Why are big-shot liberal economists hippie-punching Bernie Sanders?
This week, the center-left economic establishment ganged up on one little-known left-wing economist, all but declaring him a gibbering crank.
Gerald Friedman, an economics professor at the University of Massachusetts at Amherst, produced an analysis of Bernie Sanders' economic plan predicting eye-popping benefits from the candidate's program: 4.5 percent real GDP growth between 2016 and 2026, at which time median income would be $82,151 — about $23,000 above the Congressional Budget Office baseline.
Reaction from the economics establishment was swift and vicious. Democratic Party heavy hitters — Alan Krueger of Princeton, Austan Goolsbee of the University of Chicago, plus Christina Romer and Laura D'Andrea Tyson of Berkeley, all four former chairs of the Council of Economic Advisers — put out an ex cathedra declaration that Friedman's paper was utterly beyond the pale of serious analysis.
Paul Krugman joined the dogpile, writing three consecutive posts ("Worried Wonks," "What Has the Wonks Worried," "Wonkery Has a Well-Known Liberal Bias," — noticing a theme?) on how Friedman's paper was utterly preposterous, and demanding Sanders immediately denounce it. Brad DeLong was kinder, but still insisted that Friedman was enabling right-wing economic derp.
Ironically, in the frenzy to destroy Friedman's reputation, nobody actually explained in detail what the problems were with his paper. The CEA pronouncement had no data or economic argument at all — it was 100 percent political handwringing. Krugman gave a very brief gloss suggesting that Sanders couldn't possibly get labor force participation back up to 1990s levels due to aging, and trying to do so would cause inflation. Kevin Drum gave a similar incredulous stare argument about worker productivity and GDP growth, pronouncing it "insane," worse than Republican "magic asterisks."
Let's do what the Very Serious Wonks did not, and actually look closely at the paper. Friedman's analysis is certainly far outside the mainstream, and from my informed amateur perspective, the amounts by which he predicts Sanders' program will exceed the CBO baseline are mighty implausible. But the basic shape of his analysis — a sharp initial growth spike driven by massive fiscal stimulus, falling rapidly to a lower but still-strong rate — is not at all ridiculous.
Actually, here's a better chart. That it's real GDP growth rate is now in the title. Deleting the other one. pic.twitter.com/eFtmWM9Vtk
— Jeff Spross (@jeffspross) February 17, 2016
That might be due to the fact that Friedman's paper is based on an ordinary workhorse macroeconomic model, which he describes in some detail in the appendices to his paper. There are good reasons to believe there is quite a lot of room for fiscal stimulus to work — full economic recovery to the level of 2007 is still not very close. The working-age employment rate was last measured at 77.7 percent, or about 2.6 points below the peak of 2007 — itself substantially below the peak of the '90s boom at 81.8 percent.
Furthermore, even that all-time peak is not very high by international standards. Even a return to that number wouldn't put America in the top 10 of the OECD today. Among those countries beating us are the social democracies of Northern Europe that Sanders constantly points to as quality examples. How do they do it? A generous welfare state, particularly for children and mothers — our female employment rate is atrocious — and tons of worker training and job placement, for a start.
In short, the whole debate is about how much extra economic capacity there is in the economy, and some fairly strong evidence suggests that the answer is "a lot," provided the government is willing to try really hard. As Matthew Klein writes, "This supposedly 'extreme' and 'unsupportable' forecast implies American output will return to its previous trend just as Sanders would be finishing up his second term."
Now, no doubt a true expert could poke some holes in these arguments. Economist Jared Bernstein (who served as an adviser to Vice President Joe Biden) did this to some degree, and it makes for an instructive comparison. He lands in much the same place as the establishmentarians, but is careful to keep his criticism within the bounds of policy.
I would have no quibble if the Very Serious Wonks took this approach, arguing that the model was no good for X, Y, and Z reasons, and here's a better one. Indeed, Friedman himself told The Week, "I would be delighted to have that discussion." But they're not doing that. Instead of actually lending their expertise to improve the analysis, they're jumping directly to political demands that Sanders humiliate himself and Friedman by bowing and scraping before their wonk overlords.
This is classic hippie-punching. It's policing the leftward edge of the discourse, and in a way that is deeply unfair to Professor Friedman. Even if his analysis turns out to have some errors, he's not remotely comparable to the Republican hacks who cynically stamp out argle-bargle claiming whatever handout to the rich is on deck will create one bazillion percent growth. (Ironically, the CEA wonks' claim that the paper exceeds "even the most grandiose predictions by Republicans about the impact of their tax cut proposals," is factually mistaken; Trump's is bigger.)
Friedman is just a professor who thought it might be interesting to game out the Sanders platform. He doesn't work for the campaign, or have platoons of graduate students, think-tankers, or public relations experts at his beck and call. His major error, it seems to me, is that he didn't realize he'd be walking into a buzzsaw of Clinton supporters if he didn't fiddle with his numbers to make them look "sensible."
But even a lack of political acumen can be valuable. People who don't automatically calibrate their work to fit the current intellectual fashion often have a vital role to play in the economic discourse. Because what "sounds reasonable" changes over time, and has an inconsistent at best relationship with economic reality. Austan Goolsbee, who was in early 2007 writing this utterly brain-dead article about how subprime mortgages would help minorities and the poor (days later one of the biggest subprime lenders would file for bankruptcy) ought to know this better than most.
So should Christina Romer, who was bullied by Larry Summers into low-balling her estimate of how large the Obama stimulus should be, which probably played some role in making the Recovery Act too small and hence creating this milquetoast recovery at the heart of why we're having this discussion in the first place.
So if "wonk" is to mean anything besides a cudgel for walloping the unwashed lefties out there, the establishment economists ought to do more actual fine-grained analysis and less wagon-circling.