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.

Yet More Links on Friedman-Sanders Kerfuffle

Christina D. Romer and David H. Romer, Senator Sanders’s Proposed Policies and Economic Growth.  Finally, one of the “Gang of 4” (as Bill Black has dubbed them) has responded to Friedman’s paper with an actual substantial critique.  From the conclusion:

“The bottom line of our evaluation of Professor Friedman’s analysis is that it is highly deficient.  The estimated demand-induced effects of Senator Sanders’s policies are not just implausibly large but literally incredible. Moreover, even if they were not deeply flawed, Freidman’s enormous estimates of demand-fueled growth could not and would not come to pass. Even very generous estimates of the amount of slack still present in the American economy would not be enough to accommodate demand-driven growth of anything near what Friedman is estimating. As a result, inflation would soar and monetary policy would swing strongly to counteract them. Finally, a realistic evaluation of the impact of Senator Sanders’s policies on productive capacity (something that is neglected in Friedman’s analysis) suggests that those impacts are likely small and possibly negative.

“Though we have been frankly critical of Professor Friedman’s analysis, he has provided a service to public debate by posting his analysis so that other economists can evaluate its validity. We are posting our evaluation in the same spirit.”

James K. Galbraith, Economic Forecasting Models and Sanders Program Controversy. Galbraith comes to Friedman’s defense vigorously, again, by pointing out that they differ from him because of their theoretical assumptions and approach, not because he is in error.  And their theoretical approach has a sorry history.  The gist:

“All forecasting models embody theoretical views. All involve making assumptions about the shape of the world, and about those features, which can, and cannot, safely be neglected. This is true of the models the Romers favor, as well as of Professor Friedman’s, as it would be true of mine. So each model deserves to be scrutinized.

“In the case of the models favored by the Romers, we have the experience of forecasting from the outset of the Great Financial Crisis, which was marked by a famous exercise in early 2009 known as the Romer-Bernstein forecast. According to this forecast (a) the economy would have recovered on its own, in full and with no assistance from government, by 2014, (b) the only effect of the entire stimulus package would be to accelerate the date of full recovery by about six months, and (c) by 2016, the economy would actually be performing worse than if there had been no stimulus at all, since the greater ‘burden’ of the government debt would push up interest rates and depress business investment relative to the full employment level.

“It’s fair to say that this forecast was not borne out: the economy did not fully recover even with the ARRA, and there is no sign of ‘crowding out,’ even now. The idea that the economy is now worse off than it would have been without any Obama program is, to most people, I imagine, quite strange. These facts should prompt a careful look at the modeling strategy that the Romers espouse.”

Justin Wolfers, NYT Upshot blog, Uncovering the Bad Math (or Logic) Behind Bernie Sanders’s Economic Plan. After a phone conversation with Friedman, Wolfers tries to pick apart his analysis based on the Romers’ criticisms of it. “Here’s the problem: Mr. Friedman’s calculations assume that removing a stimulus has no effect. The result is that temporary stimulus has a permanent effect.” But by the end of the article Wolfers claims to have cornered Friedman into admitting that his model doesn’t depend on standard macroeconomic assumptions, but instead depends on “the understanding of an earlier generation of economists–a sub-tribe of Keynesians he called ‘Joan Robinson Keynesians.'” So if Wolfers is concluding that this is based on a theoretical difference, why would he suggest (and why would the Times editors allow him to suggest) that the difference is the result of math errors (or possibly errors in logic)? That would only be true if Friedman were applying the neoclassical models that the Romers and Wolfers rely on. As far as I can tell, the only error Wolfers has revealed is Friedman’s possible assumption at he was relying on standard models. That is only a real error if you assume that the standard models must be correct (and even then, it wouldn’t be a “logical” error!). There are two other problems with the Wolfers piece. One is that he is biased, having worked with David Romer, also also arguably because his partner Betsey Stevenson worked in the Obama administration until recently (and Obama and his economic advisors are supporting Clinton), which he doesn’t disclose. The other is that the title mentions “Bernie Sanders’s Economic Plan,” which mis-describes Friedman’s paper (which hasn’t been endorsed by Bernie Sanders–only mentioned favorably by someone from Sanders’s campaign).

