On Wednesday, four economists who worked in the Clinton and Obama administrations penned an open letter to the Bernie Sanders campaign and the University of Massachusetts economist Gerald Friedman, attacking them for promoting the idea that Sanders’ proposals could bring spectacular economic benefits, among them 5.3% annual real GDP growth.
They called the claims “extreme,” and argued that the Democratic Party would suffer if its candidates and surrogates exaggerated the benefits of their policy proposals.
Fortune reached out to Friedman to get his side of the story. The following transcript of the conversation has been edited for clarity and length.
Fortune: What is your response to the open letter?
Gerald Friedman: First of all, I don’t know if they read my report. There’s nothing in my letter that indicates that they read my report. For what it’s worth, I only just put it up on the web yesterday [February 16], and so there’s nothing that indicates they read it. And none of them ever contacted me for a copy.
Since I’ve known three of the four of them, they could have. I’m totally open about this.
As far as the actual mechanics of it, what I did was completely conventional. I take the multipliers that the Congressional Budget Office uses. I actually assume a reduction in the value of the multiplier over time as the economy expands, and I apply those multipliers to the spending program minus the taxes of the Sanders plan.
I do things with the minimum wage. I make assumptions about how many jobs will be lost. But these are fairly standard assumptions. I get more in terms of GDP, I get a bit of bang out of the healthcare program, because what you are doing is turning premiums paid by working people and turning it into taxes paid by upper-income people. That gives you a boost, especially in the early years.
Somebody could question, as I have a lot, some of my assumptions, but there’s nothing unusual about my methods or the results.
The idea of 5.3% GDP growth seems spectacular.
It is higher than it’s been lately. But I’m afraid we’ve gotten used to poor economic performance as the norm. We’ve been stagnating for eight years, and at this point, seven years into the recovery, we have an employment rate of 59%, which reverses 25 years of employment growth.
We have 10 million fewer jobs than we would have than if we had the employment rate of 2006. We have a lot of underutilized capacity.
Isn’t that the result of the aging of the workforce?
No. People want to say that. First of all the demographic numbers don’t add up—we’re not aging that fast. Second, part of the decline in seniors’ labor force participation, we’re talking about people in their early 60s, is because they can’t find a job. Because they can’t find a job, they choose Social Security and Medicare instead.
You think the employment rate can exceed what we had in the 1990s, even as the population ages?
Yes, by the end of the period [2026], we would have an employment rate slightly above the employment rate of the 1990s.
That flies in the face of most of what I’ve read from economists on both sides of the political spectrum. You don’t think the aging of the workforce is a big factor right now?
No, I don’t think the aging of the workforce is a significant factor. Even if you factor that in, you’re not going to have the kind of employment declines we’ve had.
Why do you think that the aging of the workforce is such a popular story for economists?
Economists love to use factor endowments to explain things. [Editor’s note: This refers to non-policy-related factors for growth, like natural resources that are available to exploit, or the size and age of the workforce.]
They like to say that it’s not social policy, it’s not what’s going on in the political realm.
These same economists ignore gender, though. If you look at women, there is still room for them to continue to join the workforce, but that’s not happening, even as women are having fewer children.
Bernie Sanders’ platform would transform the U.S. into an economy that resembles those found in Europe, with single-payer health care, higher minimum wages, and more progressive taxation. But you don’t see 5.3% growth there. How do you explain this growth?
Recovery from the Great Recession. The growth rates that I’m projecting drop off very quickly after the first year or two. The first year especially shows a big bump, as the result of stimulus. Just like the Obama stimulus, which Austan Goolsbee and Christina Romer advocated for in 2009 because the economy was seriously underperforming.
If you look at the employment rate in 2009, it was higher than it is today. If you measure the output gap in terms of the shortfall in employment, it is greater today than in 2009. We have a lot of room for fast growth, and that’s what would happen.
Most of this boost comes from increases in productivity growth, which I assume would return to levels that occurred during other periods of full employment, like the 1990s.
A lot economists, like Robert Gordon, are predicting productivity will stagnate regardless of public policy.
A lot of economists think about the economy in terms of technology. When they see that productivity is low, they think it’s the fault of technological growth.
I’m looking right now at a spreadsheet on a laptop that would completely blow the minds of the people who wrote the computer program for the Space Shuttle. I don’t know on what basis you can argue that the effects of technology are running out. What I do know is that if you run a regression of productivity growth and the unemployment rate, they are highly correlated. Productivity growth comes when companies start running out of workers.
Couldn’t that just be a coincidence? If you believe productivity results from technological growth, then high productivity growth and low unemployment may occur at the same time, even if the one isn’t caused by the other.
That’s what economists call the real business cycle model. That explanation pops up, but I’ve never agreed with it.
What is your relationship with Senator Sanders?
I’ve had almost no relationship with Senator Sanders. I met him once, when I did a paper in 2013 for the group Physicians for a National Health Program. I’ve done many studies on single-payer health plans.
Then I testified about my work in front of the Senate, and that’s the one time I met him. I took on this analysis on my own, and reached out to the campaign to make sure I had my numbers right. I wasn’t paid. The Bernie Sanders sticker on my wife’s car, she paid for. I’ve gotten nothing from the campaign, but Ben and Jerry’s are supposedly coming to town next week, so maybe I’ll get some ice cream.
