Harvard professor Ken Rogoff has not had a good week (Reuters)
For an economist, the five most terrifying words in the English language are: I can't replicate your results. But for economists Carmen Reinhart and Ken Rogoff of Harvard, there are seven even more terrifying ones: I think you made an Excel error.
Listen, mistakes happen. Especially with Excel. But hopefully they don't happen in papers that provide the intellectual edifice for an economic experiment -- austerity -- that has kept millions out of work. Well, too late. As Mike Konczal of the Roosevelt Institute reported, Thomas Herndon, Michael Ash, and Robert Pollin of the University of Massachusetts, Amherst, have found serious problems with Reinhart and Rogoff's austerity-justifying work. That work, which shows that countries with public debt of 90 percent of GDP or more tend to grow slower, omitted data for five of its 19 countries, and used the wrong data for another. The former was, embarrassingly enough, due to an Excel misadventure, and the latter an unrelated issue. If you use all of the (right) numbers, it turns out growth does slow when debt is high, but not nearly as much as Reinhart and Rogoff -- hereafter, R-R -- claimed.
In other words, there is no evidence for anything resembling a growth tipping point when debt hits 90 percent of GDP.
This is the academic's version of the dream where you're naked in public. Except it's not a dream. It's the mortifying reality for R-R, who have admitted that they forgot to drag their Excel formula down five more cells. But it's worse than mortifying for everybody else. It's been a catastrophe. Not that R-R made a pretty galling mistake; rather, that such a flawed paper gave the intellectual ballast to an idea that has failed everywhere it's been tried the past few years. Now, policymakers would have pursued austerity regardless, but R-R gave them a reason (and seemingly a bright red 90 percent of GDP line) to do so sooner. If too much debt is associated with too little growth, then there's no time to lose for slashing deficits.
Those are important words: "associated with". As I pointed out before, the best argument against taking R-R as austerity's gospel truth was it was just a correlation. Of course a ratio tends to increase more when its denominator increases less. That's how fractions work. But it doesn't prove that the rising ratio causes the stagnating denominator. If anything, the causality runs the other way -- lower growth tends to cause higher debt, as tax revenue falls and safety-net spending rises during a slump. Indeed, as you can see below, Arindrajit Dube of the University of Massachusetts, Amherst, found that debt-to-GDP predicts past GDP growth much better than future GDP growth. In other words, higher debt doesn't cause lower growth as much as lower growth causes higher debt.
Of course, this hasn't stopped deficit hawks from touting R-R's work as proof that we must tackle the long-term debt and we must tackle it now. Including, sometimes, R-R themselves. Now, in their paper, R-R are careful to say the relationship between higher debt and lower growth is just that: a relationship. In fact, that's been their defense: they never said it was anything more than a correlation, and that correlation still holds after correcting for all their mistakes, albeit not as strongly.
That's true ... if you only look at what they said in their paper, and ignore what they said about their paper. For example, here's what they said in Bloomberg View back in July 2011:
Our empirical research on the history of financial crises and the relationship between growth and public liabilities supports the view that current debt trajectories are a risk to long-term growth and stability, with many advanced economies already reaching or exceeding the important marker of 90 percent of GDP....
The biggest risk is that debt will accumulate until the overhang weighs on growth....
Those who remain unconvinced that rising debt levels pose a risk to growth should ask themselves why, historically, levels of debt of more than 90 percent of GDP are relatively rare and those exceeding 120 percent are extremely rare (see attached chart 2 for U.S. public debt since 1790). Is it because generations of politicians failed to realize that they could have kept spending without risk? Or, more likely, is it because at some point, even advanced economies hit a ceiling where the pressure of rising borrowing costs forces policy makers to increase tax rates and cut government spending, sometimes precipitously, and sometimes in conjunction with inflation and financial repression (which is also a tax)?
To be fair, R-R do say that they only found that higher debt and lower growth are "associated" and that there's no "bright red line" (even if policymakers interpret it that way) at 90 percent. But they also make it quite clear that they think their correlation is more than just a correlation. They think higher debt causes lower growth, and, after a little throat-clearing, they're not too shy about saying so.
In a series of academic papers with Carmen Reinhart - including, most recently, joint work with Vincent Reinhart ("Debt Overhangs: Past and Present") - we find that very high debt levels of 90% of GDP are a long-term secular drag on economic growth that often lasts for two decades or more....
Of course, there is two-way feedback between debt and growth, but normal recessions last only a year and cannot explain a two-decade period of malaise. The drag on growth is more likely to come from the eventual need for the government to raise taxes, as well as from lower investment spending. So, yes, government spending provides a short-term boost, but there is a trade-off with long-run secular decline.
