The Latest Links on Friedman/Sanders, Romers, etc.

Gerald Friedman, Naked Capitalism, Gerald Friedman Responds to the Romers on the Sanders Plan: Different Models, Different Politics. Differences between my evaluation of the impact of the Sanders economic program from that of the Romers reflect different views of the economy, the difference between a static model where national income and employment are largely fixed and a dynamic one where these are shaped by effective demand and are, therefore, susceptible to change in response to economic policy. There are no errors in arithmetic.* [There’s a footnote contradicting the Wolfers NYT hit piece alleging accusing Friedman of “bad math, or logic”.] It is a fundamental difference in vision that divides our approaches; the same distinction that divided John Maynard Keynes from those he labelled the Classicals in his General Theory of Employment, Interest, and Money.”

James Sherman, at his blog The Body Politick, Uncovering the Bad Math and Logic (and the Bias) at the New York Times. A nice takedown of the Romers and of Wolfers. Follow-up to a previous post, Bernie Sanders, Social Democracy, and Economic Growth – Part I.

Robert Waldman, at Angry Bear blog, New Keynesian Orthdoxy and HysteresisWaldman seems to be agreeing with Friedman (against the Romers) that temporary stimulus can have permanent effects; he is also criticizing the Romers for appealing to the standard model to criticize Friedman, when they themselves don’t agree with the standard model. “There is a standard model in which demand stimulus has only a temporary effect on output and certainly no long term effect on the rate of growth of output. The model does not fit the data. In the academic discussion, macro economists note this and discuss alternative models. But if an outsiders (the Sanders campaign) or other than top status academics say something inconsistent with the standard model, economists say they are wrong and appeal to the standard model. This can make the orthodoxy invulnerable to data. It can be noted that it is rejected by data and alternatives discussed when confronting the problematic data, but this discussion isn’t shared with non-economists.” This was the “Weekend Reading” at Brad DeLong’s blog. (Does this mean DeLong is backing away from his earlier harsh remarks about Friedman’s analysis (in this blog post, in which he manages to praise Friedman before criticizing him, as a vehicle for mentioning that he got two summa readings on his senior thesis, one from Friedman)? Will he admit that he’s doing so, vs. siding with Krugman and the Gang of Four, as he said in his original post?)

Laura Tyson,  at Project Syndicate, Closing the Investment Gap. A commenter on Robert Waldman’s Angry Bear post links to a piece by Tyson, who is one of the “Gang of Four,” saying: “Tyson may not realize it, but she just provided a ringing endorsement of the Sanders economic plan as well as Friedman’s analysis of same.” In the paper (which the commenter quotes from), Tyson argues that a temporary fiscal stimulus can have persistent effects: “Under conditions of weak aggregate demand, stronger public investment encourages more private business investment.” Oops. She’s saying what the Romers are criticizing Friedman for saying. I guess if you say it in an article that only other economists are likely to read, and not in support of an insurgent anti-establishment campaign, it’s ok; if not, not.

Menzie Chinn, Econbrowser blog, Visualizing Textbook and Alternative Interpretations of the Friedman Analysis of the Sanders Economic Plan“Now that the dust has (kind of) settled on exactly what is and is not in Gerald Friedman’s interpretation of the Sanders economic plan, I thought it useful to contrast the textbook (at least the one I use, Olivier Blanchard/David Johnson’s) view of how a fiscal stimulus works, versus that in which a one-time spending increase yields a permanent increase in output, in a graphical format.” Nice graphs!

David Ruccio, Real-World Economics Review blog, Looking Below the Surface. “The fact is, the arrogant liberal response to Sanders and Friedman carried out in the name of ‘responsible arithmetic,’ which has created an ‘illusion of consensus,’ has been been both timid (in terms of actual policies) and shallow (in terms of what it focuses on).” There were several earlier pieces on the kerfuffle from the Real-World Economics Review blog that I’d missed (also siding with Friedman, natch): Lars Syll, Real-World Economics Review blog (2/28), Bernie Sanders and the Verdoorn Law. David Ruccio, Real-World Economics Review blog (2/28), The Debate Continues; Peter Radford, Real-World Economics Review blog (2/21), Krugman versus Sanders; and earlier from David Ruccio, at Occasional Links & Commentary on Economics, Culture and Society (2/20), Pushback.

