Who me? Austerity authors say don't blame them

The Harvard scholars behind a prominent but error-riddled 2010 paper promoting fiscal discipline aren't gaining sympathy with their defense.

By Aimee Picchi Apr 26, 2013 5:37PM

Carmen Reinhart in Sept. 2012; Kenneth Rogoff in July 2010 (© Jin Lee/Bloomberg via Getty Images; Munshi Ahmed/Bloomberg via Getty Images)Harvard professors Carmen Reinhart and Kenneth Rogoff took to the pages of The New York Times Thursday to defend their highly influential work, but their "don't blame us" response isn't gaining them many fans. 

 

As I reported earlier this month, their much-cited 2010 study claimed that withering "stagflation" can result when a country's ratio of debt to gross domestic product reaches 90%. Politicians such as Rep. Paul Ryan, R-Wis., who ran as Mitt Romney's vice presidential candidate, cited the paper in calls for austerity measures.

 

But their paper was found to have serious problems by economists at the University of Massachusetts at Amherst, including an embarrassing Excel flub that excluded data from five countries. As graduate student and debunker Thomas Herndon told Viacom's (VIA) Comedy Central host Stephen Colbert, "I really couldn't believe my eyes."

 

The difference was as stark as night and day. While Reinhart and Rogoff asserted that the economies of such debt-laden countries shrank, Herndon and his colleagues found the countries actually had positive growth.

 

Now, Reinhart and Rogoff have taken to the newspaper of record to provide their defense, and they're not convincing many people. (In a separate piece in the Times, they complain about receiving "hate-filled, even threatening, e-mail messages, some of them blaming us for layoffs of public employees, cutbacks in government services and tax increases.")

 

The pair write that they view themselves "as scholars, though obviously given the prominence of book, and the extraordinary circumstances of the financial crisis, politicians will of course try to use our results to advance their cause." They note that they never advised Ryan or worked for President Barack Obama. 

 

Yet as Slate writer Matthew Yglesias notes, Rogoff "was writing op-eds drawing strong policy conclusions from this paper. He was delivering congressional testimony drawing strong policy conclusions from this paper. And it's not as if he's some political naif who stumbled down from the ivory tower into a partisan controversy he could never have predicted," since he served as research director at the International Monetary Fund.

 

The Center for Economic and Policy Research, meanwhile, wrote that their op-ed "deserves tears from crocodiles everywhere," adding that their portrayal of themselves as Ivory Tower academics who can't be blamed for real-word decisions made by governments "is disingenuous in the extreme." 

 

But despite this debunking, calls for austerity continue, writes economist Paul Krugman, a Keynesian who has taken critical aim at austerity supporters, in a separate Times' opinion piece.

 

"Part of the answer surely lies in the widespread desire to see economics as a morality play, to make it a tale of excess and its consequences. We lived beyond our means, the story goes, and now we’re paying the inevitable price," he writes. 

 

Follow Aimee Picchi on Twitter at @aimeepicchi

 

More on moneyNOW



39Comments
Apr 26, 2013 5:51PM
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Most Americans do want austerity measures to take place.  We don't want to cut things like Social Security, welfare (in many cases), and government jobs.  We want to stop sending money to foreign countries, giving out huge loans to companies as favors, wasting money on idiotic research studies, and handing out free stuff to those able-bodied individuals who don't even bother to look for work.

 

Austerity can come in many forms.  If we started now with these cuts that 99% of us wouldn't even notice, we would be well on our way to prosperity again in a few years.

 

A simple look at a household needing to cut debt and spending shows the model example.  Your first cut wouldn't be turning off the utilities or to stop buying food.  It would be to eat out less or to stop buying new devices every 6 months. 

 

The solutions to our nation's problems are easy enought for 3rd graders to understand.  All the debates and arguments at the federal level are just grandstanding.  None of them care if our country goes broke because it's not their money.  It's play money to them.

Apr 27, 2013 1:36PM
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..........."Any man who thinks he can be Happy and Prosperous

                 by letting the Government take care of him;

             Better take a closer look at the American Indian ".....

 

                                    Henry Ford...

Apr 26, 2013 7:16PM
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debate it till the cows come home. all they're saying is there is no free lunch. i agree. sure we all know people get a free lunch in this country, but it's not free cause somebody else is payin for it. all those free lunches adds up. the bill gets creatively kicked down the road, that's all.
Apr 27, 2013 1:27PM
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My "biggest concern"is the consolidation of Wealth in the hands of so many fewer people,Worldwide.

This usually bodes, for many problems in most Societies.

I think it would be amiss, to think the Rich and Elite; Are not paying attention to how some of the lower Middle Class and the so-called Poorer Classes are becoming quite dis-gruntled about their State of Affairs...And putting most of the blame on the Rich and "bought out" Politicians for all their troubles.

Not to be taken lightly, but the Elite have "bunkered down on wealth distribution" and it is quite noticeable...Especially with the lack of producing better employment during this Recession.

