, a $22,000 increase in median household income, replacing a huge debt with “a growing surplus,” and more than $15 trillion in new revenue — a financial transaction tax, carbon tax, ending fossil fuel subsidies, and much more.
The crux of this inter-economics spat, however, is just that: the economics. As Mother Jones’s Kevin Drum pointed out last week, these aren’t necessarily value judgments. You can be for Sanders’ proposals (many of these liberal economists have advocated for them for their entire professional lives) and against the numbers Friedman used to support them. Then again, Drum recently re-visited his skepticism.
For his part, Friedman says the disagreement is a common one in economic circles: how much can government spending stimulate the economy?
“[My critics] say that unemployment is low — the number they’re looking at is called the U1 unemployment rate — and say that spending to stimulate government growth may ultimately fuel inflation,” he said. “I and others see people who have retired, or have stopped looking for jobs, or are working as greeters at Walmart or something, and think that increased spending would help people like that to get back into the labor market. Of course, there are economists in the Chicago school [an infamously conservative economic ideology] that say that the economy is always at full employment and that government spending won’t change that.”
Ezra Klein reminded readers recently that, at this point in the campaign, policy proposals are more like chess moves: candidates anticipate the political battles they will face if elected, and they make proposals aimed at triangulating political attacks.
“And, hell, let’s just be honest: All this policy talk is just a way to pass the time between now and the election. It doesn’t matter how strong Bernie Sanders’s single-payer health care plan is — it’s not going to pass, just like Donald Trump isn’t going to get Mexico to pay for a wall and Hillary Clinton isn’t going to get universal pre-K past a Republican Congress and Ted Cruz isn’t going to set up a value-added tax.
It’s obvious that debating the details of campaign proposals is, on some level, fantasy football for wonks. Events will intercede, bureaucracies will weigh in, Congress will balk, promises will be broken. Remember when Barack Obama ran for president opposing an individual mandate and then flip-flopped and supported one? So what’s the point of paying attention to any of this at all?”
Klein’s answer is the obvious one, to anyone following this campaign: Bernie Sanders actually believes this stuff. And his refusal so far to surround himself with more “establishment” economists — whatever that means, given most “establishment” analyses completely underestimated the impact of the Great Recession — is a decision that deserves its own discussion.
Sanders’s mind, apparently, is not easily changed: Ralph Nader, one of Sanders’ few prospective political allies with any sort of name recognition, told U.S. News “[t]here’s a problem with getting good ideas to him and strategic changes and tactical advice … But that’s part of his charm: I haven’t had a call returned or a letter answered in 15 years.” Nader continued: “He’s really a lone ranger, and that’s a drawback when you run for president because I’m not the only one he’s not returning calls to.”
Understandably, Gerald Friedman is not happy about the skepticism with which his work as been received. And neither are his supporters, a growing group of economists and other academics who point out that, for all of the hubbub over Friedman’s numbers, his critics haven’t crunched their own.
“It is not fair or honest to claim that Professor Friedman’s methods are extreme,” writes James K. Galbraith, economics and government professor at the University of Texas at Austin, in a letter to Friedman and Sander’s critics. “On the contrary, with respect to forecasting method, they are largely mainstream. Nor is it fair or honest to imply that you have given Professor Friedman’s paper a rigorous review. You have not.”
Plenty of others have actually taken their own dives into the data: Narayana Kocherlakota, professor at the University of Rochester and former president of the Federal Reserve Bank of Minneapolis, wrote that historical trends suggest that Friedman’s projections — specifically, the enormous growth in GDP and worker productivity — are at least possible. Mark Thoma of the University of Oregon has suggested something similar. And so has Matthew Klein, writing for the Financial Times.
Their arguments in support of Friedman’s analysis reveal the uncertainties inherent even in thorough economic research: it’s difficult to project how overall worker productivity will be affected by rapid changes in government spending. It’s even more difficult to tell how much of the changes in GDP growth after the recession were due to a recovering housing market or the dysfunctional process by which our federal government cobbles together budgets. And it’s even more difficult than that to determine how labor markets will respond to things like universal healthcare or a radically different tax code.
Suffice it to say: Sanders’ economics — just like every other politician’s — are aspirational.
Photo: Bernie Sanders addresses supporters at his caucus night rally in Des Moines, Iowa February 1, 2016. REUTERS/Mark Kauzlarich