UMass economist paints a rosy picture of Sanders economics
February 14, 2016 12:00 AM
Todd Heisler/The New York Times
Sen. Bernie Sanders
By Dan Majors / Pittsburgh Post-Gazette
Democratic presidential candidate Sen. Bernie Sanders knew his ideas for stimulating America’s economy would be costly. Programs for infrastructure, pension funds, free public college tuition and paid family leave don’t come cheap.
So the Vermont senator asked an economic team at the University of Massachusetts at Amherst to put a price tag on his plans.
The analysis, prepared by economics professor Gerald Friedman, came in at $14.5 trillion over 10 years. But that, the report concludes, is money well spent — a conclusion not shared by many Sanders opponents.
“The Sanders spending program is a significant stimulus to an economy that continues to underperform,” Mr. Friedman said in the report. “These programs will increase economic growth and employment, reduce poverty and inequality, and balance the federal budget.”
Of course, all candidates for president claim to have ideas that boost the economy and put more money in Americans’ pockets. Few, however, predict that they will raise the median household income by 37 percent by 2026, as opposed to the 10 percent growth projected by the Congressional Budget Office. “In real dollars, this means an increase in median household income of over $20,000,” Mr. Friedman said.
“Like the New Deal of the 1930s, Senator Sanders’ program is designed to do more than merely increase economic activity: the expenditure, regulatory, and tax programs will increase economic activity and employment, and promote a more just prosperity.”
Following in the footsteps of President Franklin D. Roosevelt, Mr. Sanders’ proposals rely on greater government involvement.
“Wage increases and reductions in poverty and inequality will come more from government action, especially increases in the minimum wage, and from progressive taxation, rather than from collective bargaining or the working of competitive labor markets,” Mr. Friedman concluded.
“By shifting income from the rich to working people and the middle class, the regulatory changes Senator Sanders proposes, including higher minimum wages for women and overtime workers, and support for increased unionization, will also stimulate economic activity.”
The spending can be intimidating. It projects $1 trillion over five years for infrastructure, including roads, bridges, railroads, mass transit, as well as alternative energy and pollution abatement; $750 billion over 10 years for free public college tuition; $320 billion to fund family and medical leave through 2016; and $5.5 billion for youth summer employment in 2017 and 2018.
Mr. Sanders also would raise the minimum wage to $15 per hour by 2020.
There will be taxes. A 0.2 percent increase in the payroll tax on employers and employees. A carbon tax that would generate $1.1 trillion over the first decade. And progressive taxes on the top 2 percent.
“The tax program, which produces a dramatic reduction in inequality, has only a relatively small negative effect on economic activity because it is targeted so precisely at the richest with their relatively low propensities to consume,” Mr. Friedman said.
The optimistic assessment of Mr. Sanders’ programs might be taken with a grain of salt by some.
Many economists are dubious of the optimistic claims Mr. Sanders has made.
In its Upshot column, the New York Times quoted Mr. Friedman’s response to questions about how exactly Mr. Sanders’ plan would be implemented: “The pleasure of being an academic is I can just spell things out and leave the details to others,” Mr. Friedman said. “The details very quickly get very messy.”
But the absence of the “very messy” details in the Sanders plan is telling,” Upshot writer Margot Sanger-Katz wrote. “He wants to make major reforms to the health care system, and those changes will come with costs and uncertainties. Enacting his plan could make health care more affordable and less complicated for many Americans, especially those earning low incomes. But it would require wrenching, disruptive change.”
Warren Gunnels, policy director for the Sanders campaign, hailed the report’s finding that the proposals are feasible and expressed hope that more people will look into them.
“It’s gotten a little bit of attention, but not nearly as much as we would like,” Mr. Gunnels said. “Senator Sanders has been fighting establishment politics, the establishment economics and the establishment media. And this is the last thing they want to take a look at.
“It shows that over a 10-year period, we would create 26 million new jobs, the poverty rate would plummet, that incomes would go up dramatically, and we would have strong economic growth. ... It’s a very bold plan, and we want to get this out there.”
Mr. Friedman, who is a member of the Democratic Socialists of America, admits that he is inclined to think along the same lines as Mr. Sanders. But he insists his research was purely professional.
“I would have done [such an assessment] for anybody,” he said. “I have never been paid by the campaign. I do have a Sanders coffee mug, which I gave them $35 for. And we do have a Sanders bumper sticker on my wife’s car, and I donated $35 for that. Otherwise, I donate $10 a month to the Hillary Clinton campaign.
“I worry about [bias] all the time. I’m an academic, and the most important thing for me is to do work with integrity and honesty. That’s my reputation. I need to protect my good name. So I worry about introducing a bias that comes out of my own values. I did try, in this report, to lean over backwards the other way.”
Mr. Friedman acknowledged that the Sanders program promotes growth and prosperity rather than a balanced budget.
“[But] while the Sanders fiscal stimulus will initially increase the federal deficit, this deficit will contribute to faster economic growth which, combined with progressive tax increases, will quickly bring down the deficit,” he said, “producing a surplus during a Sanders second term.”
The Sanders program would, of course, face political obstacles to enactment. Other considerations are the influence of the Federal Reserve and the economies of other nations.
“This is an ideal case,” Mr. Friedman said. “In the social sciences, you try to construct an ideal case: If we did it all the way we want, how will it look? Then you chip away at it.
“It’s a little bit of a rosy scenario for the early years because we’re coming out of a recession. We’ve had very slow growth for 35, 40 years and people have gotten used to it. A couple of academics were quoted as saying I’m overly optimistic. I think they’re overly pessimistic because they’ve gotten used to slow growth.”
Dan Majors: email@example.com and 412-263-1456.
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