Robert Vienneau, at his blog Thoughts on Economics, Romer and Romer Stumble. Points to three problems with what the Romers say in just one passage about labor markets and regulation. The conclusion: “Even the best mainstream economists seem incapable of writing ten pages without spouting ideological claptrap and propagating silly errors exposed more than half a century ago. Something seems terribly wrong with economics profession.”

Robert Reich, from his blog, Why the Critics of Bernienomics Are Wrong. Short and snappy. Hew as also interviewed on Democracy Now!, “We Must & Can Aim High”: Former Clinton Labor Secretary Robert Reich on Endorsing Bernie Sanders. In response to a question from host Amy Goodman about the kerfuffle, “Bernie Sanders is claiming—and Gerald Friedman, professor Gerald Friedman, an economist, backing him up, is claiming—that he could, because of his proposals, such as a single-payer plan, get economic growth up to 5.3 percent—that’s not out of the historic dimension of what’s possible; in fact, in the early 1980s, we had 5.3, almost 5.4, percent economic growth—and also get unemployment down to 3.9 percent or 3.8 percent—again, not out of historic possibility. In fact, that’s what was the approximate rate in the late 1990s.”

Gerald Friedman, interviewed on BloombergBusiness, Sanders Economics: Do the Numbers Add Up?  Jerry acquits himself well.

Ryan Cooper, The Week, Who’s Afraid of John Maynard Keynes? Nice piece on the debate about output since the Romers’ critique of Friedman came out. “Ultimately, there is only one way of resolving this question for sure: Attempt aggressively expansionist policy, and see how far we can get. No one knows for sure where the top is, or whether serious efforts to bring the millions of discouraged workers with fiscal stimulus, active labor market policies, or paid family leave would pay dividends. But they are unquestionably worth trying. Insofar as the professional center-left economist corps is creating a sense that such efforts are futile, they are doing their nation a massive disservice.”

That’s it for now.

Latest links on Friedman/Sanders, etc.

More posts related to the kerfuffle over our columnist Gerald Friedman’s report WHAT WOULD SANDERS DO? ESTIMATING THE ECONOMIC IMPACT OF SANDERS PROGRAMS:

Alan Harvey, IDEAeconomics, Standard Fare or Fantasy Economics? An excellent and vigorous defense of the plausibility of Friedman’s growth projections and a useful summary of the debate, including Christina and David Romer’s intervention into it. Among the telling points he makes in support of the plausibility 5+% growth rates with the kinds of big, big programs Sanders is suggesting: the fact that “the average growth rate under Democratic presidents prior to Barack Obama was 4.2 percent.” Gee, Friedman estimates a few years of growth 1.1 percentage points higher than the average growth rate under pre-Great Recession Democratic presidents, and suddenly puppies are flying?

Here are some of Harvey’s useful points about the Romers’ critique:

“Romer criticized Friedman for confusing stocks and flows, suggesting – as I understand it – that the Friedman analysis projected multipliers too far into the future. The multiplier is the increment of new activity produced by an investment or government spending program. The stimulus money spent is income to workers and businesses, who each save some, but spend most,
which becomes income to other workers and businesses and results in further spending. …”

“Christina Romer is uniquely qualified to discuss overreach in projections, since she was chair of the CEA during the Obama stimulus period and famously forecast an immediate reduction in unemployment that did not materialize. [Ouch!] This failure was seized upon by Republicans to discredit government stimulus entirely. We can, of course, look back and see the economic effects, which were substantial. But because they did not match the projection, the theory of the projectors suffered. …”

“Romer appears to suggest in the Wolfers piece that multipliers act only during the period of stimulus spending, and she faults Friedman for misunderstanding stocks and flows. It should be obvious, however, that a measure which provokes additional private investment can claim credit for economic activity induced by that additional investment. If Ms. Romer is suggesting otherwise, she is wrong.”

In a nice turn of phrase, Harvey suggests that, contra Larry Summers’ mantra, in the midst of the debates about the appropriate level of stimulus, that stimulus should be “timely, targeted and temporary,” Sanders’ proposed stimulus is (as it should be) “substantial, strategic and sustained.”

James K. Galbraith, Boston Globe, The kerfuffle over Sanders’ economic planA summary similar to his other pieces, but in a forum that will have reached a much broader audience.

