"America’s two big political parties are very different from each other, and one difference involves the willingness to indulge economic fantasies." [Krugman Voodoo]
No We Democrats indulge in self flagellation and let the Cons use their not so "innocent frauds" to bully us around. We also have a habit of eating our own -- and letting the Cons, Con us. So we do their work for them.
As James K. Galbraith notes in his own rebuke:
"For the record, in case you're curious, I'm not tied to Professor Friedman in any way. But the powerful – such as Paul and yourselves – should be careful where you step." [Galbraith]
And it looks like a lot of folks have stepped in it.
But back to Krugman
Krugman next writes, with "faint praise":
"Republicans routinely engage in deep voodoo, making outlandish claims about the positive effects of tax cuts for the rich. Democrats tend to be cautious and careful about promising too much, as illustrated most recently by the way Obamacare, which conservatives insisted would be a budget-buster, actually ended up being significantly cheaper than projected."
Then he steps in it.
"But is all that about to change?"
"On Wednesday four former Democratic chairmen and chairwomen of the president’s Council of Economic Advisers — three who served under Barack Obama, one who served under Bill Clinton — released a stinging open letter to Bernie Sanders and Gerald Friedman, a University of Massachusetts professor who has been a major source of the Sanders campaign’s numbers. The economists called out the campaign for citing “extreme claims” by Mr. Friedman that “exceed even the most grandiose predictions by Republicans” and could “undermine the credibility of the progressive economic agenda.” [Krugman Voodoo]
Then he says:
"That’s harsh. But it’s harsh for a reason."
But what is that reason?
The open letter Krugman cites, alleges:
"Friedman asserts that your plan will have huge beneficial impacts on growth rates, income and employment that exceed even the most grandiose predictions by Republicans about the impact of their tax cut proposals." [Open Letter]
Horrors!! A big program might benefit a lot of people and grow the economy! Wasn't that the premise and lesson of the "Old Keynesians" and the experience we've had before in ending the Great Depression?
"We are concerned to see the Sanders campaign citing extreme claims by Gerald Friedman about the effect of Senator Sanders’s economic plan—claims that cannot be supported by the economic evidence. Friedman asserts that your plan will have huge beneficial impacts on growth rates, income and employment that exceed even the most grandiose predictions by Republicans about the impact of their tax cut proposals." [Open Letter]
This is politics, not economics. And it's a shame that the professionals step outside academia to make a political statement -- but it happens all the time. The numbers might even deserve criticism. But this isn't about the numbers this is about who wins the primaries.
"As much as we wish it were so, no credible economic research supports economic impacts of these magnitudes. Making such promises runs against our party’s best traditions of evidence-based policy making and undermines our reputation as the party of responsible arithmetic. These claims undermine the credibility of the progressive economic agenda and make it that much more difficult to challenge the unrealistic claims made by Republican candidates." [Open Letter]
And thus the letter is stepping into it too. And Krugman???? Krugman sinks even deeper.
Krugman Sinks Deeper
"The claims the economists are talking about come from Mr. Friedman’s analysis of the Sanders economic program. The good news is that this isn’t the campaign’s official assessment; the bad news is that the Friedman analysis has been highly praised by campaign officials." [Krugman Voodoo]
And why wouldn't they? Campaign Officials aren't skeptical academics whose job is to critique each other and verify their ideas. Economics advances through the multiple Points of View.
