March 4, 2016

Galbraith: Attack on Sander's Economic Plan By Former Chairs of the Council of Economic Advisors Irresponsible

Professor James K. Galbraith, author of INEQUALITY, says the attacks were politically motivated assertions without evidence, and it was professionally irresponsible to criticize a fellow economist without having done the critical work
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James K. Galbraith teaches at the LBJ School of Public Affairs, The University of Texas at Austin. He is a Senior Scholar of the Levy Economics Institute and the Chair of the Board of Economists for Peace and Security. The son of a renowned economist, the late John Kenneth Galbraith, he writes occasional commentary for many publications, including Mother Jones, The Texas Observer, The American Prospect, and The Nation. He directs the University of Texas Inequality Project, an informal research group based at the LBJ School, and is President this year of the Association for Evolutionary Economics.


Galbraith: Attack on Sander's Economic Plan By Former Chairs of the Council of Economic 
Advisors IrresponsibleSHARMINI PERIES, EXEC. PRODUCER, TRNN: It's the Real News Network. I'm Sharmini Peries coming to you from Baltimore.

On February 17, four former chairs of the Council of Economic Advisors for President Barack Obama and Bill Clinton penned an open letter to the Bernie Sanders campaign and economist Gerald Freidman. In it they claim that presidential candidate Bernie Sanders' economic plan and much of the optimism behind it could not be supported by economic evidence. The letter was a response to the economist Gerald Friedman's predictions that Sanders' campaign plan would yield strong economic rates as well as higher employment levels.

With us to discuss this issue is James K. Galbraith. He's a professor at the University of Texas at Austin LBJ School of Public Affairs, and author of Inequality: What Everyone Needs to Know, just out from Oxford University Press. James, thank you so much for joining us.

JAMES K. GALBRAITH: Always a pleasure.

PERIES: James, the Council of Economic Advisors, they put out economic forecasts each year. And there has been some wildly optimistic ones. For example, if you look at the 2010 predictions for 2012 and 2013 they have not quite been attained. And one would say it was done in the interest of trying to make the administration that they were serving more impressive. But what accounts for this particular attack on Friedman's projection and other fellow economists?

GALBRAITH: This was a classic case of professional bad manners and rank-pulling. What we had here were four former chairs of the president's Council of Economic Advisors, and two from President Obama, two from President Clinton, who decided to use their big names and their titles in order to launch an attack on a professor of economics at the University of Massachusetts who had written a paper evaluating the Sanders economic program.

It's likely that the four bigwigs thought that Professor Friedman was a Bernie Sanders supporter. In fact, as of that time he was a Hillary Clinton supporter and a modest donor to her campaign. What he had done was simply to write his evaluation of the economic effects of the ambitious Sanders reform program. The four former council chairs announced that on the basis of their deep commitment to rigor and objectivity, they had discovered that this forecast was unrealistic. And what I pointed out was that that claim was based on no evidence and no analysis whatsoever. And when you pressed down on it you found that it was simply based on the obvious fact that we haven't seen the kinds of growth rates that Professor Friedman's analysis suggested the Sanders program would produce. And for a very simple reason: the Sanders program is bigger. It's more ambitious than anything we've seen in recent years, so it's not surprising that when you put it through a model it generates a higher growth rate.

So that was the basic underlying facts, and these guys, two men and two women, announced that they, that it was a disreputable study, but failed to present any analysis that suggested they'd actually even read the paper before they denounced it. And that's what I pointed out in my counter letter, in a number of articles that have appeared since.

PERIES: James, so in your letter, how do you counter them? What methods did you use to come to your conclusions?

GALBRAITH: Well, I, no need to say anything beyond the fact that I had looked in their letter for the rigor that they were so proud of, for the objectivity and the analysis that they were so proud of, and I'd found that they had not done any. They had not made any such claim, not done any such work.