James K. Galbraith, interviewed on the Real News Network, Attacks on Sanders Economic Plan By Former CEA Chairs Are Irresponsible.  Some nice detail in this interview, conducted by TRNN’s Sharmini Peries, that hasn’t appeared in his earlier written statements. The summary: “So what we had here was a, what was essentially an academic exercise that produced a result that was highly favorable to the Sanders position, and showed that if you did an ambitious program you would get a strong growth response. It’s reasonable, certainly, for the first three or four years that that would transpire in practice. And what happened was that people who didn’t like that result politically jumped on it in a way which was, frankly speaking, professionally irresponsible, in my view. It was designed to convey the impression, which it succeeded in doing for a brief while through the broad media, that this was not a reputable exercise, and that there were responsible people on one side of the debate, and irresponsible people on the other.And that was, again, something that–an impression that could be conveyed through the mass media, but would not withstand scrutiny, and didn’t withstand scrutiny, once a few of us stood up and started saying, okay, where’s your evidence, on what are you basing this argument? And revealed the point, which the Romers implicitly conceded, and I give them credit for that, that in order to criticize a fellow economist you need to do some work.”

Michael S. Gordon, Boston Globe, Socialists, look to economists at UMass Amherst for support.  In light of the huge uptick in the number of people in the U.S. who call themselves “socialists” (see below), this headline isn’t as snide or marginalizing as it might have seemed a couple of years ago. Look for an uptick in applications to the UMass-Amherst econ department from all those millennial Berniegals and -bros.

Annie Lowrey, New York magazine, Who’s Winning the Great Bernie Magic-Math Battle?  Follow up to an earlier piece (something of a hit piece) by Lowrey, Bernie Sanders Has Started Thinking Like a Republican  (where Bernie is “thinking like a Republican” because “He has no interest in garnering respectability and credibility among Establishment Democrats,” with the suggestion that he is willing to make unrealistic promises). Despite her continued use of the derogatory and tendentious term “magic math,” the more recent piece is more favorable to Friedman:

“The truth is that it seems impossible for Sanders’s economic plans to do what Friedman thinks they would. But the whole debate has underscored that our current growth rates are as much a function of policy as they are of anything else, and that we need not resign ourselves to growing at 2 percent a year, year after year. Maybe the technocrat wonks are right. But maybe Hillary Clinton should be promising to try for 5 percent growth herself. Smarter policies —infrastructure investment, early childhood education, making work pay, rebuilding the safety net, declining to raise interest rates and choke off a recovery — would all help bolster the economy. Five percent growth over a decade might be fantastical, but 5 percent in a few years might not be.”

Two pieces I had missed on the keruffle:

Mark Thoma, The Fiscal Times (Feb. 23), Here’s Why Bernie Sanders’ 5% Growth Plan Isn’t Crazy After All. Another prominent left-leaning economist weighing in on Friedman’s side. Thoma quotes former Minneapolis Fed chair (whose blog posts I linked to in my last post):

“Narayana Kocherlakota argues ‘that there are good reasons to believe that, with appropriate stimulus, it would be possible to achieve growth outcomes of around 5-6 percent per year for the next four years.’ But we won’t know unless we try. The inflation risk is minimal, and we owe the households who have struggled so much during the recession and the long, drawn out recovery the best possible chance we can give them of finding a decent job.”

Greg Ip, Wall Street Journal (Feb. 19), To Match Lofty Growth Goals, Presidential Candidates Need Better Plans.  Discussion of what Ip views as overly optimistic growth promises from both Sanders and Republicans; an early criticism of Friedman’s report, but he appears to have actually read it: “Mr. Friedman claims a big deficit-financed stimulus, increased entitlements and redistribution would achieve this. That seems implausible; Barack Obama, after all, did all three (though by less than Mr. Sanders would), and labor-force participation and productivity growth have trended down. Indeed, in theory, increased social transfers and marginal tax rates tend to reduce labor-force participation, and increased regulation hurts productivity growth.” He concludes: “There’s nothing wrong with outside-the-box thinking. That’s what got the U.S. out of the Great Depression. But so far, what the candidates have offered doesn’t measure up. Either more realistic goals or far more unorthodox thinking is in order.” Sounds good–let’s go for much bigger stimulus and government intervention than Sanders is calling for!