"And the analysis is really something. The Republican candidates have been widely and rightly mocked for their escalating claims that they can achieve incredible economic growth, starting with Jeb Bush’s promise to double growth to 4 percent and heading up from there. But Mr. Friedman outdoes the G.O.P. by claiming that the Sanders plan would produce 5.3 percent growth a year over the next decade." [Krugman Voodoo]
Krugman is Afraid - "fear is the mind killer"
We've had periods of 5% growth in the past. We've seen economics work to improve our lives. But we can't resist self-flagellation. There is no reason why economic policy can't:
"Even more telling, I’d argue, is Mr. Friedman’s jobs projection, which has the employed share of American adults soaring all the way back to what it was in 2000. That may sound possible — until you remember that by 2026 more than a quarter of U.S. adults over 20 will be 65 and older, compared with 17 percent in 2000." [Krugman Voodoo]
Essentially Krugman is buying into the neo-keynesian "can't" that underlies the neo-liberal poison that the IMF and World Bank have used to impose income inequality on the entire world in the guise of "responsibility", and austerity on populations around the world. His inner Reagan really believes Reagan's swindle that we should fear government policy. He's having an emotional reaction and doesn't even realize it!
He goes on.
"Sorry, but there’s just no way to justify this stuff. For wonks like me, it is, frankly, horrifying." [Krugman Voodoo]
So he's horrified! My God, we don't have to let people starve in the streets or languish in jails. We could put them to work and do productive things. We could stop turning our country into a Banana Republic. We could do the kinds of things our parents did. But no, that "horrifies" him. But why does it horrorize him? Let's get to the real doubt:
"Still, these are numbers on a program that Mr. Sanders, even if he made it to the White House, would have little chance of enacting. So do they matter?" [Krugman Voodoo]
He's afraid that this program will be rejected and that it would never be enacted.
"Unfortunately, the answer is yes, for several reasons." [Krugman Voodoo]
He's afraid that he'd be ridiculed!
"One is that, as the economists warn, fuzzy math from the left would make it impossible to effectively criticize conservative voodoo." [Krugman Voodoo]
And this fear, while it has some legitimate basis, is self fulfilling prophesy.
"Beyond that, this controversy is an indication of a campaign, and perhaps a candidate, not ready for prime time. These claims for the Sanders program aren’t just implausible, they’re embarrassing to anyone remotely familiar with economic history (which says that raising long-run growth is very hard) and changing demography. They should have set alarm bells ringing, but obviously didn’t." [Krugman Voodoo]
But is it really that bad?
Krugman takes a legitimate critique and turns it into a refutation. As Galbraith notes in his letter:
"In the specific case of this paper, one can quibble with the out-year multipliers, or with the productivity assumptions, or with the presumed impact of a higher minimum wage. One can invoke the trade deficit or the exchange rate. Professor Friedman makes all of these points himself. But those issues are well within mainstream norms. " [Galbraith]
The real issue is that we've "settled for" policies that harm labor, set country against country so that speculators can do wage arbitrage and bargain labor down to sub-subsistence levels. And we have forgotten the distinction between "actual capital" and the kinds of pseudo-wealth institutes that create and maintain a rentier class. Krugman ought to read Galbraith's books, (father and son) again. He can't even see outside the austerity regime that has been built since the 70s. Even though he's read his Piketty and been part of the refutation.
Krugman's comments set alarm bells ringing. But not at Friedman. Bill Black responds by saying his column was:
"plumbing new depths of moral obtuseness, arrogance, and intellectual dishonesty in what is now his third smear of the well-respected economist Gerald Friedman in two days."
William Black claims that Krugman is trying:
"to destroy the career of an economist?"
And labels Krugman's and the critics:
"the Gang of 4" and "Krugman’s ... efforts" as a "smear". First, Friedman is a political supporter of Hillary Clinton. He did not gin up an economic study to benefit his favored candidate. He looked at the economic impact of Bernie’s proposals because that is what macroeconomists do. It is not clear whether the Gang of 4 did the minimal due diligence to discover this fact before they decided to smear Friedman by implying that he was a political hack shilling for Bernie. It is certain that they know now and should immediately correct their open letter, formally withdraw it, and apologize to everyone they smeared. [Black]
But the issue is not whether Friedman is a Hillary supporter or not -- but whether folks like Krugman are really willing to dump the last of the Zombie economic theories that are holding the country back.
Fairy Dust or Creativity?