So that began to provoke a discussion. It's fair to say ultimately, without apologizing for effectively launching an ad hominem attack on an independent academic researcher, one of the former chairs, Christina Romer of President Obama's council, and her husband David Romer, a fellow economist, did produce a paper in which they spelled out their differences with the, with the Friedman paper. But that, again, raised another set of interesting issues which we've continued to discuss at various, various outlets of the press.

PERIES: Now, James Friedman's claim that the growth rate from Sanders' plan to be around 5.3 percent. And some economists, including Dean Baker at the Center for Economic Policy and Research, have claimed that this is unrealistic. What do you make of that?

GALBRAITH: Well, the question is whether it is an effect, let's say, a reasonable projection, of putting the Sanders program into an economic model. And the answer to that question, yes, Professor Friedman did a reasonable job. He spelled out what the underlying assumptions that he was using were. He spelled out the basic rules of thumb that macroeconomists had used for decades to assess the effects of an economic program. In this case, an expansionary economic program. And he ran them through his model and reported the results, a perfectly reasonable thing to do.

Now, one can be skeptical. And I am, and Dean Baker is, lots of people are skeptical that the world would work out quite that way, because lots of things, in fact, happen which are not accounted for in a model. And we've talked, we've basically put together a list of things that you think might be problematic. But the exercise here was not to put everything into paper that might happen in the world. The exercise was to take the kind of bare bones that economists use to assess and to compare the consequences of alternative programs, and to ask what kind of results do you get out? And that's what, again, what Jerry Friedman did. It was a reasonable exercise, he came up with a reasonable answer, and he reported it.

PERIES: Now, Friedman seems to think that the rate of full employment in 1999 is attainable. However, many labor economists seem to think that the larger share of the elderly currently in society compared to 1999 explains some of the lack of labor participation, which creates a lower full employment ceiling that's contradicting Friedman's report. Your thoughts on that?

GALBRAITH: Well, I think it is a fact that the population is getting older. But as, I think, any economist would tell you, that when you offer jobs in the labor market, the first thing that happens is the people who are looking for work take those jobs. The second thing that happens is that people who might look for work when jobs were available start coming back into the labor market. And if that is not enough to fill the vacancies that you have, it's perfectly open to employers to raise their wages so as to bring more people in, or to increase the pace at which they innovate and substitute technology for labor so that they don't need the work.

So there's no real crisis involved in the situation if it turns out five years from now we're at 3.5 percent unemployment, and they were beginning to run short of labor. That's not a reason to, at this stage, say no, we're not going to engage in the exercise and run a more expansionary, vigorous reform program, a vigorous infrastructure project, a major reform of healthcare, a tuition-free public education program. All of those things, which were part of what Friedman put into his paper, should be done anyway. The fact that the labor market forecast might prove to have some different, the labor market might have different characteristics in five years' time is from our present point of view just a, it's an academic or a theoretical proposition, purely.

PERIES: And Friedman's paper, he looks at a ten-year forecast. Did you feel that when you looked at the specifics of that, including college, universal healthcare, infrastructure spending and of course, expanding Social Security and so on, that those categories and his predictions or projections, rather, made sense to you?

GALBRAITH: Well, again, what he was doing was running a program of a certain scale, of a large scale, through a set of standard macroeconomic assumptions. And that, again, is a reasonable exercise. If you ask me what my personal view is, I've written a whole book called The End of Normal in which I lay out reasons for my chronic pessimism about the capacity of the world economy to absorb a great deal more rapid economic growth.

But that's not in the standard models, and it would not be appropriate to layer that on to a forecast of this kind. What Friedman was criticized for was not for putting his thumb on the scale, but for failing to put his thumb on the scale. In fact, that was the reasonable thing to do.

On the contrary, and on the other side, when Christina and David Romer did put out their forecast, their own criticism of the Friedman paper, they concluded by asserting that if this program were tried, inflation would soar. So they there were making an allegation for which, again, they had no evidence and no plausible model, that in the world in which we presently live would produce that result.

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.

PERIES: James, thank you so much for joining us this election year. We hope to have you back very soon.

GALBRAITH: My pleasure.

PERIES: And thank you for joining us on the Real News Network.


DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


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