Wednesday, March 9, 2016

[NJFAC] Is Bernomics Impossible?

Is Bernomics Impossible?                                                                                                                March 9, 2016

            You may be aware of the broohaha about Bernie Sanders' economic projections. (This debate is not about political possibilities; it's about whether the numbers make sense.) Bernie wants progressive taxation, Medicare for all, and a lot of federal spending. He wants rapid economic growth. Economist Gerald Friedman ran the numbers and said they made sense. James K. Galbraith agreed. But Paul Krugman and other mainstream economists, including three who directed Obama's Council of Economic Advisors (Alan Krueger, Austan Goolsbee, and Christina Romer) have attacked the Sanders' program as unrealistic and even dangerous. For example, they argue that we cannot grow the labor force as fast as Bernie wants to.

            But what is the situation Americans confront today? We've had growth in jobs and incomes since the recession, but mostly anemic rates of economic growth and few gains for income equality. It is common knowledge that people in the lower 50% are still doing worse than before the recession. Poverty rates are high and there's a lot of hidden unemployment out there. Six million part-time workers want full-time jobs and cannot find them. Another twelve million people have no jobs but want one.

            So millions of Americans have been left behind, and not just in the last few years. Wage stagnation is a forty-year problem. So why not propose really big spending with a left-liberal twist? Obama's stimulus program kept the world economy from falling into a Great Depression; but it was too small. In 1933-37, government spending helped to create 8 million jobs; but it did not end the Great Depression. But 1940-1945 was another story: giant spending increases and massive deficits wiped out unemployment. In our time, why not plan something adequate to the task? Start with a plan for five years of 5% economic growth and make it growth that adds good jobs.

            Are the centrist economists who went after Bernie just too moderate, too "responsible?" I recall that Mr. Krueger used economic research to conclude that a $12 minimum wage was OK, but $15 would harm the economy. Something like that. In effect, he was saying that we could not lift people a little more, even to a sub-poverty annual income of $30,000.

             Do Krugman, Krueger, and friends want to cure poverty and raise incomes for the lower 50%? Is so, what is their method? More free enterprise? It's rarely worked in the last forty years. How about interest rates even lower than they are now and more risky loans to homeowners? That brought the Great Recession. A little more government spending?  Not good enough.

            Why not a program that can actually do the job--something that can push poverty rates down for good and put wages permanently on the road to recovery? Bernie has a plan to do it. No one else does.


            There's plenty to read on the kerfuffle around Bernomics. You can easily find James K. Galbraith's brief defense, and here is a short piece by Kevin Drum: On Second Thought, Maybe Bernie Sanders' Growth Claims Aren't As Crazy As I Thought. The Sanders "Economic Plan" Controversy , by Dave Johnson and Chris Sturr, reviews the controversy and has more links than most of us will need.

Submitted by Frank Stricker. He has completed American Unemployment: A New History, Explanations, Remedies

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