"And there’s an even larger issue here: Good ideas don’t have to be sold with fairy dust." [Krugman Voodoo]
And he claims:
"Mr. Sanders is calling for a large expansion of the U.S. social safety net, which is something I would like to see, too. But the problem with such a move is that it would probably create many losers as well as winners — a substantial number of Americans, mainly in the upper middle class, who would end up paying more in additional taxes than they would gain in enhanced benefits." [Krugman Voodoo]
"By endorsing outlandish economic claims, the Sanders campaign is basically signaling that it doesn’t believe its program can be sold on the merits, that it has to invoke a growth miracle to minimize the downsides of its vision. It is, in effect, confirming its critics’ worst suspicions." [Krugman Voodoo]
But Post Keynesianism isn't Fairy Dust, it's humane and just economic Policy
But James K. Galbraith in his clear and simple voice contradicts that assertion based on simple logic:
"Let's turn, finally, to the serious question. What does the Friedman paper really show? The answer is quite simple, and the exercise is – while not perfect – almost entirely ordinary." [Galbraith]
"What the Friedman paper shows, is that under conventional assumptions, the projected impact of Senator Sanders' proposals stems from their scale and ambition. When you dare to do big things, big results should be expected. The Sanders program is big, and when you run it through a standard model, you get a big result." [Galbraith]
So my recommendation is that we need to all enter an "Economics Anonymous" program and deprogram ourselves from and unlearn the swindles of the Reagan era. Which:
"...by the way, is the lesson of the Reagan era – like it or not. It is a lesson that, among today's political leaders, only Senator Sanders has learned." [Galbraith]
Not Getting it
I can only respond to the rest of this Kerfluffle with a bit of laughter.
When we get a little self centered. We forget that, when the "other guy" is outraged that we impugned the "motives of the critics", it might be because the critics were even more sloppy than the people they were criticizing. Yes:
"Alan Krueger is one of the founders of modern research on minimum wages, which shows that moderate increases in the minimum don’t cause major job loss. Christina Romer was a strong advocate for stimulus during her time in the White House, and a major figure in the pushback against austerity in the years that followed." [Krugman Voodoo]
And yes, there are legitimate critiques of any statistical model -- as Galbraith already noted. No need to dismiss this kerfluffle as the work of "Hillary Shills" versus "Bernie Shills." This is just cognitive dissonance at work. Economies should not have 8% unemployment, young people in jail, homelessness or market failure. The fact that they do means they aren't working very well. One shouldn't be horrified that there is a viable alternative. One should be horrified that we have such a nightmare economy and are used to it.
The Voodoo of the right created this zombie economy. And it is time that we put a bullet in the head of notions such as "we can't have full employment", Or that a functional economy is somehow not possible. The whole idea that you can only balance a budget by effing workers and destroying the middle class is what horrifies me. Friedman's paper is like the little boy shouting "hey the Emperor is naked!" I don't care if Bernie wins the election -- but Krugman needs to admit he stepped in it this time. I don't expect an apology. We are dealing with University sized egos. I also don't buy the exaggerated anger of the folks bashing him. He's not going to destroy Friedman's career. This fight pretty much guarantees that those numbers will be examined carefully and that Professor Friedman will be employed and the paper read.
- Sources and references
- Article: http://www.nytimes.com/2016/02/19/opinion/varieties-of-voodoo.html
- Open letter:
- Not worth quoting but maybe worth reading:
- John Atcheson: http://www.commondreams.org/views/2016/02/21/voodoo-journalism-dr-krugman-strikes-again-risking-his-credibility \
- Always worth Reading, Galbraith:
- Related links: http://dollarsandsense.org/blog/2016/02/links-on-the-kerfuffle-about-friedmans-sanders-analysis.html
- Open Letter https://lettertosanders.wordpress.com/2016/02/17/open-letter-to-senator-sanders-and-professor-gerald-friedman-from-past-cea-chairs/