Austerians have had their worst week since the last time GDP numbers came out for a country that's tried austerity.
But this time is, well, different. It's not "just" that southern Europe is stuck in a depression and Britain is stuck in a no-growth trap. It's that the very intellectual foundations of austerity are unraveling. In other words, economists are finding out that austerity doesn't work in practice or in theory.
What a difference an Excel coding error makes.
Austerity has been a policy in search of a justification ever since it began in 2010. Back then, policymakers decided it was time for policy to go back to "normal" even though the economy hadn't, because deficits just felt too big. The only thing they needed was a theory telling them why what they were doing made sense. Of course, this wasn't easy when unemployment was still high, and interest rates couldn't go any lower. Alberto Alesina and Silvia Ardagna took the first stab at it, arguing that reducing deficits would increase confidence and growth in the short-run. But this had the defect of being demonstrably untrue (in addition to being based off a naïve reading of the data). Countries that tried to aggressively cut their deficits amidst their slumps didn't recover; they fell into even deeper slumps.
Enter Carmen Reinhart and Ken Rogoff. They gave austerity a new raison d'être by shifting the debate from the short-to-the-long-run. Reinhart and Rogoff acknowledged austerity would hurt today, but said it would help tomorrow -- if it keeps governments from racking up debt of 90 percent of GDP, at which point growth supposedly slows dramatically. Now, this result was never more than just a correlation -- slow growth more likely causes high debt than the reverse -- but that didn't stop policymakers from imputing totemic significance to it. That is, it became a "fact" that everybody who mattered knew was true.
Except it wasn't. Reinhart and Rogoff goofed. They accidentally excluded some data in one case, and used some wrong data in another; the former because of an Excel snafu. If you correct for these very basic errors, their correlation gets even weaker, and the growth tipping point at 90 percent of GDP disappears. In other words, there's no there there anymore.
Austerity is back to being a policy without a justification. Not only that, but, as Paul Krugman points out, Reinhart and Rogoff's spreadsheet misadventure has been a kind of the-austerians-have-no-clothes moment. It's been enough that even some rather unusual suspects have turned against cutting deficits now. For one, Stanford professor John Taylor claims L'affaire Excel is why the G20, the birthplace of the global austerity movement in 2010, was more muted on fiscal targets recently.
The discovery of errors in the Reinhart-Rogoff paper on the growth-debt nexus is already impacting policy. A participant in last Friday's G20 meetings told me that the error was a factor in the decision to omit specific deficit or debt-to-GDP targets in the G20 communique.
The UK and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not. You've got to spend money.Bond investors want growth much like equity investors, and to the extent that too much austerity leads to recession or stagnation then credit spreads widen out -- even if a country can print its own currency and write its own checks. In the long term it is important to be fiscal and austere. It is important to have a relatively average or low rate of debt to GDP. The question in terms of the long term and the short term is how quickly to do it.
Growth vigilantes are the new bond vigilantes. Gross thinks the boom, not the slump, is the time for austerity -- which sounds an awful lot like you-know-who.
The austerity fever has even broken in Europe. At least a bit. Now, eurocrats can't say that austerity has been anything other than the best of all economic policies, but they can loosen the fiscal noose. And that's what they might be doing, by giving countries more time and latitude to hit their deficit targets. Here's how European Commission president José Manuel Barroso framed the issue on Monday:
While [austerity] is fundamentally right, I think it has reached its limits in many aspects. A policy to be successful not only has to be properly designed. It has to have the minimum of political and social support.
That's not much, but it's still much better than the growth-through-austerity plan Eurogroup president Jeroen Dijsselbloem was peddling on ... Saturday.
Now, Reinhart and Rogoff's Excel imbroglio hasn't exactly set off a new Keynesian moment. Governments aren't going to suddenly take advantage of zero interest rates to start spending more to put people back to work. Stimulus is still a four-letter word. Indeed, the euro zone, Britain, and, to a lesser extent, the United States, are still focussed on reducing deficits above all else. But there's a greater recognition that trying to cut deficits isn't enough to cut debt burdens. You need growth too. In other words, people are remembering that there's a denominator in the debt-to-GDP ratio.
