Christina and David Romer on the Sanders plan

They have produced a systematic critique of the overly optimistic projections (pdf):

…standard indicators of slack suggest that the output gap is currently no more than moderate. The unemployment rate, at 4.9%, is at normal levels. A broader measure of unemployment (the “U-6” measure) is just 2 percentage points above its low point before the 2008 recession. The Federal Reserve index of capacity utilization is about 4 percentage points below its pre-recession level. Job vacancies, which one would expect to be low with vast slack, are above their pre-recession levels.  And inflation, which one would expect to fall in an economy operating far below capacity, is flat or perhaps creeping slightly upward.  None of this is remotely consistent with a shortfall of output from capacity of even 10%, much less the amount that would be needed to accommodate Friedman’s estimate that the Sanders policies would raise output in 2026 37% above the CBO forecast.

There is much more at the link.  For the pointer I thank many people in my Twitter feed, including Austan Goolsbee.


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