Bernie Slanders: How the Democratic Party Establishment Suffocates Progressive Change

By Thomas I. Palley, Independent Economist Washington, D.C.

Cross-posted at the author’s blog, thomaspalley.com.  An earlier version of this appeared at Social Europe.

The Democratic Party establishment has recently found itself discomforted by Senator Bernie Sanders’ campaign to return the party to its modern roots of New Deal social democracy. The establishment’s response has included a complex coupling of elite media and elite economics opinion aimed at promoting an image of Sanders as an unelectable extremist with unrealistic economic policies.

The response provides a case study showing how the Party suffocates progressive change. Every progressive knows about the opposition and tactics of the Republican Party. Less understood are the opposition and tactics of the Democratic Party establishment. Speaking metaphorically, that establishment is a far lesser evil, but it may also be a far greater obstacle to progressive change.

The elite media’s response was captured in a snapshot report by Fairness and Accuracy In Reporting (FAIR) showing that the Washington Post ran 16 major negative stories on Sanders in 16 hours, prior to the Michigan primary. The headlines were particularly hostile, and since only 40 percent of the public reads past the headline, that is as important as the substance of the story.

Economic policy has been the fulcrum of Sanders’ campaign, and the response of elite opinion has been exemplified by Paul Krugman of The New York Times.

For years, Krugman has mockingly used the term “very serious people” to attack Republicans opposed to President Obama’s policies. Now, he unironically revokes the credentials of all who do not support Clinton  by declaring: “every serious progressive policy expert on either health care or financial reform who has weighed in on the primary seems to lean Hillary.”

Regarding Sanders’ opposition to neoliberal trade agreements, Krugman writes “In this, as in many other things, Sanders currently benefits from the luxury of irresponsibility: he’s never been anywhere close to the levers of power, so he could take principled-sounding but arguably feckless stances in a way that Clinton couldn’t and can’t.”

The slamming of Sanders has also been joined by a gang of past Democratic appointee Chairs of the Council of Economic Advisers. In an open letter co-addressed to Senator Sanders, Messrs. Kruger, Goolsbee, Romer and Tyson mauled a favorable empirical assessment of Sander’s economic program conducted by Professor Gerald Friedman.  Without any detailed independent assessment, they simply declared the assessment unsupported by the “economic evidence”.

Messrs. Kruger et al. were then joined by Justin Wolfers, via one of his regular New York Times opinion pieces. His accusation was the beneficial effects of fiscal stimulus would disappear once full employment was reached and the stimulus withdrawn.

Wolfers is co-editor of the prestigious Brookings Papers on Economic Activity. Ironically, a recent issue contained an article by elite Democratic economists Larry Summers and Brad DeLong invoking a similar mechanism as Professor Friedman. Summers and DeLong argued a large negative temporary demand shock can permanently lower output: Friedman simply reversed that and argued a large positive temporary stimulus can permanently raise output and growth.

There is legitimate room for intellectual difference. What is so stunning is the tone of the critique and the fact it sought to diminish an important policy (fiscal stimulus) just because Sanders was using it to his political advantage.

Given their elite professional standing and easy access to elite media, these attacks quickly ramified throughout the mainstream media, illustrating how the elite media – elite opinion nexus works.

The slamming of Sanders reflects an enduring status quo defense mechanism which usually begins with insinuations of extremism, then mixes in charges of lack of qualification and realism, and ends with assertions of un-electability. It is applied in both political and public intellectual life.

The extremism gambit explains the persistent linking of Sanders and Trump. Whereas Trump is an egotistical demagogue and businessman with a disreputable business history, Sanders is a thoughtful social democrat with a long history of public service through high electoral office.

The un-electability charge pivots off the extremism insinuation as follows. Americans will not elect extremists; Sanders is an extremist; ergo, Sanders is unelectable.

As with the extremism insinuation, the un-electability charge lacks foundation. Polls show Sanders beating all the potential Republican nominees, and beating Trump handily.

