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.
One hundred years ago, a retail giant that shipped millions of products by mail moved swiftly into the brick-and-mortar business, changing it forever. Is that happening again?
Amazon comes to conquer brick-and-mortar retail, not to bury it. In the last two years, the company has opened 11 physical bookstores. This summer, it bought Whole Foods and its 400 grocery locations. And last week, the company announced a partnership with Kohl’s to allow returns at the physical retailer’s stores.
Why is Amazon looking more and more like an old-fashioned retailer? The company’s do-it-all corporate strategy adheres to a familiar playbook—that of Sears, Roebuck & Company. Sears might seem like a zombie today, but it’s easy to forget how transformative the company was exactly 100 years ago, when it, too, was capitalizing on a mail-to-consumer business to establish a physical retail presence.
E!’s 10-year-anniversary special celebrating its flagship family was surprisingly honest and strangely tragic.
On Friday, as Puerto Rico contended with the aftermath of a hurricane that had left much of the island without power, and North Korea threatened to detonate a hydrogen bomb in the Pacific Ocean, the internet-gossip complex grappled instead with the momentous news that an unmarried 20-year-old reality star was pregnant. Kylie Jenner, TMZ reported, the youngest scion of the Kardashian family, had been telling friends that she and her boyfriend, the rapper Travis Scott, were going to have a baby. Unidentified family friends promptly confirmed the news to People. And some fans began to wonder—had Kylie’s mother, Kris Jenner, leaked the news herself to boost the ratings for E!’s Sunday night 10-year-anniversary special of Keeping Up With the Kardashians?
NFL athletes are protesting on behalf of America’s founding values––and Donald Trump neither loves nor understands them.
Donald Trump, who has a disturbing history of praising brutal dictators, possesses no better than a Twitter troll’s understanding of what it means to be an American patriot. He spent the weekend trolling the NFL over the players protesting police violence during the national anthem, though any other president would have been attending to the millions of fellow citizens suffering in Puerto Rico; and the NFL athletes who defied him by taking a knee Sunday in solidarity with protests against police killings had the high ground, as good students of American history will understand.
When the Founding Fathers affixed their signatures to the Declaration of Independence, the first act of political courage in United States history, the American flag as we know it did not yet exist. And it would be more than a century before the Star Spangled Banner was adopted as the national anthem. Yet the Founders were not deficient in love of country for lacking the Stars and Stripes. In bravely dissolving political bonds with Britain, Thomas Jefferson set forth the premise of the United States, the core ideas around which his countrymen rallied: “that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.”
The foundation of Donald Trump’s presidency is the negation of Barack Obama’s legacy.
It is insufficient to statethe obvious of Donald Trump: that he is a white man who would not be president were it not for this fact. With one immediate exception, Trump’s predecessors made their way to high office through the passive power of whiteness—that bloody heirloom which cannot ensure mastery of all events but can conjure a tailwind for most of them. Land theft and human plunder cleared the grounds for Trump’s forefathers and barred others from it. Once upon the field, these men became soldiers, statesmen, and scholars; held court in Paris; presided at Princeton; advanced into the Wilderness and then into the White House. Their individual triumphs made this exclusive party seem above America’s founding sins, and it was forgotten that the former was in fact bound to the latter, that all their victories had transpired on cleared grounds. No such elegant detachment can be attributed to Donald Trump—a president who, more than any other, has made the awful inheritance explicit.
The alliance between presidents and sports was perhaps the last fully functioning bipartisan tradition left in Washington. This weekend, Trump blew it up.
It’s hard to imagine Major League Baseball inviting President Trump to throw out a ceremonial first pitch before any World Series games next month. And he definitely won’t be tossing the coin before the Super Bowl next February. Over the weekend, Trump ignited a firestorm in the sports world by harshly criticizing the NFL for failing to punish players who take a knee during “The Star-Spangled Banner.” Then he withdrew his invitation to Stephen Curry of the NBA champion Golden State Warriors to visit the White House because Curry was “hesitating” about accepting the invitation. Curry’s teammates subsequently announced that none of them would go to the White House but instead would use the team’s February trip to Washington to “celebrate equality, diversity, and inclusion.” On Saturday night, an Oakland A’s catcher Bruce Maxwell became the first MLB player to take a knee during the anthem. On Sunday morning, Trump was back at it, calling on fans to boycott NFL games.
The president’s latest comments shouldn’t be surprising—but his deliberate inflammation of tense situations is no less stunning.
During last year’s presidential campaign, I conducted a running feature called the “Trump Time Capsule.” Its purpose was to chronicle the things Donald Trump said or did that were entirely outside the range of previous presidents or major-party nominees. This, in turn, was meant to lay down a record of what was known about this man, as the electorate decided whether to elevate him to presidential power.
