Grad student Thomas Herndon did a run of the mill academic paper, entitled "Growth in a Time of Debt", in which he exposed several errors including: simple coding errors, data omissions and peculiar aggregation procedures. Incredibly, when the spreadsheet errors were corrected, lo and behold the nations sporting debt at 90 percent or more of GDP were no longer in recession (the Rogoff -Reinhart paper showed growth typically defined for them at -0.1%) but with a reasonable 2.2 %. (This contrasts with 4.2% when debt is below 30% of GDP).
But never mnid uncovering the errors - which are definitely significant because the percent of growth is the issue on which austerity pivots- the abundant austerity freaks in congress don't want to hear it. You see, the issue isn't about whether the Rogoff -Reinhart paper was correct or not, but rather that it provided - at least for a time- special cover for the austerity - spending cut crowd to howl like banshees. Especially for Obama to make many more cuts so they can come to the table, agree no a sequestration resolution, and allow millions to leave on their flights on time.
But as blogger Richard Eskow also observed on smirkingchimp.com:
"Economists Carmen Reinhart and Ken Rogoff seem surprisingly unremorseful. And austerity's paid pitchmen are still hawking their wares."
As Eskow added:
"Their response can be boiled down to "Numbers. Shmumbers. Surely too much debt is bad, right?"
Well, of course such a cavalier attitude isn't suprising, given the dynamic duo are high-powered academics who've clearly invested lots of brain energy into their work. I mean, no academic wants to be forced to recant an error in a paper that earlier received so much welcome (from the Neoliberals) far less several errors - possibly making the whole paper useless.
But what I have found interesting is the inevitable comparisons with this austerity paper and the lies told the American people to justifying making war on Iraq ten years ago. This was noted in a recent article: Curveball: Spies, Lies, and the Con Man Who Caused a War (American Prospect.) In the interview therein, Pete Drogin notes that all of the CIA intelligence used to justify the Iraq War - all of it -- traced back to a single, self-interested party. This fraud was also the source for Judith Miller's highly influential (and entirely false) reporting for the New York Times. All of that, together with the shrill calls from other corporo-media, had the American people polling for war by early 2003.
Curveball didn't need to prove his claims because the decision had already been made to go to war. He just needed to sound plausible enough for Miller and all the other self-interested hacks inside and outside of government.
As Drogin says in the interview, the Curveball episode was "a conspiracy of ineptitude driven by tawdry ambitions, spineless leadership, and fear." It wasn't that "they failed to connect the dots," says Drogin. They "made up the dots."Hmmmmmm.....sounds to me an awful lot like austerity economics and the babble of the Neoliberal imps who support it. The nuts and screwballs who want their cuts, despite the fact we remain in a low aggregate demand environment.
What has interested me, however, is how the Governor of the Central Bank of Barbados (De Lisle Worrell) shrugged when recently asked about Barbados low rate of growth (barely 1% last year) and high % of debt of GDP, essentially dismissed it. He also dismissed the worries of some that it might spark an IMF intervention. "What intervention?" he sneered, and in so many words. Adding that Barbados has mainly gone its own way for over 350 years and will continue to do so. He noted the low growth is directly connected to the continued credit crisis and low aggregate demand - especially in the U.S. - where most of the island's tourists hail from. DUH!
So he isn't worried because he grasps that Barbados' economic fortunes are cyclical, with the tourist dollar. For a time this was counterbalanced by offshore banking operations, until capitalist-Neoliberal scumballs like Nicholas Sarkozy (at assorted OECD meets) castigated it and called a pox upon all the banking houses of the Caribbean as harboring monies of "criminals". In one fell swoop, the economic Neoliberal naysayers set the offshore banking business back at least a decade. Also, they had better watch themselves if they ever think of tripping in Bim.
But a point Gov. Worrell ought to concern himself with is the $400 m going out each year from the island to pay for fuel imports to runs buses, over 100,000 cars and taxis. Unless the island gets a grip on this they will enter into a sovereign debt crisis.
As for the U.S. - the real worry isn't any similar such thing but rather another, possibly greater recession, especially if too many imbeciles in D.C. keep buying into and pushing their austerity economics - based on spreadsheet errors in a high falutin' Harvard economics paper!