AUSTERITY’S GRIP: When blue-chip economists Carmen Reinhart and Kenneth Rogoff published a 2010 paper making the case for austerity, the report was seized upon by conservative economists, politicians like Mitch McConnell and Paul Ryan, and deficit hawks Alan Simpson, Erskine Bowles and Pete Peterson. The authors argued that when the ratio of public debt to GDP exceeds 90 per- cent, economic growth falls dramatically. With the United States and European nations nearing or exceeding that number, government efforts to stimulate the economy through traditional deficit-financed jobs programs would thus lead to slower growth, higher unemployment and worse debt.
But austerity’s theoretical underpinnings have been exposed as flimflam, constructed out of egregious spreadsheet error and goofy logic. Thomas Herndon, a graduate student in economics at the University of Massachusetts, recently discovered that Reinhart and Rogoff omitted basic and crucial data. A working paper by Herndon and his professors Michael Ash and Robert Pollin, a longtime contributor to The Nation, shows that average rates of growth for countries with 90 percent public-debt-to-GDP ratios between 2000 and 2009 were in fact comparable to—or higher than—those for countries with debt ratios from 30 to 90 percent.
Reinhart and Rogoff admitted their errors but claimed, incorrectly, that it remains true that high public debt levels are correlated with slower growth. In fact, as sensible economists observed when their study first came out, correlation is not causation. Government deficits and public debt rose as a result of the financial crisis, not as a cause. The International Monetary Fund, once a bastion of austerity economics, has admitted its errors, warning that austerity is sabotaging recovery. Will the Fix the Debt austerity claque do the same?
Don’t count on it. When asked about the discredited paper, Bowles maintained that he relies on “common sense and my own personal experience”—a dubious expertise given his failure, as a director of Morgan Stanley, to foresee the housing bubble and bust that devastated the economy.
We will be freed of austerity’s grip only when those in power return to fact-based politics and hear much more from the unemployed and the immiserated, and much less from bankers and their favored economists. KATRINA vanden HEUVEL
SACK COACH SAC! Perhaps the most disturbing feature of the Steubenville High School rape trial involving members of the school’s storied football team wasn’t the crime itself so much as the complicity of those close to it. Symbolic of this unholy marriage of jock culture and rape culture was the revered Big Red football coach Reno Saccoccia, who didn’t seem to care that his players could have treated a 16-year-old girl this way. Many believed that he would, at the very least, lose his job for apparently failing to report the sexual assault. Instead, on April 19, “Coach Sac” was granted a two-year contract extension by the Steubenville school board. The decision was made even as a grand jury prepares to assess whether he and others obstructed justice in the case.