Related Items on Candidates’ Health Care Proposals (or Lack Thereof):

Beverly Mann, Angry Bear, Clinton Announces When She Will Disclose Her Healthcare Insurance Improvement Plan: She’ll announce it just as soon as the Republican presidential candidates tell us theirs.  (Via Naked Capitalism.) See also Ben Mathis-Lilley, Slate, Hillary Clinton Doesn’t Have a Practical Plan, or Any Plan, for Universal Health Care Coverage.  So much for “pragmatism.” As David Sirota pointed out on Twitter, in its efforts to hitch Clinton to Obama’s parade, the Clinton campaign sometimes overstates Obama’s achievements, including on health care: “See this quote from Clinton campaign, then note that 30+ million don’t have health insurance:”

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Find this statement on Hillary Clinton’s campaign site, here.  So maybe the reason Clinton doesn’t seem to have a plan to make health care universal is that she believes her own false claim that it is already universal (and affordable–which Obamacare isn’t either).

Is Clinton much better than Trump on this score? See Roy Poses, Health Care Renewal blog, It Has Come to This? – Donald Trump’s “Truly Absurd,” “Word Salad,” “Gibberish” Health Care Policy. (This also via Naked Capitalism.) This piece makes fun of the “word salad” and “gibberish” in Trumps debate answers about health care, mostly endless repeating that he will “get rid of the lines between states.” More recently, though, Trump has gone beyond revisionist cartography by posting more details about his health care reform ideas on his website. Besides repeal of Obamacare and “[m]odify[ing] existing law that inhibits the sale of health insurance across state lines,” the reform plans include allowing taxpayers to deduct premium payments, plus health savings account. Standard “free-market” fare, but trust him, “It’s gonna be great.”

Meanwhile, Sanders’ plan has gotten more scrutiny than Clinton’s and Trump’s non-plans. In an earlier post I mentioned the piece from WashPo Wonkblog,  Study: Bernie Sanders’s health plan is actually kind of a train wreck for the poor. This is the one that only cited Kenneth Thorpe’s study, and not the critiques of it by Friedman and by Woolhandler/Himmelstein. Where’s the scrutiny for Clinton’s failure to explain how she’s going make Obamacare truly universal?

Our current issue, which just went out to e-subscribers and is being mailed soon to print subscribers, includes a column by Gerald Friedman on Sanders’ health care proposals. I’ll post that to the website soon–probably next week.

Several pieces about the leftward shift in U.S. politics (without a corresponding leftward shift among establishment elites):

Gertrude Schaffner Goldberg and Sheila D. Collins, HuffPo, Diminishing Expectations: For Whom?  Great piece by two friends of D&S (see Trudy Goldberg’s Jan/Feb 2015 cover story, Where Are Today’s Left Movements?: What we can learn from the millions who demonstrated for jobs, government relief, and collective bargaining rights in the 1930s). The first paragraph gives the lie to Clinton’s claim to be the best candidate for people of color: “In a debate with former Secretary of State Hillary Clinton Senator Sanders referred to the achievements of the Nordic countries in providing such things as universal health care and free higher education as models for the United States. Secretary Clinton responded by saying, ‘I love Denmark, but the United States is not Denmark.’ What does that mean? The allusion is not to insufficient economic resources but to unrealistic political expectations. Sometimes the excuse or barrier is our ‘diversity.’ In the final analysis, one might infer from that explanation that we would extend these benefits if it didn’t mean that they would be provided to persons of color, immigrants or other groups somehow regarded as alien and undeserving.” (Clinton’s remark about Denmark is another example of how easily she picks up right-wing talking points against social-democratic goals; this is on par with her criticisms of Sanders for promising “free stuff” and her promise not to raise taxes on the middle class (which would make it hard to replace premium-supported Obamacare with a tax-funded single-payer system).)
This piece reads well alongside Doug Henwood’s Post-Hope Democrats, which I linked to in an earlier post.

Harold Myerson, The Guardian, Why are there suddenly millions of socialists in America?  “It used to be a dirty word. Bernie Sanders helped remove the stigma – but it’s the spectacular failure of capitalism that has really changed people’s minds.” An excerpt:

“Bernie Sanders’s presidential campaign has made clear that many Democrats are inclined to vote for a candidate who proclaims himself a democratic socialist, but even more dramatic and consequential are the many Democrats who say they’re socialists themselves. In a poll on the eve of the Iowa caucuses, more than 40% of likely Democratic caucus attendees said they were socialists. In a Boston Globe poll on the eve of the New Hampshire primary, 31% of New Hampshire Democratic voters called themselves socialists; among voters under 35, just over half did. And in late February, a Bloomberg poll of likely voters in the Democratic primary in South Carolina – South Carolina! – showed that 39% described themselves as socialists.

