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.
The class divide is already toxic, and is fast becoming unbridgeable. You’re probably part of the problem.
1. The Aristocracy Is Dead …
For about a week every year in my childhood, I was a member of one of America’s fading aristocracies. Sometimes around Christmas, more often on the Fourth of July, my family would take up residence at one of my grandparents’ country clubs in Chicago, Palm Beach, or Asheville, North Carolina. The breakfast buffets were magnificent, and Grandfather was a jovial host, always ready with a familiar story, rarely missing an opportunity for gentle instruction on proper club etiquette. At the age of 11 or 12, I gathered from him, between his puffs of cigar smoke, that we owed our weeks of plenty to Great-Grandfather, Colonel Robert W. Stewart, a Rough Rider with Teddy Roosevelt who made his fortune as the chairman of Standard Oil of Indiana in the 1920s. I was also given to understand that, for reasons traceable to some ancient and incomprehensible dispute, the Rockefellers were the mortal enemies of our clan.
A short—and by no means exhaustive—list of the open questions swirling around the president, his campaign, his company, and his family.
President Trump speculated on Tuesday that “if” the FBI placed a spy inside his campaign, that would be one of the greatest scandals in U.S. history. On Wednesday morning on Twitter, the “if” dropped away—and Trump asserted yesterday’s wild surmise as today’s fact. By afternoon, a vast claque of pro-Trump talkers will repeat the president’s fantasies and falsehoods in their continuing project to represent Donald Trump as an innocent victim of a malicious conspiracy by the CIA, FBI, and Department of Justice.
The president’s claims are false, but they are not fantasies. They are strategies to fortify the minds of the president’s supporters against the ever-mounting evidence against the president. As Laurence Tribe and Joshua Matz show in their new book about impeachment, an agitated and committed minority can suffice to protect a president from facing justice for even the most strongly proven criminality.
American society increasingly mistakes intelligence for human worth.
As recently as the 1950s, possessing only middling intelligence was not likely to severely limit your life’s trajectory. IQ wasn’t a big factor in whom you married, where you lived, or what others thought of you. The qualifications for a good job, whether on an assembly line or behind a desk, mostly revolved around integrity, work ethic, and a knack for getting along—bosses didn’t routinely expect college degrees, much less ask to see SAT scores. As one account of the era put it, hiring decisions were “based on a candidate having a critical skill or two and on soft factors such as eagerness, appearance, family background, and physical characteristics.”
The 2010s, in contrast, are a terrible time to not be brainy. Those who consider themselves bright openly mock others for being less so. Even in this age of rampant concern over microaggressions and victimization, we maintain open season on the nonsmart. People who’d swerve off a cliff rather than use a pejorative for race, religion, physical appearance, or disability are all too happy to drop the s‑bomb: Indeed, degrading others for being “stupid” has become nearly automatic in all forms of disagreement.
Despite what the president says, the question is answered.
Trump aides colluded with foreign governments.
This is a simple, straightforward statement, and by this point, it ought to be an uncontroversial one. There’s ample evidence on many fronts, from legal documents to reliable reporting. This doesn’t mean that a crime was committed, because, as Trump lawyer Rudy Giuliani and others have pointed out, collusion is not a crime per se. But it does mean that attempts to dismiss the Russia investigation as a witch hunt that lacks any evidence are not merely disingenuous—they’re simply wrong.
What do we mean by collusion? As the Columbia Journalism Review explored last year, there are a range of meanings, but a clean synthesis would be a secret compact or conspiracy with an illegal or deceitful aim. The examples of such cooperation, between Trump aides and agents of foreign governments, abound. So far, three people have pleaded guilty to lying to federal agents about it. The unresolved question, at this stage of the investigation, is not whether such cooperation was attempted; it’s how successful it proved, how large an impact it actually had, who was involved, and whether they broke any laws.
The president’s latest interview with Fox News highlights a dissonance in his thinking on free speech.
President Trump, who has portrayed himself as a defender of free speech andfoe of political correctness, told Fox News’s Brian Kilmeade in an interview aired Thursday that NFL players should bebarred from the field—and should perhaps even leave the U.S.—if they seek to protest.
“You have to stand proudly for the national anthem or you shouldn’t be playing,” Trump said in the interview. “You shouldn’t be there. Maybe you shouldn’t be in the country.”
Trump was commenting on a new NFL policy, unveiled Wednesday, to handle players who have kneeled, sat, or raised a fist inprotest during the playing of the national anthem before football games. Players will no longer be required to be on the field during the anthem, but if they do not stand, they could be fined. The president was generally positive about the policy, but added, “I don’t think people should be staying in locker rooms.”