It's the same pattern: a few caveats, and then a semi-speculative overselling of their results. But their biggest overselling didn't come in the media. It came behind closed doors -- in Congress. Tim Fernholz of Quartz flagged the following passage from Senator Tom Coburn's recent book about the time R-R briefed members of Congress in April 2011, a few months before the debt ceiling debacle:
Johnny Isakson, a Republican from Georgia and always a gentleman, stood up to ask his question: "Do we need to act this year? Is it better to act quickly?"
"Absolutely," Rogoff said. "Not acting moves the risk closer," he explained, because every year of not acting adds another year of debt accumulation. "You have very few levers at this point," he warned us.
Reinhart echoed Conrad's point and explained that countries rarely pass the 90 percent debt-to-GDP tipping point precisely because it is dangerous to let that much debt accumulate. She said, "If it is not risky to hit the 90 percent threshold, we would expect a higher incidence."
R-R whisper "correlation" to other economists, but say "causation" to everyone else. Now, they don't always say it outright -- at least not at first. Rather, they say "this isn't definitely causation ... but come on, what else could it be?" That's been more than enough for the austerians who have been desperate for any kind of justification to forget about unemployment and worry about debt instead.
The boring reality is the relationship between public debt and growth isn't clear. As Justin Fox of Harvard Business Review points out, there simply isn't enough data. Some countries run up big debts fighting wars, and then grow fine. Some countries run up big debts fighting financial crises, and then grow slowly as the private sector deleverages. Some countries run up big debts as a matter of course, and then grow slowly as rising rates crowd out private investment. And even the few data points we do have don't always tell us all that much. Indeed, as Paul Krugman points out, it shouldn't surprise us that the U.S. has averaged negative growth during its high debt years, because most of those years came during the World War II demobilization. In other words, it's impossible to say anything dispositive about debt and growth more broadly.
But that hasn't stopped R-R from trying. This kind of overhyping is why Joe Weisenthal called them "the most dangerous economists in the world" back in 2011. And it's a far more damning error than anything they did with Excel.
White House Press Secretary Sean Spicer’s assertion that the National Mall was "full when the president took the Oath of Office" is demonstrably false.
On January 21, White House Press Secretary Sean Spicer issued a statement criticizing journalists for their coverage of President Trump's inauguration. Some media outlets, Spicer claimed, were using photographs of the event in misleading and deceptive ways. To back this claim up, Spicer made a number of assertions that turned out to be false. He offered incorrect D.C. Metro-ridership numbers, and said that white ground coverings had never been used on the Mall during Inauguration before, when they had been employed in 2013. Two days later, during his first press conference, Spicer blamed the bad Metro numbers on an "outside agency" and stated that his claim about the "largest audience to ever witness an inauguration, period," was meant to include all viewership, in person and online, rather than referring to the in-person crowd specifically.
The technology has been used to create sped-up videos that falsely depict a response to stimulus.
One of the first measures that Republicans in the 115th Congress proposed was the “Heartbeat Protection Act.” On January 11, a group led by Steve King of Iowa introduced a bill that would require doctors nationwide to “check for a fetal heartbeat” before performing an abortion, and prohibit them from completing the procedure if they found one. In December, Republicans in the Ohio state legislature put forth a similar measure. Governor John Kasich vetoed it, observing that such a law would almost certainly be struck down as unconstitutional, but approved a 20-week abortion ban.
Opponents of the heartbeat bills have pointed out that they would eliminate abortion rights almost entirely—making the procedure illegal around four weeks after fertilization, before many women realize that they are pregnant. These measures raise even more elementary questions: What is a fetal heartbeat? And why does it matter?
Overshadowed by headlines about chaos and infighting, the new administration is notching a string of early victories.
From some angles, the Trump presidency is off to a rocky start. There were the somewhat disappointing crowds at the inauguration, and then the needless lies about them, presented as “alternative facts.” There’s the controversy over Trump’s remarks to the CIA, and precisely who in the crowd cheered his visit. On Monday, the president repeated a dumb and unnecessary lie about illegal ballots having cost him the popular vote during a meeting with members of Congress. The Washington Post reports in detail on White House infighting and an attempted reboot—just four days into the administration. ABC’s The Notefrowns, “He can’t help himself, and he isn’t helping himself.”
But what if the Trump presidency is actually off to a surprisingly effective start? For months, Trump has shown a perverse ability to overshadow his own message with chaos and disorder, and the first five days of his administration fit right into that pattern.
The president repeated his belief that the U.S. should have taken Iraq’s oil, ominously adding that the CIA may “have another chance.”
