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Presidential Issues: Economic Growth

Economic Growth

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Bernie Sanders and Gerald Friedman’s Bad Math Overestimating Government Spending Growth Effects

February 29, 2016

By John Hartley

Over the past two weeks, economic analysis by UMass-Amherst economist Gerald Friedman, claiming that Bernie Sanders’ economic plan would create 5.3% real GDP growth, has come under intense scrutiny from prominent Democratic economists including 4 former Democratic CEA chairs and Paul Krugman, who is calling such forecasts “fairy dust”.

Former Obama CEA Chair Christina Romer and David Romer, both prominent UC Berkeley macroeconomists, have further put together a detailed analytical take-down of how the rosy economic projections overlook much of modern macroeconomic analysis, mainly Friedman’s faulty assumption that temporary increases in government spending can result in permanent long-term increases in economic output (GDP).

While Friedman’s projections have only been lauded by the Sanders campaign policy director and are a result of external analysis, Sen. Sanders has a long track record of going against mainstream economic analysis supported by top academic economics departments housing both Republicans and Democrats alike.

As the Romers highlight, Friedman’s analysis of Sanders’ plan uses a conventional government spending multiplier of 0.89, which is no far off in magnitude from the spending multiplier used by the CBO, however Friedman’s economic projections assume that government spending increases have permanent long-run positive effects on GDP growth, a contradiction with mainstream economics which views government spending increases as having temporary growth effects at best.

Read the full article at Forbes.com: Bernie Sanders and Gerald Friedman's Bad Math Overestimating Government Spending Growth Effects

Issue Categories : Bernie Sanders, Economic Growth