Gerald Friedman, Response to the Romers. This is an exclusive to D&S;  he’ll have more to say soon, I’m sure.  Here’s his response in its entirety: “The Romers, and I suppose other neoclassical macro economists, believe that the economy tends towards full employment equilibrium and will move there on its own without need for government intervention or stimulus. They would acknowledge that following a negative shock, government stimulus spending may accelerate the recovery somewhat, as Bernstein and Romer in 2009 anticipated the Obama stimulus would speed recovery by about 6 months. They deny, however, that stimulus spending could change the permanent level of output because the economy will on its own return to full employment at a capacity output set without regard to the level of employment by factor endowments, by preferences, and by the level of exogenous technology. From this perspective, because a period of prolonged measured slow growth cannot be caused by involuntary unemployment, it must, by a priori assumption, be due to a decline in the exogenously determined growth rate in capacity. Like mosquitos on an otherwise delightful summer afternoon, slow growth is unfortunate but there is little that can safely be done about it.

“Or maybe we can find safe pesticides. Here I agree with John Maynard Keynes that the economy can have a low-employment equilibrium because of a lack of effective demand, and I agree with Nicholas Kaldor and Petrus Verdoorn that productivity and the growth rate of capacity can be increased by policies that push the economy to a higher level of employment. And to the contrary, periods of prolonged unemployment and underutilization of capacity can lower capacity by discouraging workers and reducing the incentive to invest, to innovate, and to raise productivity. Unfortunately, this is what has been happening in the US for the last few years; and, fortunately, there is reason to believe following Keynes/Kaldor/Verdoorn that policy can reverse this decline by pushing the economy to a higher level of output and thus a higher level of productivity. Rather than dismiss the rising output gap as orthodox macro economists have done by assuming that the United States suffered a great loss of efficiency since 2007, I see an economy at low-employment equilibrium where discouraged workers have abandoned the labor market and firms have had little incentive to innovate or to raise productivity. In this situation, additional stimulus can not only temporarily raise output but by priming the pump and encouraging additional private spending and investment, it can push the economy upwards towards capacity. And, beyond because at higher levels of employment, more people will look for work, more businesses will invest, and employment will grow faster and productivity will rise pushing up the growth rate in capacity. That is why I see lasting effects from a government stimulus when, as now, the economy is in a low-employment equilibrium.

“This theoretical point turns on empirical questions: are we 11% below capacity, as I would estimate, or are we 2-4% below, as the Romers suggest? And is capacity set or is it endogenous with respect to output levels; does it rise when the economy approaches capacity? If the Romers were right that the economy is at full employment at capacity utilization, and capacity utilization grows independently of the level of output, then there cannot be a lasting stimulus effect at a fully employed economy. In the Romer case, a stimulus can raise output only temporarily because output depends on capacity and the economy is always at or moving towards capacity. But, if the economy can be stuck at an unemployment equilibrium, if it does not move to a full employment equilibrium, or if a higher employment and output level can trigger a higher growth rate, then a Keynesian-style government stimulus can have lasting effects. Even a one year stimulus can push employment and output to a permanently higher level, and at that higher level it can generate faster growth by pulling more into the labor force and stimulating higher productivity growth. We might call this, the Keynesian-Kaldor case with equilibrium unemployment and growth dependent on the level of the output gap. In the Keynesian-Kaldor case, a one year stimulus can lead to permanently higher output both by reducing unemployment and by raising the growth rate of capacity.

“Gerald Friedman, University of Massachusetts at Amherst
February 27, 2016”

Also, here is Friedman’s new website! http://geraldfriedmanecon.org/

Dean Baker, at his CEPR blog “Beat the Press,” The Romers Do the Numbers on Friedman-Sanders.  Disappointingly (to me, at any rate), Baker sides with the Romers:  “I could quibble with aspects of their critique, but I would say it is basically right. There clearly is still a large amount of slack in the economy which would allow for 2–4 years of exceptionally strong growth (e.g. 4–5 percent). However, it is very hard to envision a story where this sort of growth rate is maintained for a full eight years of a Sanders’ administration.” But I find this puzzling, as did at least one commenter on Baker’s blog: “This seems to be the exact opposite of what the Romers are saying. To Quote: ‘First, standard indicators of slack suggest that the output gap is currently no more than moderate. […] Second, experts think that slack is small. […] This suggests that, at least by this measure, professional forecasters see little if any slack in the current economy.'” 

John Cassidy, The New Yorker, Bernie Sanders and the Case for a New Economic-Stimulus Package.  Seems to side with Friedman against the “Post-Hope Democrats” (as Doug Henwood calls them).