Every American, regardless of who they voted for in the election, should be furious with President Donald Trump for what he told the CIA during a recent meeting at its headquarters. I do not mean his digressions about the size of the crowd at his inauguration and the number of times he has appeared on the cover of Time magazine, although it does not inspire confidence to see the president waste fleeting time with national-security employees on his vanity rather than our security.
It’s his comments on Iraq that ought to make Americans apoplectic, for in the space of seconds, Trump managed to utter words that are 1) morally repugnant, 2) certain to be exploited as a recruiting tool by America’s terrorist enemies, and 3) likely to help foreign adversaries diminish America’s reputation and power. For the sake of an indisciplined, self-indulgent riff, Trump made Americans less safe.
As the party struggles to agree on a replacement, a group of GOP senators unveil a bill that would give states the option to keep it.
The vast majority of Republicans in Congress haven’t budged from their longstanding vow to completely repeal the Affordable Care Act. But as the party struggles to write a replacement, a few GOP lawmakers are declaring their support for keeping the law on the books in some form indefinitely.
A group of senators on Monday unveiled legislation that would give states the option of preserving Obamacare, securing federal support for a more conservative health-insurance system, or opting out of any assistance from Washington. Offered as a middle ground in the partisan health-care fight, the proposal breaks with years of Republican orthodoxy on the 2010 law, which party leaders have pledged to rip out “root and branch.”
The White House hasn’t released the executive order yet. Here’s some of the text that the president signed.
On Tuesday afternoon, President Donald Trump signed a memorandum ordering the Secretary of the Army to expedite approval of the Dakota Access Pipeline, a 1,100-mile pipeline linking the North Dakota oil fields to a river terminal in Illinois. The U.S. Army Corps of Engineers denied final approval to the project late last year, after months of protests from the local Standing Rock Sioux tribe and from Native people nationwide.
The text of Trump’s executive memorandum has yet to be made public, which has made reporting on his actual order difficult. The only version available right now is what is visible in an image from an Associated Press photographer. That version is missing at least a page, and some words are so blurry as to be non-parseable. While I fully expect that the White House will soon release the full text of the memo, there is great interest in its contents right now, so I’ve transcribed the visible text and posted it below for curious readers.
For people sick of high deductibles, Republicans offer high-deductible plans as replacements for Obamacare.
Obamacare’s days are numbered. That was the message of the executive order President Donald Trump signed Friday, instructing government agencies to “minimize the unwarranted economic and regulatory burdens of the [Affordable Care Act].”
When I spoke with a handful of Trump supporters after the inauguration Friday, they said they eagerly awaited Obamacare’s end. Tanya, a woman from Virginia who was rolling a walker down I Street to the inaugural parade, said she was struggling with her $6,750 deductible. “As a business person who is self-employed, it’s killing me,” she said.
Nearby, Marlita Gogan, from Houston, said she just wants Trump to “do what he says”—repeal and replace Obamacare. Her daughter’s insurance premium has risen from $250 to $375, with a $5,000 deductible. “It’s too much,” she said. “You can’t even use it.”
The president declared his own inauguration a national holiday. But the language he used says something more.
You could be forgiven for forgetting the National Day of Patriotic Devotion—technically, it happened before it was ever declared. Donald Trump established it with a stroke of a pen sometime after his inauguration; the official proclamation appeared Monday in the Federal Register.
That bit isn’t all that unusual. Presidents christen National Days Of Things all the time. President Barack Obama, for example, proclaimed the day of his own inauguration in 2009 a “National Day of Renewal and Reconciliation,” calling “upon all of our citizens to serve one another and the common purpose of remaking this Nation for our new century.” He annually declared September 11 to be “Patriot Day.” But “Patriotic Devotion” strikes a different note—flowery, vaguely compulsory.
A No. 1 bestseller by a respected physician argues that gluten and carbohydrates are at the root of Alzheimer's disease, anxiety, depression, and ADHD. What to make of the controversial theory?
“If you could make just three simple changes in your life to prevent, or even reverse, memory loss and other brain disorders, wouldn’t you?”
So asks Dr. David Perlmutter, in promotion of his PBS special Brain Change, coming soon to your regional affiliate. Three changes. Simple ones. Wouldn’t you?
The 90-minute special is a companion to Perlmutter’s blockbuster book on how gluten and carbs are destroying our brains. In November it became a New York Times number one bestseller. Since its September release, as Perlmutter told me, “It’s never not been on the bestseller list, frankly.”
“Is it still number one?” I asked. A pause over the phone as he checked. In modern interview style, we were both also on our computers.