But austerity doesn't just have a math problem. It has an image problem too. Just a week ago, Reinhart and Rogoff's work was the one commandment of austerity: Thou shall not run up debt in excess of 90 percent of GDP. Wisdom didn't get more conventional. What did this matter? Well, as Keynes famously observed, it's better for reputation to fail conventionally than to succeed unconventionally. In other words, elites were happy to pursue obviously failed policies as long as they were the right failed policies.
But now austerity doesn't look so conventional. It looks like the punchline of a bad joke about Excel destroying the global economy. Maybe, just maybe, that will be enough to free us from some defunct economics.
The agreement doesn’t guarantee that Tehran will never produce nuclear weapons—because no agreement could do so.
A week ago I volunteered my way into an Atlantic debate on the merits of the Iran nuclear agreement. The long version of the post is here; the summary is that the administration has both specific facts and longer-term historic patterns on its side in recommending the deal.
On the factual front, I argued that opponents had not then (and have not now) met President Obama’s challenge to propose a better real-world alternative to the negotiated terms. Better means one that would make it less attractive for Iran to pursue a bomb, over a longer period of time. Real world means not the standard “Obama should have been tougher” carping but a specific demand that the other countries on “our” side, notably including Russia and China, would have joined in insisting on, and that the Iranians would have accepted.
Orr: “Sometimes a thing happens. Splits your life. There’s a before and after. I got like five of them at this point.”
This was Frank offering a pep talk to the son of his murdered former henchman Stan in tonight’s episode. (More on this in a moment.) But it’s also a line that captures this season of True Detective so perfectly that it almost seems like a form of subliminal self-critique.
Remember when Ray got shot in episode two and appeared to be dead but came back with a renewed sense of purpose and stopped drinking. No? That’s okay. Neither does the show: It was essentially forgotten after the subsequent episode. Remember when half a dozen (or more) Vinci cops were killed in a bloody shootout along with dozen(s?) of civilians? No? Fine: True Detective’s left that behind, too. Unless I missed it, there was not a single mention of this nationally historic bloodbath tonight.
The former secretary of defense lobbied for the repeal of “Don’t ask, don’t tell,” and has now ended the Boy Scouts’ ban on gay scoutmasters.
Eagle Scout. Young Republican. CIA recruit. Air Force officer. CIA director. Secretary of defense.
It’s not the resume of a radical civil-rights campaigner, but Robert Gates has now integrated two of the great bastions of macho American traditional morality—first the U.S. armed forces, and now the Boy Scouts of America. In both cases, Gates pursued a careful, gradual strategy, one that wasn't fast enough for activists. In both cases, he was careful to take the temperature of constituents. And in both cases, once he was ready to act, he did so decisively. In the end what seemed to matter most was not Gates’s personal feelings but his determination to safeguard institutions he cared about and his deft skills as a bureaucratic operator.
Has the Obama administration’s pursuit of new beginnings blinded it to enduring enmities?
“The president said many times he’s willing to step out of the rut of history.” In this way Ben Rhodes of the White House, who over the years has broken new ground in the grandiosity of presidential apologetics, described the courage of Barack Obama in concluding the Joint Comprehensive Plan of Action with the Islamic Republic of Iran, otherwise known as the Iran deal. Once again Rhodes has, perhaps inadvertently, exposed the president’s premises more clearly than the president likes to do. The rut of history: It is a phrase worth pondering. It expresses a deep scorn for the past, a zeal for newness and rupture, an arrogance about old struggles and old accomplishments, a hastiness with inherited precedents and circumstances, a superstition about the magical powers of the present. It expresses also a generational view of history, which, like the view of history in terms of decades and centuries, is one of the shallowest views of all.
Companies that overvalue alpha-male behavior need to change—both to retain female talent and for the bottom line.
When it comes to gender equality in the workplace, the research on its economic benefits is clear: Equality can boost profits and enhance reputation. And then there’s also the fact that it’s more fair. But the progress of women in the workplace is so far inadequate: Women are woefully underrepresented in executive positions, the pay gap persists, and the motherhood penalty is very real.
Barbara Annis is the founder of the Gender Intelligence Group, a consultancy that works with executives at major firms (including Deloitte, American Express, BMO Financial Group, and eBay) to create strategies to transform their work cultures into ones that are friendly to both men and women.
