He has provoked controversy within the Democratic Party, but the professor who projected that Bernie Sanders’ economic program would stoke near-miraculous growth is not backing down.
Gerald Friedman, a University of Massachusetts, Amherst labor economist, elicited condemnation from top Democratic economists this week when a copy of his extraordinarily optimistic estimates of Sanders’ presidential platform’s economic effects circulated on the web.
Friedman’s projections suggested that an economic boom of historic proportions would follow the Vermont socialist senator’s plans for massive infrastructure spending, a $15 minimum wage and single-payer health care. In his analysis, economic growth would soar to an average of 5.3 percent, far above the Congressional Budget Office estimate of closer to 2 percent. Meanwhile, the unemployment rate would drop to 3.8 percent by the end of Sanders’ first term, while incomes would soar and poverty would fall by two-thirds to a record-low 6 percent.
In an interview with the Washington Examiner, Friedman said his projections were “completely conventional.”
And he resents the former economic advisers to Presidents Bill Clinton and Barack Obama who coordinated on an open letter warning Sanders that Friedman’s estimates were undermining the credibility of progressive policy, comparing his results to the “unrealistic” promises they said that Republicans have made with tax-cut plans.
“It’s wrong to criticize the results without criticizing how these results were derived,” Friedman said.
Indeed, the economists provided little justification for why they found Friedman’s analysis unbelievable. In doing so, they played into one of the dynamics that has made the Democratic primary increasingly bitter, namely the perception that the party’s establishment backing Hillary Clinton is unfairly attacking Sanders.
Friedman says he has no association with the Sanders campaign. The campaign answered his questions, but otherwise haven’t paid him or retained him. In fact, Friedman says he hasn’t decided whether he’s going to vote for Sanders or Clinton. But he favors either over Republicans.
Yet, the Sanders campaign at times has touted Friedman’s work, without outright endorsing it.
As a result, Friedman’s analysis has kicked off a tense debate over what kinds of promises campaigns can reasonably make and whether the growth envisioned under Sanders’ program is realistic.
“It’s pretty clear that this type of growth wouldn’t happen under any policies,” said Marc Goldwein, senior policy director at the Committee for a Responsible Federal Budget, a group that advocates reducing the federal debt.
Goldwein referred to what he saw as problems in Friedman’s analysis: Much of the growth comes from spending that acts as stimulus in the short-term, employing spare capacity and labor in the economy to reach full potential. But in Friedman’s analysis, those short-term effects carry into the long term. Furthermore, the projections assume that employment grows to an extent that is implausible given that the retirement of the Baby Boom generation has shrunk the labor force, a development that government agencies expect to slow growth. Lastly, Friedman does not account for the possibility that Sanders’ new government programs and dramatically higher tax rates would discourage people from working, slowing growth.
In all, Goldwein said, Sanders’ promises were even more over-optimistic than those made by Republican candidate Jeb Bush, who has suggested that 4 percent annual growth would be achievable with tax reform and lowered regulations. “We criticized that as unrealistic for any sustained period of time,” Goldwein noted.
Friedman acknowledged that he “pushed the envelope” on some of the favorable projections, but that none of the assumptions undergirding his plans are unreasonable. The two most speculative assumptions, he said, regard the stimulus from Sanders’ infrastructure plan and the growth that would follow a $15 minimum wage. But changing those results wouldn’t significantly change the bottom-line numbers, he said.
He also brushed off the suggestion that growth is bound to be slower over the next decade because of demographic changes, positing that older people would work if they could. “Some people may say they’re not working because the baby boomers are retiring,” Friedman said of shrinking labor force participation. “I say they’re not working because they can’t get a job because the economy’s not doing well.”
Furthermore, he dismissed the suggestion that he should have modeled the possibility that expanding government programs and raising tax rates would discourage work. That is a “freshwater” approach, he said, referring to the supply-focused brand of economics developed at the lakeside University of Chicago, whereas he subscribes to Keynesian economics.
Incorporating behavioral responses to taxes and government programs is an approach that has been discredited, he argued. “It’s not what I do, I don’t believe in it, and I’m not the right person to do it,” he explained.
That aspect of his analysis is what led the Democratic economists to compare his findings to Republican promises about their supply-side proposals.
Douglas Holtz-Eakin, president of the conservative think tank American Action Forum and a former adviser to Republican candidates, objected to the slight to Republicans, but agreed that Friedman’s analysis was the “reinvention of supply-side economics from the demand side.”
Holtz-Eakin, who previously directed the Congressional Budget Office, called Friedman’s analysis “completely implausible,” arguing that it was wrong to assume that the stimulative effects of government spending, which could plausibly lead to catch-up growth in the short term, could apply in the long run.
Nevertheless, Friedman’s analysis has received support from unexpected quarters. For example, former Federal Reserve Bank of Minneapolis President Narayana Kocherlakota, now a professor at the “freshwater” school University of Rochester, on his personal site Thursday suggested that the growth envisioned by Friedman could be possible.
Friedman said he is refining his analysis of Sanders’ plans to incorporate some of the outside feedback.
He also is considering an analysis of Clinton’s plans. So far, however, the campaign has declined to answer the questions he needs to plug into his models.
