If it were so…

There has been much discussion about an economist’s projections of Bernie Sanders’s economic policies, should they be enacted. Gary Friedman, a University of Massachusetts economics professor, posted this paper, which he marks “draft.” Here’s his executive summary:

The economic proposals of Senator Sanders can be grouped under three headings. First, he proposes spending programs for infrastructure, education, retirement security, health care, and to address the threat of climate change. Second, there are progressive tax increases to pay for these programs, and lastly there are regulatory changes to raise wages and to reduce discrimination against women. In sum, these programs will increase economic growth and employment, reduce poverty and inequality, and balance the federal budget.

Other economists, those who would be sympathetic with Sanders’s progressive ideals, have sharply criticized the paper’s conclusions. Paul Krugman, for one, has devoted considerable ink to challenging Friedman’s assertions, especially as regards economic growth, which Friedman believes would reach 5.3 percent per year—under Sanders’s economic programs. Jeb! Bush promised over four percent growth by slashing taxes and cutting government spending. No way, said Krugman. So, Friedman’s projections undermine his own candidate’s reputation for seriousness, Krugman suggests.

Berkeley’s Brad DeLong also questions Friedman. He writes:

It’s fine to propose aspirational policies based on a hope that the world is such that things will break your way. It’s not so good to put the world breaking your way forward as a central-case forecast of what your policies will do. And it’s distressing that I cannot figure out how to make Friedman’s analysis hold together quantitatively even if I do allow the assumption that the entire output relative to the pre-2007 potential-output trend can be closed easily…

In particular, wonders DeLong, how can $1.4 trillion in additional government spending produce over $14 trillion in added economic output. That’s a multiplier of 10, even though Friedman himself assumes a multiplier of less than three.

That said, other studies (e.g., here) suggest that inequality retards growth. Certainly, Sanders wants to make the rich poorer and the poor richer, through taxes, transfers, and public investments. And there’s no question that as the incomes of the top one percent grow, economic growth sputters.

real gdp gini index to 2015