I recently spoke with Annis about her work and the challenges to achieving gender parity. The following transcript of our conversation has been edited for clarity.
Connecticut, Missouri, and Georgia have dropped the slave-owning presidents from their annual fund-raising dinners, and many more states could follow suit.
The Democratic Party is on the hunt for a new pair of fathers.
Last week, Democrats in Connecticut rather matter-of-factly decided to oust Thomas Jefferson and Andrew Jackson from their place of honor as the namesakes of the state party’s annual fund-raising dinner. The debate—such as it was—over the legacies of the two slave-owning presidents took all of two minutes, a spokesman for the state central committee said, and the vote to strip their names from the dinner was unanimous. A week earlier, Missouri changed the name of its Jefferson-Jackson dinner to honor native son Harry Truman instead, and two days after Connecticut’s vote, Georgia Democrats announced a similar change with even less fanfare.
This is the third in a series. Readers are invited to send their own responses to firstname.lastname@example.org, and we will post their strongest critiques of the book and the accompanied reviews. (The first batch is here.) To further encourage civil and substantive responses via email, we are closing the comments section. You can follow the whole series on Twitter at #BTWAM and read all of the responses to the book from Atlantic readers and contributors.
Several years ago, Ta-Nehisi Coates took his son, not yet 5, to see a movie on the Upper West Side of Manhattan. As his son made his way off the escalator, a white woman pushed him and said, “Come on!” Chaos ensued. There was a black parent’s rage and a white man’s threat to have the black parent arrested. Coates narrates the incident in cool, steady prose. Ultimately, he writes of the regret he carries: “In seeking to defend you I was, in fact, endangering you.”
Educators seldom have enough time to do their business. What’s that doing to the state of learning?
It’s common knowledge that teachers today are stressed, that they feel underappreciated and disrespected, and disillusioned. It’s no wonder they’re ditching the classroom at such high rates—to the point where states from Indiana to Arizona to Kansas are dealing with teacher shortages. Meanwhile, the number of American students who go into teaching is steadily dropping.
A recent survey conducted jointly by the American Federation of Teachers and Badass Teachers Association asked educators about the quality of their worklife, and it got some pretty harrowing feedback. Just 15 percent of the 30,000 respondents, for example, strongly agreed that they’re enthusiastic about the profession. Compare that to the roughly 90 percent percent who strongly agreed that they were enthusiastic about it when they started their career, and it’s clear that something has changed about schools that’s pushing them away. Roughly three in four respondents said they “often” feel stressed by their jobs.
A controversial treatment shows promise, especially for victims of trauma.
It’s straight out of a cartoon about hypnosis: A black-cloaked charlatan swings a pendulum in front of a patient, who dutifully watches and ping-pongs his eyes in turn. (This might be chased with the intonation, “You are getting sleeeeeepy...”)
Unlike most stereotypical images of mind alteration—“Psychiatric help, 5 cents” anyone?—this one is real. An obscure type of therapy known as EMDR, or Eye Movement Desensitization and Reprocessing, is gaining ground as a potential treatment for people who have experienced severe forms of trauma.
Here’s the idea: The person is told to focus on the troubling image or negative thought while simultaneously moving his or her eyes back and forth. To prompt this, the therapist might move his fingers from side to side, or he might use a tapping or waving of a wand. The patient is told to let her mind go blank and notice whatever sensations might come to mind. These steps are repeated throughout the session.
How a radical epilepsy treatment in the early 20th century paved the way for modern-day understandings of perception, consciousness, and the self
In 1939, a group of 10 people between the ages of 10 and 43, all with epilepsy, traveled to the University of Rochester Medical Center, where they would become the first people to undergo a radical new surgery.
The patients were there because they all struggled with violent and uncontrollable seizures. The procedure they were about to have was untested on humans, but they were desperate—none of the standard drug therapies for seizures had worked.
Between February and May of 1939, their surgeon William Van Wagenen, Rochester’s chief of neurosurgery, opened up each patient’s skull and cut through the corpus callosum, the part of the brain that connects the left hemisphere to the right and is responsible for the transfer of information between them. It was a dramatic move: By slicing through the bundle of neurons connecting the two hemispheres, Van Wagenen was cutting the left half of the brain away from the right, halting all communication between the two.