News Release

Galbraith: Beyond the Spin on Sanders’ Economic Plan

512922642JAMES K. GALBRAITH, galbraith at grandecom.net
Galbraith holds the Lloyd M. Bentsen Jr. Chair in Government/Business Relations and a professorship of Government at the Lyndon B. Johnson School of Public Affairs, The University of Texas at Austin. His latest book is the recently released Inequality: What Everyone Needs to Know. He is available for a very limited number of interviews with some openings on Tuesday.

He just wrote the piece, “The Kerfuffle over Sanders’ Economic Plan,” which states: “The key takeaway from the fuss over the projected growth effect of Senator Bernie Sanders’ economic program is that it doesn’t matter. Sanders’ reforms for health, public education, investment, and for social fairness stand on their own. Whether they would produce economic growth at 3 percent or 5 percent, for five years or 10 years, is a secondary issue.

“The entire fuss is over an independent estimate of the growth effects, which certain prominent economists found implausible, mainly because such high growth rates have not been seen recently in this country. On that basis, four past chairs of the Council of Economic Advisers decided to brand the author of the paper, Professor Gerald Friedman of the University of Massachusetts, as a nut.

“Now two of the attackers, Christina Romer and her husband David, of the University of California, have decided to engage more seriously, with an 11-page critique. The epithets have been dropped. This is a good thing — if a bit late.

“The Romers now maintain (mainly) that Friedman made a math error, confusing levels of output with rates of change. But this complaint isn’t actually about math; it’s about economic theory.

“To see the issue, ask yourself: did the American Reinvestment and Recovery Act of 2009 make any difference to the level of economic output that we experience today? Equally, did the New Deal help to end the Great Depression? How about the Second World War?

“The Romers say no. They admit a temporary effect only. According to them, the economy of the 1930s would have recovered in full, eventually, without the New Deal or World War II. And the American economy today would be exactly where it is, or even a bit further ahead, even if there had been no recovery act — and also, for that matter, had there been no automatic stabilizers such as unemployment insurance or food stamps. …

“And does President Obama believe that his great economic policy triumph in the face of the Crisis of 2009 had no lasting impact? Does he agree that had the American Reinvestment and Recovery Act never been proposed, the economy would have recovered anyway, just a few months later than it actually did? I rather doubt that the president thinks this. Is he even aware, that this is the deeply-held view of his own chief economic adviser at the time?

“Somehow I doubt that too.”

See also: “James Galbraith: The Friedman v. Romers Growth Debate on the Sanders Plan — A Summing Up,” at NakedCapitalism.com.

Galbraith’s prior books include Inequality and Instability: A Study of the World Economy Just Before the Great Crisis (Oxford University Press, 2012); The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too and Created Unequal: The Crisis in American Pay.