You have heard at least a part of this story, but there is so much more beneath the surface. With their supposedly seminal 2011 work, “Growth in the Time of Debt,” Carmen Reinhart and Kenneth Rogoff were gurus to austerity hawks. Reinhart was, according to the NY Times, “the most influential female economist in the world.” Indeed Paul Ryan lapped up the faux austerity “results.” The same authors had burst onto the international stage in 2010 when they “found’ grounds for austerity in another study.
“The authors purported to show that once county’s gross debt to GDP ration crosses the threshold of 90%, economic growth slows dramatically,” according to an Alternet article.
It turns out that that was a crock. Influential, you see, is not the same as correct. Another research team couldn’t replicate the original authors’ findings. So it requested the raw data.
When the PERI team finally got a hold of the data used by Reinhart and Rogoff, they uncovered gaping problems. They found that “coding errors, selective exclusion of available data, and unconventional weighting of summary statistics lead to serious errors that inaccurately represent the relationship between public debt and GDP growth.” Adjusting for these errors, the Amherst team contends that “the average real GDP growth rate for countries carrying a public debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0.1 percent.”
With respect to the so-called coding error, the authors dropped a century of data for some countries, which completely changed the outcome of the study. This has been deemed a glitch or a coding error. I am not so sure. It is not that coding errors do not happen. However, given the connections of the lead author and her ideological connections, I somehow doubt it.
It turns out to be no coincidence that their calls for austerity sounded amazingly like everything and everyone associated with Peter Peterson for, according to CrooksandLiars.com here, Carmen Reinhart is one of Peterson’s minions.
You see, Reinhart was a fellow at the Peterson Institute AND at least some of the authors’ work was funded by Peterson. His institute also funded a 2011 book by Reinhart and Rogoff mentioned in the first paragraph above.
What can one say to the likes of Reinhart and Rogoff, who have lent “credibility” to austerity theory and thus compromised the well being of millions of people around the world based on false data? Let is also be said, that the austerity hawks have failed miserably while basic macro econ hasn’t. Today, Paul Krugman reminded that basic Macro Econ 101 not only holds up but performed spectacularly well in the crisis. Austerity theory on the other hand failed spectacularly.
We had already known that 30 years of evidence failed to produce a morsel of real evidence that trickle down economics worked in the real world. But trickle down or supply side economics was part of a two pronged assault on the poor and middle class. The other prong was imposed austerity to revoke all aspects of the social safety net, earned pensions and quality of life programs. The supply-siders and austerity hawks have for decades experimented on real world “laboratories,” as in nations, as if it were either legitimate, ethical or even theoretically correct to experiment on living human beings and their countries.
Meanwhile, the IMF has apologized for relying on flawed austerity hawk research. It’s better than nothing, but not by much. Not the Peterson crowd! Simpson and Bowles are back slithering about the halls of Congress and Peter Peterson has given a “deadline” of July 4th this summer for Congress to do what he says. (I think July 4th we should all proclaim ourselves free from the likes of Peter Peterson.) It’s about time someone tell Peter Peterson and the Koch Brothers where to stick their egregious, contemptuous, manipulative austerity maneuverings. Not only do their prescriptions for America not work, but they cause harm, untold harm while they laugh all the way to the bank.