The 9-year-old has built a huge following with profane Instagram posts, but the bravado of “the youngest flexer of the century” masks a sadder tale about fame and exploitation.
In mid-February, a mysterious 9-year-old by the name of Lil Tay began blowing up on Instagram.
“This is a message to all y’all broke-ass haters, y’all ain't doing it like Lil Tay,” she shouts as she hops into a red Mercedes, hands full of wads of cash. “This is why all y’all fucking haters hate me, bitch. This shit cost me $200,000. I’m only 9 years old. I don’t got no license, but I still drive this sports car, bitch. Your favorite rapper ain’t even doing it like Lil Tay.”
Referring to herself as “the youngest flexer of the century,” Lil Tay quickly garnered a fan base of millions, including big name YouTubers who saw an opportunity to capitalize on her wild persona. In late January, RiceGum, an extremely influential YouTube personality dedicated an entire roast video to Lil Tay.
The bombastic legal adviser to Stormy Daniels is taking cues from the era of O.J. Simpson and Monica Lewinsky.
On cable news these days, there are very few people who have approached President Trump’s ubiquity. In fact, there is only one, and his name is Michael Avenatti. (Stormy who?)
Avenatti is not the first attorney to understand how the publicity game is played. Litigators are often like this: brash, aggressive, and sophisticated media manipulators. But Avenatti is the first celebrity lawyer of the Trump age, and it’s for that reason that he has become ultra-famous: Everything to do with Trump becomes, for good or ill, a star. And so it is with Avenatti, who in the public imagination has become not just “Stormy Daniels’s lawyer Michael Avenatti,” but simply “Michael Avenatti,” and appears to live inside your TV set.
In the landscape where Mad Max: Fury Road was filmed, a scientist is trying to understand a natural phenomenon that has eluded explanation for decades.
One evening earlier this spring, German naturalist Norbert Jürgens strayed from his expedition in the Namib Desert. He walked away from his campsite beside Leopard Rock, a huge pile of schist slabs stacked like left-over roofing tiles, and into a vast plain ringed with red-burnished hills. He had 20 minutes of light left before sunset, and he intended to use them.
This next part may sound like a reenactment from a nature documentary, but trust me: This is how it went down.
Off by himself, Jürgens dropped down to his knees. He sank his well-tanned arms in the sand up to the elbows. As he rooted around, he told me later, he had a revelation.
At the time, I was watching from the top of Leopard Rock, which offered a bird’s-eye view of both Jürgens and his expedition’s quarry. Across the plain, seemingly stamped into its dry, stubbly grass, were circles of bare ground, each about the size of an aboveground pool. Jürgens, a professor at the University of Hamburg, was digging—and pondering—in one of these bare patches.
The president may not care that he is upsetting the safeguards against abuses imposed on federal agencies in the wake of Watergate—but the damage will prove lasting.
If Donald Trump was elected with any mandate, it was to shake up the orthodoxy—to challenge the establishment and its established ways of operating. To drain the swamp. What he actually delivers, however, may be transformation that even many of his supporters come to regret.
Nowhere has the mandate for change been more forcefully exercised than in the field of criminal and counterintelligence investigations of the president and his closest associates. His last tweet of the day on May 20 sounded more like a proclamation:
I hereby demand, and will do so officially tomorrow, that the Department of Justice look into whether or not the FBI/DOJ infiltrated or surveilled the Trump Campaign for Political Purposes - and if any such demands or requests were made by people within the Obama Administration!
The advent of a Euroskeptic government in a founding member state of the European Union may be a point of no return.
PARIS—Will a certain dream of Europe end with a bang or a whimper, with a calamity or a thousand paper cuts, with a grand dramatic moment or a tawdry local melodrama? That’s the question that has been swirling around in Europe ever since two populist, Euroskeptic parties triumphed in Italy’s national elections in March. The vote failed to produce a solid majority, plunging the country into weeks of confusing backroom negotiations that have made serious people despair and markets tremble. But this week, the anti-establishment Five-Star Movement and anti-immigrant League party, which joined together in an unsettling marriage of convenience last week, announced they’d picked Giuseppe Conte, an unknown lawyer, law professor and expert in “de-bureaucratization,” to be prime minister. On Wednesday, after weeks of twists and turns, Italian president Sergio Mattarella gave Conte a mandate to form a government. The deal isn’t entirely sealed and the government must pass a confidence vote in Parliament, but that’s likely to happen since the two parties have a majority, however slim.