 

But instead of them bunkering down in the backwoods, they have sequestered themselves tighter into stronger gated communities, hired more security for home and travel and moved or have left Billions in "off shore tax havens" or other secret accounts..

They are investing in themselves, more prominently...

They "don't buy Guns and lead nor canned goods", their choices are more into the Precious Metals such as Gold and Silver, Artwork and such...

And are now buying or investing in depressed Real Estate or Land; That was "once owned" by the Hardworking Middle Class or others trying to better their lives for their families..?

 

Many older companies being abandon, by the sometimes wealthy or sold out to Venture Capitalist Investors or Management(?) Groups, only to weaken or disengage the Workforces employed at such; They refer to it as "downsizing/rightsizing", leaner and meaner AND MORE PROFITABLE..

At all or ANY cost...Little To the workers or founders that built the Organization...

Really, NOTHING is for the betterment of those tossed aside souls.. 

 

Yes, the 1%'ers and the 5%'ers are growing and amassing at an alarming clip..

While the 75-80% are not gaining anything..

Yes, this is what concerns me, the most....And I will not repeat the "worn-out cliche." 

Apr 27, 2013 3:05PM
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"You can't create wealth by printing money.'
Apr 27, 2013 5:55PM
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DAVE BRUBECK....Glad you put your "insidious comment" out for all to see...

 

INSTEAD OF in MY REPLY SECTION only....??

 

I want "no part" of your kind, or be connected in any way to that type of disparaging remark;

About,  Aimee Picchi !!!

Whether I agree or disagree with her remarks, I usually make it in a civil manner, hopefully?

With you, maybe because of the way you were raised, or the way you might picture others.?

You probably "don't deserve the time of day".. 

Go screw yourself.....Hit that thumb thing dimwit...!!!

 

 

Apr 27, 2013 1:53PM
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......."Today's Progress is tomorrow's Folly.."

      " I fear the day when technology surpasses Human interconnection;

          We'll have a Generation of Idiots..."

 

                            Albert Einstein.

Apr 28, 2013 3:15PM
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The pair writes that they view themselves "as scholars" or paraphrased -whhhaaaaat you listened to us, we’re scholars for the love of god, we don’t live in the real world, it’s too complicated and moves to quickly. We need tenure, we have to write papers and publish, and convince important people we too are important, so we maintain TENURE. Tenure, for those not in academia, means it’s nearly impossible to get fired, with nice salaries and benefits for life. Napoleon once said  “Never underestimate how much a man  will sacrifice for a piece of ribbon" I think this has a second part which reads “never underestimate how far that ribbon may take you-in spite of your incompetence” The ribbon here  is of course a metaphor for a “Gilded  Degree”  and tenure offer from Harvard.

Apr 28, 2013 12:13PM
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A someone who has published research papers in periodicals like Journal of the American Chemical Society and presented research as a speaker at an ACS annual meeting in Washington, D.C., let me tell you that many, MANY hours were spent reviewing our data making sure our numbers were not only correct within the limitations of our ability to measure, but also calculating the possible range of error (the possible pluses and minuses) that applied to each and every bit of experimentally measured data.

For these two clowns to have released such shoddily prepared information is next to criminal.

Apr 27, 2013 1:45PM
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......"Bull Markets are built on Pessimism,

           Grown on Skepticism,

               Mature on Optimism,

                   And die on Euphoria".....

    John Templeton

 

 

 

Apr 26, 2013 7:53PM
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Keynesians have zero credibility at this point.  The sooner they are relegated to the fringe of economic thought where they belong, the faster we can start to build an actual, sustainable recovery based on sound economic fundamentals and principles.  As long as we continue to let Keynesians set policy, the hole we are in will only continue to get bigger.
Apr 27, 2013 12:46PM
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Too much free stuff creates a complete breakdown of a society as the people who pay for everyone wise up and say screw it - the productive, risk taking work force is no more and progress exponentially slows - a country that reins no more
Apr 27, 2013 4:17PM
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To Carmen & Ken... by the time I got my degree, I was flying nationwide building America's future. I wanted the degree to stop those who asked for it first and judged me before knowing anything about me or my accomplishments. The nation changed after 1999 and suddenly the degree mattered more, while all that skill, experience and wisdom was sluffed off by the degree crowd. Since more and more younger people were getting key roles after graduation, 2000 to 2008 was the era of administrator not ability, capability, wisdom or knowledge. I called all 6 key triggers correctly as we slid into recession, without a Harvard Degree. So then your spreadsheet came forth. Both puppets and puppy dogs mass terminated millions of family people (87% were male breadwinners), ending the lives of hard working people, literally or by tossing them deep into poverty. YOU still got a paycheck. The terminated lost homes to bad banks who made terrible mortgages. YOU cannot imagine the psychological damage from submitting thousands of online resumes and getting no responses. YOU cannot imagine anything. You created a Weapon of Mass Destruction. You never checked your work. No one validated it before it was exposed to doofus politicians and devicive losers in business platforms. YOU literally killed millions. Just because there was no gun doesn't mean a crime wasn't committed. Get yourselves lawyers. Should any devicive person step in the way of Due Process may they do so knowing that terrorism (impeding justice) is a crime in America. You can avoid jail and reparations to the victims by restoring all 90 million jobs. You went to Harvard... this should be a piece of cake. Feel free to start with my career. Unlike you or yours, my history was pure economic positives for Americans and America. Feel free to post a response here. Please don't make us have to call in Homeland Security, you might get shot in the throat as you hide in that boat avoiding the Law.   
Apr 28, 2013 8:35AM
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To the President and Congress...