“Favorable views of socialism aren’t limited to Sanders supporters. The 39% of South Carolina Democrats who call themselves socialists exceeded by 13 percentage points the number who actually voted for Sanders. In a New York Times poll last November 56% of Democrats – including 52% of Hillary Clinton supporters – said they held a favorable view of socialism. Nor was this sway toward socialism triggered by Sanders’s candidacy: as far back as 2011, a Pew poll revealed, fully 49% of Americans (not just Democrats) under 30 had a positive view of socialism, while just 47% had a favorable opinion of capitalism.”

See also: Peter Beinart, The Atlantic, Why America Is Moving Left. An interesting piece, but hard to follow because of the author’s use of the term “liberalism” to mean “left,” and the author’s suggestion that Obama is liberal/left, as in this thesis statement: “There is a backlash against the liberalism of the Obama era. But it is louder than it is strong. Instead of turning right, the country as a whole is still moving to the left.” Shouldn’t he instead say that there is simultaneously a left-wing backlash against neoliberal Obama, and a right-wing reaction against that backlash (and against whatever socially liberal elements or imagined “left” or “socialist” elements there are in the Obama administration)?

Ethan Young, Rosa Luxemburg Stiftung, A Political Revolution for the U.S. Left. Much better piece. “The U.S. Left is in the process of emerging from decades of decline. It entered the Obama years in terrible shape: politically incoherent, cut off from its historical continuity, and organizationally and socially fragmented. Yet in the last years there have been signs of awakening, and in the past few months a new progressive insurgency has appeared, piercing public consciousness in a way not seen in generations.

“The most distinctive form this insurgency takes is the Bernie Sanders campaign for the Democratic Party nomination for president in 2016. Sanders is the first self-proclaimed socialist to win a national audience since Eugene V. Debs ran as the Socialist Party’s presidential candidate in the early 20th century, and the size of his base is arguably greater than that of any socialist leader in U.S. history.”

Two pieces on the Democratic primaries:

Jim Naureckas, FAIR/Extra! blog, NYT Works Hard to Present Primary Race as More Boring Than It Is.  This is a searing critique of the NYT’s post-Super Tuesday piece that originally bore the headline “Wins for Sanders in Liberal Strongholds,” but eventually read Minority Voters Push Hillary Clinton to Victories. As Naureckas rightly points out, it’s ridiculous to call Oklahoma and Colorado “liberal strongholds.”

Corey Robin, from his blog, Super Tuesday: March Theses. Republished at the Jacobin website as The Primary Isn’t Over  (whose title I would have edited to “The Primaries Are Not Over”). Excellent points about how the Super Tuesday results are not as good for Clinton as many have suggested. After Super Tuesday, Clinton has ten states and Sanders has five, but: “[t]he elections in Nevada, Iowa, and Massachusetts were either close or extraordinarily close. A little bit more time here, a little bit more organizing there, and they could easily have tipped his way. In other words, Sanders could very easily have seven states now to Clinton’s eight. He doesn’t, and coulda shoulda woulda is just that. But what this does mean, going forward, is that we have the opportunity to turn potential into actual. We’ve got time, we’ve got organizing, we’ve got money: let’s make use of it all.” Others have pointed out that Clinton’s wins on Tuesday were in the south, states which (with the exception of Virginia) neither Democrat would be likely to win in the general election. So Sanders’ wins in Oklahoma and Colorado may be more significant. What’s more, in the 2008 Democratic primaries, Clinton won CA, NY, NJ, MA, FL, CA, PA, TX, and a bunch of smaller states, and still lost to Obama, as this map shows:

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(*Remember that the delegates assigned from the MI and FL primaries were disqualified, because those states held their primaries earlier than the DNC allowed. Still, the rest of the states I listed are big states.) This surely had to do partly with the (small) margins by which she won those big states and the (large) margins by which she lost the less populous states that Obama won. But all this is to say that it is far from clear that Clinton will inevitably win the primaries. As Robin says, “Clinton’s strongest weapon is the aura of inevitability that she and her supporters and the media have concocted around her.” I would add that one of her weaknesses may be a sense of complacency among her supporters about the upcoming primaries; Sanders supporters can take advantage of that by heeding Robin’s advice to make use of the time, money, and organizing that we have on our side. (I myself canvassed in NH and MA and will make phone calls to likely Democratic voters in upcoming primary states. Maybe you should too.)