There’s a bit of old folk wisdom that says that if you find yourself stuck down in the bottom of a deep hole, the first step to getting out is to stop digging. I remember hearing it from my dad when I was a kid. Carmen Reinhart and Kenneth Rogoff (hereafter R&R) don’t appear to have learned that lesson.
R&R’s 2010 paper, “Growth in a Time of Debt” has served as a kind of intellectual fig leaf for conservatives who proceeded to cut programs for the poor in the name of “austerity.” Their paper famously concluded that when a country’s public debt reaches 90 percent of its Gross Domestic Product, its growth becomes negative. The argument was that once debt reached such levels, governments should cut spending to decrease debt.
That advice ran contrary to perceived wisdom, which says that in times of recession, governments should spend more to stimulate the economy. Nevertheless, conservatives used R&R’s findings as justification for massive spending cuts, both in the United States and in Europe, and liberals politicians have gone along for the ride. After all, R&R had good empirical results. Who can argue with facts?
Only it turns out that the R&R’s results were based on an Excel error.
You read that right. Federal programs like Head Start have been cut and thousands of federal employees are being furloughed because two Harvard economists didn’t add correctly. (There were some other methodological issues that R&R appear to be alone in defending, but even if we grant them those methodological choices, the Excel mistake alone invalidates their findings.)
Now R&R have taken to the pages of the New York Times where they defend themselves while continuing to cling to a belief that austerity is a legitimate reaction to a recession, despite a complete lack of theoretical—and, as it turns out, empirical—evidence for doing so.
Yesterday, Century Foundation fellow Mark Thoma hosted a Twitter conversation with Century fellow and Economic Policy Institute budget analyst Andrew Fieldhouse, and Roosevelt Institute fellow Mike Konczal to explain why it’s time for R&R to stop digging. If you missed the discussion, don’t worry. We’ve The Century Foundation picks the best policy pick of the week, crowd-sourcing from Twitter. This week’s winner was from the Next New Deal Blog, a piece on the Reinhart/Rogoff debacle. We asked TCF Fellows Mark Thoma, Andrew Fieldhouse and Roosevelt Institute’s Mike Konczal to discuss austerity.
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By the the way, Thoma, Fieldhouse, and Konczal all turned up on a recent list of the most influential economics bloggers around. If you’re not already following @MarkThoma, @A_Fieldhouse, and @rortybomb on Twitter, you really should be. And be sure to follow @TCFdotorg to keep getting great content from some of the brightest people on the Internet.