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.

By Aimee Picchi Apr 24, 2013 1:46PM

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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Apr 24, 2013 3:26PM
Austerity programs time and time again have hurt the economies where they have been implemented. Instead of cutting when times are bad we should have been cutting when times were good so we could afford to spend more when times are bad. No president wants to make meaningful spending cuts though so instead we wait until times are bad to make the cuts. The goal being to dampen economic boom times in order to lessen economic bust times.
Apr 24, 2013 3:56PM
As a matured industrialized country it is not realistic to have consistent double digits growth. Even economic powerhouses like China and India are having slower growth rates. A slow but steady growth cycle is far better then the boom and bust cycle we have seen crash and burn in 1973, 1981, 2001, and 2008. A balanced approach to reduce our deficit is needed but neither party is willing to give ground on what they view is "untouchable". Yes cuts need to be made, Yes revenue needs to be generated from lower subsidies/increased taxes. Anyone who thinks either party has the "magic" solution is deluding themselves
Apr 24, 2013 3:20PM
Colbert is the best! His satire brings news and comedy together to make watching otherwise boring or depressing stories interesting. Instead of the crap of cable news more should be combining comedy with news so more people will understand the world. "A little bit of sugar helps the medicine go down"
Apr 24, 2013 4:03PM
If all income was ordinary income we would be able to solve many of our countries issues. The Tax code would be simplified which would let us cut the IRS while at the same time making them more efficient (no more complex loopholes to audit). More audits would be able to be performed (less time for each audit) which would expose fraud. More money would go into social security and medicare. Why should working people pay more then money managers or people who manage rentals? I understand the double taxation of corporations argument but currently many large corporations are avoiding US taxes by incorporating in Ireland and using tax avoidance techniques. If these companies paid US taxes the first time we could afford to lower taxes on those owning their stock
Apr 24, 2013 4:18PM
The best way to help an economy is to expand the middle class. The easiest way to do this is to lift lower middle class families into the middle class (compared to the higher cost of raising the very poor to the middle class). There are many families who are living just above the poverty line who want to be self sufficient but have little to no opportunity. We need to be hiring the young to do things like fix our infrastructure to give them needed experience and money to feed back into the economy (compared to living at home) If we were to pay them $10 an hour you would see a long term decrease in dependence on government assistance and increase in our tax base.
Apr 24, 2013 3:35PM
"Junk economics"  is the Republicans' forte.
Apr 24, 2013 4:24PM

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.

Apr 24, 2013 4:37PM
Spending is definitely what makes our economy roll.  But government spending eventually results in either inflation or sucking capital from private individuals for investment. 
Apr 24, 2013 5:00PM
Some Govt debt is good but but not the rate we're going. At some point the US will not be able to borrow at low interest rates... If I had a million $ mortgage at 2% and I could only pay $5K of the $20K/year interest, not too bad and even come out ahead considering inflation. But when my credit drops and the rate goes to 10% (Greece is paying 11%) I am SCREWED!
Apr 24, 2013 5:03PM
I SAY STOP AMERICA NOW AND LET'S GET TO THE BOTTOM OF THIS. So many Americans have suffered so much for the errors of nitwit scholars on salaries.  
Apr 24, 2013 7:15PM

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.



Apr 24, 2013 5:51PM

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.

Apr 24, 2013 5:01PM
I have an austerity program in my own household.  My wife and kids and I don't allow ourselves to spend more than we make.  We also don't make long term commitments based on short term gain.  We all pitch in and do the work of one whole person each, so we never have excess workers we need to get rid of.  If one of our family members feels too lazy to work we don't take money from the other family members and give it to him.  We all pay our own bills first before we consider giving away our extra money to moochers.  We don't take any of our neighbor's money either, with the consideration that he earned it and has a right to spend it as he pleases.

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.

Apr 24, 2013 6:49PM
Governments are not households. Households are not governments. Corporations do not build bridges, dams, hiways or aqueducts, governments do. Microeconomics is not macroeconomics. You are all quoting liberally from whomever suites your last assertion no matter what branch of economic theory that particular quote comes from. Entertaining but not productive.
Apr 24, 2013 5:54PM

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

Apr 24, 2013 7:13PM
Austerity only hurts big government and socialist societies.
Apr 24, 2013 3:16PM
Simple Econmics tells you if the " Business is making money , the employess are making money "  there for the city is making money  ( taxes )  and so on and so on ..    CUT THE CRAP and we are taxed enough ..  less taxes .. more money for people and business!
Apr 24, 2013 3:59PM
Does this change our views on the so-called fiscal cliff?
Apr 24, 2013 4:23PM

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. 

Apr 24, 2013 3:22PM
Somebody needs to explain to Herndon where the money comes from to hire those people in gummit in the first place!!!
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