February 18, 2016 at 2:05 PM
The first thing you should know about Gerald Friedman, the economist suddenly at the center of a wonk-storm over Bernie Sanders' policy proposals, is that he does not actually support Bernie Sanders for president.
He likes Sanders. And he has written, in consultation with the Sanders campaign, an analysis that projects Sanders' ambitious domestic agenda would raise economic growth to as high as 5.3 percent per year, yielding sustained income gains for the middle class.
But Friedman, an economist at the University of Massachusetts-Amherst, says he'll vote for Hillary Clinton in the Democratic presidential primary.
"I support Clinton," he said in an interview on Thursday. "I donate $10 a month to Clinton. I remember the woman who said, women's rights are human rights. I think she did a great job as secretary of state. I agree with Bernie on economic issues, but there are other issues."
Friedman came under attack this week by a group of liberal economists, including Austan Goolsbee, Christina Romer, Alan Krueger and Laura D'Andrea Tyson, all former top economic advisers to Democratic presidents. They called his analysis of Sanders' agenda – including free college for all, massive infrastructure spending and single-payer health care, all funded through sweeping tax increases – "extreme claims" that "cannot be supported by economic evidence."
Those economists didn't reach out to Friedman before they released an open letter on Wednesday criticizing his analysis. If they had, he said, he would have happily adjusted his modeling to respond to their specific critiques.
He also he would have explained that what he found, in what he calls his "orthodox" model of the Sanders plan, boils down to something many liberal economists have been saying for years: that the economy would respond strongly to a big new dose of fiscal stimulus.
Friedman said he is revising his estimates now with more pessimistic assumptions about that response, but that he still expects the new numbers to show broad growth and income gains as a result of Sanders' plans.
Here's why, according to Friedman's analysis: Sanders' spending would ramp up faster than the new taxes that would pay for it, which means the plan would, under this model, run big deficits in early years, and then big surpluses to offset them in later years. That would amount to a classic short-term fiscal stimulus, one that Friedman says would be larger than the Recovery Act signed into law by President Obama in 2009. Also, the taxes in the plan would redistribute income from the very rich to the middle-class and the poor, who are more likely to spend the money and less likely to save it.
In Friedman's model, both those effects would boost growth – particularly because data suggest the economy still has a lot of ground to regain from the Great Recession, including workers to bring back into the labor force who have stopped looking for jobs.
"The spending goes to working people, the taxes, a lot of them go to the very rich," Friedman said. "We can have fast growth because we'll be coming out of this deep recession, where there are a lot of underutilized or unutilized resources."
He said those particular circumstances make the spending plans so potentially potent: "This program might not have been a good idea in 1998, when we were close to full employment," he said. "It might not have been a good idea in 1968, when we were trying to slow the economy down."
Some liberal economists this week endorsed the idea, at least in the abstract, that another big fiscal stimulus could boost growth. They include J.W. Mason, an economist at the progressive Roosevelt Institute.
But Goolsbee isn't swayed by Friedman's arguments, which he has said risk pushing Democrats into the fantastical high-growth projections that conservative economists – such as Arthur Laffer, who famously sketched a version of this idea on a cocktail napkin – say will follow large cuts in top income tax rates.
In an email, Goolsbee said growth projections aren't the only problem with Friedman's analysis. It's also his projections for income growth, for large effects from equalizing pay between men and women, for outsized savings on drug costs from the Sanders health plan, and more.
Krueger said in an email that Friedman had, among other issues, dramatically overestimated productivity growth in the future, ignored ways in which Sanders' programs would discourage some Americans from working and failed to account for the likelihood that the Federal Reserve would intervene to slow growth in a time of low unemployment in order to head off inflation.
"To be clear, our letter wasn't a critique of his study," Goolsbee wrote. "It was a plea that we not invent a Vermont version of voodoo economics. If he wants to start using real economic data to analyze Sanders' policies, that's great."
Goolsbee cited footnotes from the study, which contradicting a fear Friedman expressed in the interview: that the economists critiquing him had not read his work. He said he'd used straightforward, classic modeling tools to find his results.
"It's completely standard," Friedman said. "I'm not sure if I knew another way to do it. Maybe if I'd done it on a napkin?"