Obviously, we aren't going to get competent gun control. Sales of assault weapons are UP. Rigged stock markets are UP. Gold is restored to it's HIGH. Job recovery doesn't exist. Violation of Civil Rights are off the scale. Pretty much-- to be a normal American is a crime deemed dying for by all psychopaths. Unless you are into sports and Kool Aid, you are an outcast.

THIS is YOUR legacy.
This is YOUR America.

If you cannot establish gun control or rein in nut cases, the prudent alternative is to arm the rest of us. Democracy is a fighting chance, not a barrel full of commoners to shoot.
If you cannot see how the markets are creating the imbalance that destroys ALL societies, then you are blind. If you cannot realize that Civil Right violations eliminate the ability of the wronged to stand up, then you aren't human.

How long have you been warned of war? Are you more willing to see it than to diffuse what is obviously making it our only choice? Our BEST are not making outrageous salaries and living lives as psychopaths. Our BEST are losing hope and the hopeless resort, when it comes down to death or a fight for existence. The whole world is a powder keg and you are standing there with a fire hose in one hand and a lit match in the other. A clock is ticking... it isn't a good clock. Choose. The lit match will burn you- It is it's only function.

I WOULD NEVER HAVE HAD TO WRITE THIS IF THAT FLAWED MS EXCEL SPREADSHEET DIDN"T BRING OUR NATION AND THE WORLD TO THE BRINK OF WAR. YOU COMMITTED A BETTER PART OF THE POPULATION TO AN AGONIZING DEATH. WHO DO YOU THINK YOU ARE? GOD? YOU ARE NOT.

Apr 29, 2013 8:30AM
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Who will buy US bonds when the Fed stops?

And at what price (interest rate?)

Not me, or many others, that is the problem with too much debt.

Apr 29, 2013 2:29PM
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It seems unsustainable to me to run a deficit every year.  At some point the interest on the accumulated debt is so large that we will need to borrow money just to pay the interest on the old debt.  When we reach that point what will happen to interest rates and confidence in the economy?
Apr 29, 2013 12:37PM
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Figures!!! And to think the guilt trip laid on Americans by Obama continues based on flawed research - kind of like Global Warming too - hmm.
Apr 26, 2013 11:17PM
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Paul Krugman...Kicked the Austerian's azzes, with his proposals..

 

Quite true Steve in CO.

One major item left out, "World Cop" and as of recent "Two unfounded,unfunded Wars"..

The payments never stop, even after we leave the Theaters of Operations..

Veterans need care..

Expensive(balooned) machinery and equipment need to be replaced or updated.

We leave much of it behind, when vacating.

We set up "puppet Governments" that only respect us while we still FUND them..Sometimes not.

Many are corrupt or "no better" than what we helped removed.

And we are stuck paying Foreign Aide for decades...We need to stop this practice..

We do this in the "name of Common Defence" from Our Constitution....????

What?? protecting assets or resources; That we pay through the azz to get ?? 

Apr 29, 2013 8:35AM
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The facts are simple.

 

There is no economic pricinple that allows a nation to spend more than it collects in revenue without consequence.

 

There is no economic principle that allows a nation to tax itself into prosperity.

 

There is no economic principle that allows a nation to simply print money in order to cover its debts.

 

In time, all nations that do such things suffer from economic collapse.  Greece is only the latest example.  Italy and others are on the verge.  The Wiemar Republic did it and they too suffered the consequences.  So too did Zimbabwe.  The list goes on and on and on.

 

The real problem is that too many people foolishly believed the government when it said that it would take care of them and now don't want their hands to be taken from the cookie jar.  These fools come up with all sorts of reason as to why their programs should not be cut or even disolved completely.  But not one of their reasons is built on sound economic policies, only poorly contrived me-centered rhetoric.

 

In the end we will all pay for this folly.

Apr 29, 2013 10:47AM
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The logical point of view would be that the soundness or applicability of a particular economic theory (e.g. Supply Side economics vs Keynsian, etc) or political theory (authoritarian vs democratic) depends on the circumstances, as well as how well it is executed in real life. (use a screwdrive when you need screws and a hammer when you need nails)

 

For example, democracy will work better in a calm, prosperous circumstance but not so well on board a sinking ship when you are trying to get people to lifeboats. Supply side may work in certain circumstances, and Keynsian in others. I suspect the problems we have stem from both execution (spending stupidly) and from circumstances (too much debt & spending before things got worse, i.e. saturation)

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