“Having read Friedman’s paper pretty carefully on my return to the United States, I remain deeply skeptical of his projections for G.D.P. growth and productivity. But his analysis, which isn’t an official campaign document, was well worth spending some time with. For one thing, it is the first effort I have seen to quantify how some of Sanders’s proposals, such as raising the minimum wage to fifteen dollars and sharply raising taxes on high earners, would reduce income inequality. Friedman outlines a compelling scenario under which the ratio of the average incomes of the richest five per cent of households to the poorest twenty percent would fall from 27.5 to 10.1. And this estimate doesn’t hinge on his own macroeconomic assumptions—it mainly reflects explicit efforts to boost the wages of low-paid workers, and to redistribute post-tax incomes.

“In addition, Friedman makes a valuable contribution to the debate about how we can escape from the New Normal, or secular stagnation, or whatever other label you want to attach to our era of seemingly permanent low growth. To repeat: I think Friedman overstates the likely impact of Sanders’s policies. But he offers a timely reminder that economic growth rates aren’t set in stone, and that changes in policy—particularly those that seek to boost overall demand—can have a substantial impact, even when the official unemployment rate isn’t particularly elevated.”

Paul Starr, Politico, Why Democrats Should Beware Sanders’ Socialism
He’s a socialist, not a liberal—and there’s a big difference.  Ridiculous red-baiting here.  See also On Point with Tom Ashbrook (NPR), Debating Bernie Sanders’ Vision. With Paul Starr doing more red-baiting, and Jonathan Tasini doing a great job of calling him on his red-baiting (and explaining Sanders’s proposals).

Doug Henwood, at his blog LBO News, Liberal Redbaiting.  An excellent take-down of the liberal conniptions about Sanders; especially good on Paul Starr’s red-baiting (e.g., his ridiculous claims that single-payer will involve worrisome centralization of power).

Matthew Yglesias, Slate, Have top Democrats given up too soon on boosting economic growth?  A surprisingly good piece, though he takes a potshot at Friedman in calling his report “somewhat silly” (apparently on the basis of Brad DeLong’s criticism that it’s too late to fill the output gap left by the Great Recession–but if other high-profile economists disagree, is it fair to call Friedman’s view “silly”?).

Michael Corcoran, Truthout, The Dominant Media, “Left-Leaning” Economists and the Illusion of Consensus.  An excellent review of the kerfuffle, with an emphasis on the Times’s propaganda role.

Dave Johnson, Campaign for America’s Future, The Sanders “Economic Plan” Controversy. A very good review of the kerfuffle.

Dolphin99, Daily Kos, Sanders and the Economists.  An earlier review of the kerfuffle.

Chris Matthews, Fortune, Meet the Man Who Says Bernie Sanders Can Deliver 5.3% Economic Growth.  Another earlier piece I’d missed. (Not that Chris Matthews.)

Jordan Weissman, Slate’s Moneybox blog, Here’s Something Important That Bernie Sanders Gets Absolutely Right About the Economy. It’s on his infrastructure spending plan. Weissman seems to have been dismissive of Friedman in another post.

Max Ehrenfreund, WashPo Wonkblog, Study: Bernie Sanders’s health plan is actually kind of a train wreck for the poor.  A lazy piece–based on Thorpe’s criticisms of Sanders’s single-payer plan, with no mention of Friedman’s critique of it or Woolhandler/Himmelstein defense of Sanders’s single-payer plan.

David Sirota, International Business Times, Election 2016: Do Sanders’ Economic Plans Add Up? The Cost Of His ‘Revolution’. A great review of the kerfuffle, nicely balanced, which does (on the single-payer issue) what the Wonkblog piece failed to do–talks about both the Thorpe analysis and critiques of it.

Tim Mullaney, MarketWatch, Could it be that Bernie Sanders is the real-deal capitalist?  An offbeat take that takes Friedman’s study more seriously than some.  On the one hand, I don’t think Sanders is actually anti-capitalist.  On the other, I am guessing this author feels he has to emphasize that Sanders is the “real-deal capitalist” because he (the author) likes Sanders programs and their projected effects.

Narayana Kocherlakota, at his policy blog, Faster Growth IS Possible – And It May Well Be Desirable.  I had neglected to link to this post by the former president of the Minneapolis Fed (he has a couple more recent related posts) that lend support to Friedman’s analysis. (Hat-tip to Eileen Applebaum on Twitter for this.)