A group among this nation’s top economic pundits have been rendering negative judgments of Bernie Sanders economic policy proposals, based on preliminary campaign plank information. The mainstream press has given prominence to the negative view, while there are other economists who have rendered a positive review of Sanders’ economic plank in the form of a letter signed by 170 economists.
Economist Jared Bernstein was interviewed for such a New York Times article and subsequently issued two blog posts expanding on the quotes in the article. Here are both of those posts, reprinted in full, with Jared’s permission:
The interaction of a) this NYT article about the cost and macro-impact of Sanders’ agenda and b) a tightening Democratic primary is creating a fair bit of buzz. I’m accurately quoted in the piece making a few points (paraphrasing here where I have more space!), but some readers have misinterpreted my position as an endorsement or anti-endorsement. Not so.
–Sanders’ policy aspirations mirror many of those I write about here: deep infrastructure investments, efficiency improvements in health care, college affordability, and so on. FTR, Clinton’s do too, though she dials back the extent of her proposed interventions. She’s admittedly more of an incrementalist as her theory of change is much more path dependent than Bernie’s. (Path dependency: your options in terms of where you end up depend on where you’re starting from.) I return to this important difference below.
–If you roughly sum up the costs of what Sanders is proposing, you will find that federal government spending under his agenda grows to something like 30% of GDP instead of the historical average of around 20%. That’s not at all unheard of in European and Scandinavian social democracies, as the candidate himself often notes. It is, however, as I suggested in the piece, unheard of in our own history. Again, that’s one way to interpret his call for a “political revolution.” And it’s more evidence of his path-non-dependency.
–I did not find the macro estimates of Bernie’s agenda by economist Jerry Friedman, who, according to Dean Baker is “not affiliated” with the Sanders’ campaign, very plausible. I do give Friedman credit for running all of Sanders’ plans through a macro model, versus Republican candidates’ hand-waving claims that the power of their personalities leavened with massive sprinklings of supply-side fairy dust will generate GDP growth of 4, 6, 8 percent! But such models are a function of your assumptions, and his, including his multipliers, the sharp increase in labor supply and productivity, diminished health care inflation, and a passive Fed amidst all this stellar growth, all seemed way too sunny to me (I called them “wishful thinking” in the NYT).
Isn’t that a non-endorsement? Fair question, but no, it’s not.
What I do here, there, and everywhere is analyze economic policy, very often through a political lens (ergo, political economy). It would go far beyond my scope to endorse a candidate. It would also compromise my ability to call it like I see it. Yes, I ding conservatives a lot more than progressives, but a) “duh” and b) I ding and praise them all accordingly.
As an aging pundit who’s spent decades here at the intersection of dysfunction junction, both in and out of government–I’ve seen the sausage made at every level, people, and damn…it ain’t pretty–I too am drawn to path dependency and incrementalism. I’ve seen lots of market failure, but I’ve seen government failure too.
And yet, I would strongly constrain my criticism of those who feel otherwise. I admire their hope, their aspirations, the fact that they’ve had it with incrementalists posing as revolutionaries. I agree with them that we need a new model, as the current one is, in many ways, working as badly as I’ve seen it work.
Moreover, while I think it’s absolutely right to look at the details and question the implications of the candidates’ numbers, not to mention whether they add up, one can push that too far. Look at their aspirations, their role for government, their tax plans (do they raise needed revenues or just cut taxes?), their views on trade (do they acknowledge both winners and losers?), inequality, poverty, the depth of their reconnection agenda, and mostly: are they WITTs or YOYOs?
And, in the current case, evaluate for yourself how heavily to weigh path dependency. Krugman gives it a very heavy weight. Baker less so. I give it a heavy weight with regard to health care–defend the ACA against the marauding hordes!–build on its successes so far!–perhaps because I was there in the sausage factory when we somehow managed to pass the damn thing. But beyond that, I’m not sure how heavily to weigh path dependency.
Perhaps that will become clearer as time progresses, though I suspect not. Either way, I’ll be here doing political economy, sans endorsements, in the hopes of informing anyone who’s interested.
More on path dependency: describing the past is not endorsing the past…but these are the facts, like ‘em or not.
I’ve apparently managed to confuse some people in my post yesterday about federal government spending and taxing as a share of the economy. Though to be fair to myself, always a good practice, it looks to me like those people a) don’t read my stuff (unforgivable!), or b) don’t want to face historical facts.
First, reviewing those facts, I’ve got historical data from OMB on federal receipts and outlays as a share of GDP since 1930, which I’ve plotted below, along with a line at 20%, the rough avg for both series. The WWII spike is obvious and you should also note the spike at the end as we, including yours truly, temporarily expanded spending to fight the Great Recession. But outside of wars and downturns, the range is as you see it.
That does not and should not—I’d say must not—restrict the future. A key point of my work is that when it comes to our fiscal future, we mustn’t succumb to the tyranny of the historical average. I’d urge those who are unaware of this to dig much more deeply into my scribblings before concluding that describing the past is the same as endorsing the past.
But continuing this description of the way things are—this is the path dependency point from yesterday’s post—check out this OECD figure on tax receipts as a share of GDP by country. This includes both federal and state spending, as it should.
Those progressives who both discount path dependency (not me) and want to see us move up in that chart (yes me!) believe we can or at least we should fight for jumping from the bottom to closer to the top.
As I wrote yesterday, go for it! I’m not the chin-stroking, finger-waggling pundit saying “give up, you’ll never get there!” And it is glaringly obvious to me that for lots of reasons, we will need to raise more revenues to meet both demographic and a whole set of other challenges, including climate, poverty, immobility, infrastructure, health care, retirement security, and more.
I’m just more path dependent than you are. That doesn’t mean we have to stay on the path we’re on, Buddha willing. It does mean, to me, that the better path with true access is in the same general part of the woods as the current one.
Reprinted with the permission of Jared Bernstein
Blog#42 is a reader-supported site and my full-time job. I cannot do more without your financial support. Please click here to help me take Blog#42 to the next level!