By the time the campaign ended, the series had reached installment #152. Who Donald Trump was, and is, was absolutely clear by election day: ignorant, biased, narcissistic, dishonest. As Ta-Nehisi Coates argues in our current issue, everyone who voted for him did so with ample evidence about the kind of person they considered the “better” choice, or even as a minimally acceptable choice for president. Almost nothing Trump has done since taking office should come as a surprise.
More comfortable online than out partying, post-Millennials are safer, physically, than adolescents have ever been. But they’re on the brink of a mental-health crisis.
One day last summer, around noon, I called Athena, a 13-year-old who lives in Houston, Texas. She answered her phone—she’s had an iPhone since she was 11—sounding as if she’d just woken up. We chatted about her favorite songs and TV shows, and I asked her what she likes to do with her friends. “We go to the mall,” she said. “Do your parents drop you off?,” I asked, recalling my own middle-school days, in the 1980s, when I’d enjoy a few parent-free hours shopping with my friends. “No—I go with my family,” she replied. “We’ll go with my mom and brothers and walk a little behind them. I just have to tell my mom where we’re going. I have to check in every hour or every 30 minutes.”
Those mall trips are infrequent—about once a month. More often, Athena and her friends spend time together on their phones, unchaperoned. Unlike the teens of my generation, who might have spent an evening tying up the family landline with gossip, they talk on Snapchat, the smartphone app that allows users to send pictures and videos that quickly disappear. They make sure to keep up their Snapstreaks, which show how many days in a row they have Snapchatted with each other. Sometimes they save screenshots of particularly ridiculous pictures of friends. “It’s good blackmail,” Athena said. (Because she’s a minor, I’m not using her real name.) She told me she’d spent most of the summer hanging out alone in her room with her phone. That’s just the way her generation is, she said. “We didn’t have a choice to know any life without iPads or iPhones. I think we like our phones more than we like actual people.”
At a game played in London on Sunday afternoon, many of their fellow Ravens and Jaguars took a knee.
Before the Lions met the Falcons in Detroit on Sunday, Rico LaVelle sang “The Star-Spangled Banner.” And then he took a knee.
They were replicating the gesture of Colin Kaepernick, the former 49ers quarterback who, starting in 2016, had been kneeling during the pre-game singing of the national anthem. “I am not going to stand up to show pride in a flag for a country that oppresses black people and people of color,” Kaepernick explained. “To me, this is bigger than football and it would be selfish on my part to look the other way. There are bodies in the street and people getting paid leave and getting away with murder.” Kaepernick’s 49ers teammates, Eric Reid and Eli Harold, took a knee. The Beaumont Bulls, a high school team, took a knee. Their collective protests, however, had been limited—deviations from the norm.
The contest between Luther Strange and Roy Moore raises the question of who has more sway with Trump’s base: the president or conservative firebrands like Steve Bannon?
MOBILE, Ala.—Outside the Von Braun Center in Huntsville, Alabama, on Friday night, a man stood holding a sign.
Under the word “MOORE,” it read “Make America Great Again” and “Yes,” in big, bold red white and blue letters. Under “STRANGE,” it said “Mitch,” and “No,” in a faint gray scrawl. This was outside a rally where President Trump was scheduled to campaign for one of the candidates in Alabama’s special Senate election—and it wasn’t Roy Moore.
Like a dubious nutrition label designed to satisfy FDA requirements while convincing shoppers that their granola bars are all-natural, the sign outside the Huntsville rally didn’t exactly lie. It just elided the truth. And it’s a perfect snapshot of the mindset in Alabama right now, where Moore, the ultra-conservative judge made famous by his crusade to keep a monument to the 10 Commandments displayed at the state’s supreme court, is running against Senator Luther Strange in the race to fill Attorney General Jeff Sessions’s old seat, for which Strange was appointed as the seat-warmer. Strange, a remarkably tall but otherwise not particularly distinctive former state attorney general, is the establishment pick.
A new film details the reason the star postponed her recent tour—and will test cultural attitudes about gender, pain, and pop.
“Pain without a cause is pain we can’t trust,” the author Leslie Jamison wrote in 2014. “We assume it’s been chosen or fabricated.”
Jamison’s essay “Grand Unified Theory of Female Pain” unpacked the suffering-woman archetype, which encompasses literature’s broken hearts (Anna Karenina, Miss Havisham) and society’s sad girls—the depressed, the anorexic, and in the 19th century, the tubercular. Wariness about being defined by suffering, she argued, had led many modern women to adopt a new pose. She wrote, “The post-wounded woman conducts herself as if preempting certain accusations: Don’t cry too loud; don’t play victim.” Jamison questioned whether this was an overcorrection. “The possibility of fetishizing pain is no reason to stop representing it,” she wrote. “Pain that gets performed is still pain.”