The third charge is lack of qualification. The reality is Sanders has a fifty year history of political involvement, worked his way through the political ranks serving people, was Mayor of Vermont’s largest city, then Vermont’s representative in Congress where he co-founded the Congressional Progressive Caucus, and after that became a Senator for Vermont. That seems to be exactly the career and CV a President should have.

Lastly, Sanders has been dismissed as selling unrealistic pipe dreams. Social Security would be a pipe dream if we did not already have it; so would Medicare and public education too. There is a lesson in that. Pipe dreams are the stuff of change.

Rather than an excess of pipe dreams, our current dismal condition is the product of fear of dreaming. The Democratic Party establishment persistently strives to downsize economic and political expectations. Senator Sanders aims to upsize them, which is why he has been viewed as such a threat.

November will be a time for Democratic voters to come together to stop whoever the Republicans nominate. In the meantime, there is a big lesson to be learned.

Today, the status quo defense mechanism has been used to tarnish Bernie Sanders: tomorrow it will, once again, be used to rule out progressive policy personnel and options.

Progressives must surface the obstruction posed by the Democratic Party establishment. Primaries are prime time to do that, which means there is good reason for Sanders’ campaign to continue.

The Poverty of Neoclassical Economic Analysis

By Ron Baiman, Chicago Political Economy Group

 

 

When I first got wind of the denunciation of Prof. Gerald Friedman’s Bernienomics impact estimates by prominent liberal Economists two questions came immediately to mind.  Who were these “liberal economists” and what were their objections?  A little googling around got me the first answer in a jiffy.  The liberal economists were four former Chairs of the Council of Economic Advisors (CEA) under Democratic Presidents Clinton and Obama: Alan Kreuger, Austan Goolsbee, Christina Romer, and Laura D’Andrea  Tyson.  It took more time and more work to establish the second answer.  According to their three paragraph letter, they: “are concerned to see the Sanders campaign citing extreme claims by Gerald Friedman” (Italics mine) that Bernienomics  could have: “huge beneficial impacts on growth rates, income and employment”  because these “exceed even the most grandiose predictions by Republicans about the impact of their tax cut proposals” and “no credible economic research supports economic impacts of these magnitudes”.

As Friedman’s  comprehensive and detailed analysis (56 pages with four Appendices, 22 Tables, and 12 Figures) uses public data and standard techniques to estimate the economic impact of 9 major policy, 11 Revenue Enhancement, and 6 regulatory, Acts or proposals raised by the Sanders’ campaign, I tried to find out what techniques, data, or estimation errors, the CEA’s objected to?  I was not able to find anything.  As Jamie Galbraith has pointed out in his excellent retort there are no specifics.  The CEA’s three paragraph letter presumes that Friedman’s report does not even warrant careful study as growth rates, income, and employment, have not reached these levels in recent years.  Adding insult to injury, the former CEA chairs imply that Bernienomics , and Friedman’s estimates of its impacts, is equivalent to Republican “Laffer Curve”  assertions that have never passed muster in any standard impact analysis of the kind that Friedman has subjected the Sanders proposals to.

As Galbraith, citing Mathew Iglesias  notes, the CEA’s appear to believe that their status entitles them to a blanket dismissal, without a shred of argument or analysis, of a standard economic analysis of a raft of economic proposals the scale and scope of which have not been seen since the New Deal. Far from being an “extreme” analysis, the Friedman study conservatively uses standard techniques such as those employed by the CBO, OMB and CEA to estimate economic impacts.  In another excellent retort Matthew Klein shows that real GDP growth rate projections of 5.3%  by the end of a Sanders second term (one of the Friedman estimates that the CEAs believe is not credible) is in line with pre-2007  estimates of long-term U.S. trend growth.  Klein points out that short-falls in government spending and residential construction can explain much of the gap.  But under Bernienomics government spending would undergo a massive increase so that it is not hard to imagine infrastructure and direct green energy job creation programs including housing and energy retro-fitting providing a more productive economic boost than pre 2007 residential housing construction – see for example CPEG jobs program.

