This response to the Romers’ Critique of Friedman Bernienomics Analysis, authored by CPEG’s Ron Baiman, is a cross-post from the Dollars and Sense blog.
To her credit Christina Romer, one of the four former CEA Chairs who wrote a scathing four paragraph letter dismissing Gerald Friedman’s detailed study of the impact of the Sanders economic program, has acknowledged that Friedman’s estimates warrant a detailed and substantive analysis. Romer has, with her husband and prominent fellow “Neoclassical (NC) Keynesian” Economist, David Romer, produced a more detailed critique that attempts to back up the stridently critical statements of the CEA Chair’s letter.
As Friedman notes, in his detailed rebuttal, the Romers’ major critique appears to be that a stimulus program that ramps up from $300 billion in 2016 to $600 billion by 2021 and then declines to the $300-$400 billion per year range from 2022 to 2026 (Romers, p. 2) cannot produce permanent gains in GDP growth rates via increased emp/pop ratio and productivity rather than a one-time boost in output that tapers off as the stimulus declines. Indeed, the Romers appear so sure of their NC methodological approach that they speculate that Friedman must have made an elementary miscalculation by not calculating multiplier impacts off of an unchanged (for 10 years) CBO baseline.