R&R did not create austerity – discrediting them will not kill it.
If you’ve been reading about the Rogoff and Reinhart incident this week, most everyone outside of the right wing press is claiming that the austerity argument has now been proven false. If only it were that simple. When Paul Krugman (probably the fiercest critic of austerity on this side of the Atlantic) wrote about R&R last week, he closed his column by saying the following:
“So will toppling Reinhart-Rogoff from its pedestal change anything? I’d like to think so. But I predict that the usual suspects will just find another dubious piece of economic analysis to canonize, and the depression will go on and on.”
Essentially, if it wasn’t R&R, proponents of austerity would have found some other paper by some other economist to back their claims. And most folks on the right are admitting that Excel error or not, debt kills economic growth (just a lot less than we thought it would).
Bob Samuelson committed probably one of the most egregious false equivalences in recent years in his column by referring to the fall-out over the paper a “dispute”, in which one side says X and the other says Y – as though X had not already been proven to be factually inaccurate and misleading.
So what now? For once, we seem to have a good set of economic data that millions of people around the world are familiar with. When debt approaches GDP, growth slows down to about 2%. That’s not great, but borrowing money is always painful. Taking a mortgage prevents you from accessing liquid capital in the short-run, but it is often a sound long-term investment.
Peggy Noonan made the mistake in the Wall Street Journal this week of basically making Obama’ argument for him, by claiming that the jobs crisis is much worse than the debt crisis. The Republican Party will likely pivot soon and start blaming the President for not doing enough for jobs, months and years after they blocked any and all legislative efforts to do something about jobs.
This is the Republican game – don’t let facts get in the way of your agenda. Excel errors do not matter. There are scores of other economists who are willing to stand in for R&R and defend the merits of austerity. While it’s true that Herndon’s work at UMass has exposed bad research and briefly given progressives, and Keynesians, and basically everyone other than right wing fiscal conservatives something to cheer about, I’d be surprised if politicians remember this a month from now. I’m a bit surprised that the coverage over an Excel error in an academic paper has lasted a week already.