Klein and Iglesias also both discuss the extra-ordinarily low post-2007 Emp/Pop ratio in the U.S. , see Figure 1 below:

Baiman-fig.1

The U.S. Emp/Pop ratio is more than 5% below its pre Lesser-Depression 2007 level.  This is a lot of labor market slack that could be drawn upon by large scale job creation programs that should be able to at increase employment above its pre-2008 level.    To the argument that changing demographics have made prior Emp/Pop ratios unobtainable, see Figure 2 below shows that the current ratio is roughly r3% below its demographically adjusted pre-2008 Emp/Pop ratio.  Paid Family leave, child care, equal pay, youth job programs, should significantly drive up the Emp/Pop ratio, whether this is measured after adjusting for demographics or not. As Klein points out, is it really that unrealistic to hope that we can achieve things are a reality in Canada?

Bernie’s economic program is exposing the long politically dormant deep fissure within economics between generally “progressive” economists who still broadly adhere to mainstream Neoclassical (NC) economic theory and “radical” economists who have long rejected core NC theory. I don’t know Prof. Friedman personally but he teaches at one of the five “heterodox,” or “radical” in U.S. economics parlance, Ph.D. granting economics departments in the U.S. The “radical” moniker stems from the name of the major professional organization of left leaning heterodox economists in the U.S. – the “Union for Radical Political Economics” (URPE).  Jamie Gailbraith is a prominent Post-Keynesian heterodox economist.  In contrast, the four former CEA Chairs all teach in mainstream NC economics departments that reject heterodox economics as unscientific value-laden deviance. To be fair the CEA foursome are known as political liberals who, like Paul Krugman,  another generally progressive NC economist, have often been stalwart supporters of politically progressive economic policies and principles, using data analysis that is indistinguishable for all practical purposes from that employed by radical economists.  But this time apparently, the structural economic changes that Sanders is proposing have simply gone too far for them.

Baiman-fig.2

The CEA’s blanket argument is that economic outcomes that have not occurred in the recent past are not possible.  This reminds one of the, similar, refusal of the vast majority of NC economists to contemplate the 2008 crash because this had never happened in recent history, and the optimistic estimates of the CEA, based on the average of post-war recessions, of the impact of the woefully inadequate Obama stimulus.  I believe that the former CEA chairs are, like 99% of economists in the U.S., a victim of the NC economic school that they have been trained in. They think of economics as an objective “science” and cannot accept the possibility that a fundamental change in the basic structure of the economy can lead to impacts that have not been seen in recent years, because they cannot accept the possibility of fundamental structural economic changes.  The New Deal raised U.S. real GDP growth rates by over 10% in years of government spending expansion.  Is 5.2% late in a second Sanders term unrealistic assuming these programs are passed?

And this brings me to my final point. No one assumes that Bernie’s economic program will be passed as currently conceived.  The fate of these proposals depends on the power of the “political revolution” that the Sander’s campaign is leading.  Like the Clinton campaign, the, NC economics trained, former CEA Chairs exhibit abundant “pessimism of the intellect” but little “optimism of the will”. This is not a technocratic economic debate. It’s a political and ideological debate that reflects the deep division in fundamental  theoretical outlook between NC progressive and radical democratic socialist economists.   For more background on this see my upcoming book: The Morality of Radical Economics: Ghost Curve Ideology and the Value Neutral Aspect of Neoclassical Economics (Palgrave, 2016).

Postscript  (2/21/2016)

Unfortunately, even politically liberal, mainstream or “Neoclassical”, economists do not believe that massive increases in effective demand, or other large scale public spending and policy measures, can produce lasting major and fundamental structural changes in the economy (in spite of the examples of the New Deal, WWII, etc. ). They also don’t accept Verdoorn’s law (which Friedman employs) in spite of numerous empirical studies and common sense validation: long-term growth in demand leads to increased investment and thus increases in productivity and by implication structural changes in the economy. NC “Keynesians” believe only in short-term Keynesianism, not in a long term principle of effective demand. To the extent that Friedman (rightly) employs a long-term “Post Keynesian” principle like Verdoorn’s law (in addition to all of the other standard techniques that he uses) he crosses a line that NC economists will not cross. I belatedly remembered after writing and posting this piece that Friedman had employed Verdoorn’s Law in his study of the long-term economic impact of Bernienomics.