The austerity movement is finding out what happens when one's intellectual underpinnings are proved to be deeply flawed. First disbelief settles in, then the laughter. 

Viacom's (VIA) Comedy Central host Stephen Colbert took aim at a highly influential paper written by two Harvard professors, Carmen Reinhart and Kenneth Rogoff, and afterward he interviewed the 28-year-old Ph.D. student who poked holes in their findings. 

The student, Thomas Herndon, told Colbert that the pair sent him their spreadsheet after he told them he was trying to replicate their research.

"I really couldn't believe my eyes," said Herndon, a student at the University of Massachusetts at Amherst. He noted that once he had the spreadsheet he "was able to identify the error pretty quickly."

And that error was a whopper.

Image: Cutting a dollar bill (© Steve Allen - Brand X-Jupiterimages)
As reported last week, Rogoff and Reinhart had argued that countries with ratios of debt to gross domestic product of 90% or more suffered negative growth of 0.1%, leading to years of soul-sucking "stagflation" -- the dreaded combination of inflation and slack economic growth.

But Herndon found those countries actually posted positive annual growth of 2.2%. He discovered that Rogoff and Reinhart's findings were marred in part because an Excel coding error, which excluded five countries, including Canada and Australia.

"You realize you have upset some people in the austerity crowd," Colbert told Herndon. The host added, "They have (austerity measures) in Europe, and they love it so much that they have celebrations in the street, sometimes with fire and everything," earning laughter from his audience. 

Herndon believes austerity is counterproductive, saying, "If we lay off a lot of people, it's not good for the economy, because then they can't go out and participate and buy things."

Rogoff and Reinhart's work had supported calls for drastic government spending cuts by the likes of Rep. Paul Ryan, the Wisconsin Republican who ran as Mitt Romney's vice presidential candidate. 

Their paper has prompted calls to action from politicians and citizens alike, resulting in proposed cuts to Social Security and other programs. As Michael Hiltzik of the Los Angeles Times writes, "That fear is based on junk economics."

The austerity mavens may want to take a hard look at their favorite research paper -- after the laughter dies down.

Follow Aimee Picchi on Twitter at @aimeepicchi.

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