Colbert turns austerity movement into punch line
His interview with the 28-year-old student who uncovered a grave error in a key economics paper is doing the job.
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.
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.
My suspicion is that the Harvard Dynamic Duo didn't have their spreadsheet peer-reviewed for one simple reason: They knew exactly what Mr. Herndon would find.
Hey, it got them their 15 minutes of fame.
This isn't about the deficit, or government spending. Its about the income gap, and increasing it.
Social security is solvent through 2034 with no changes. A slight increase in the contribution and raising the ceiling will take care of this.
Austerity is the worst thing that can be done.
The deficit should be eliminated, but it took over 200 years to get to this point (yes, the founding fathers started it), so we should expect it to take a little bit to get out of it. Lets say, 20 years to eliminate the budget deficit, 5% each year. After that, the budget must be balanced, and even a small surplus required to pay down the national debt (deficit and debt are two different things).
Remember that we last had a BUDGET SURPLUS during the Clinton administration. Those must have been terrible years economically because of the "high" taxes. Then Bush came along and lowered taxes, eliminating the surplus and creating a deficit again. SMART!
I am in the upper middle income range and would gladly go back to the Clinton tax rates to take care of this.
A more fair solution is to set the income tax, corporate tax, and capital gains taxes at the same rate. Make some allowances for lower incomes, but even it all out at a reasonable point, say $50,000 -$75,000.
I would love to see a little common sense applied by our government.
Massive deficits may grow gdp but you are borrowing from the future in hopes that real growth comes back. If growth doesn't come back all you have is the debt (you can't borrow or print forever).
If you have overspent and are running deficits, austerity is just trying to pare that back. If you pare back too much it isn't good just like spending 1 trillion a year you don't have for the past 5 years isn't good (now 17 trillion in debt). Austerity or deficit spending by itself will not improve the economy long term. You need actual growth not borrowed. You know he economy is still in trouble (4 years after the recession technically ended) when the all that deficit spending only gets you .1% of growth for 4q2012. Can't wait to see what the next results are. Do you think the results will justify the how the markets have rallied since last November? No way but that won't stop the bubble from inflating because all the fed knows how to do is bail out banksters and print money.
Austerity programs tend to be disliked because they stop giving away free stuff. In our household, we never became accustomed to getting something for nothing, so it hasn't been a problem.
Oh yeah. Japan will be a case in study. 240% debt to gdp, debasing the yen and adding more debt. If rates rise they'll be paying an enormous amount just to cover the interest payments and when that happens it's game over
If we continue to "print" money at this pace we will implode, only a matter of time. Try living like this in your own life and see how that works for you. We either start acting like adults in this country, which means living within your means, not living in a damn fantasy.
I see a bad moon rising if we don't get this spending under control. Idiots who just belief life is riding on a credit card are fools. By the way "your share" is about 50 grand. Colbert is a comic, and he's not that funny, not a damn economist.
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