PAUL KRUGMAN DEBUNKS PRINCIPLE STUDY THAT HIGH DEBT MEANS NO GROWTH OR SLOW GROWTH
Filed under: Alan Greenspan, Austerity, Austerity fiasco, Carmen Reinhart, Debt and Growth: A Response to Reinhart and Rogoff Responding To Our Critics, Harvard Spending Study, Kenneth Rogoff, Michael Ash, Milton Friedman, Paul Krugman, Reinhart and Rogoff: Responding to Our Critics, Reinhart-Rogoff Study, Robert Pollen, The Excel Depression, Thomas Herndon, Uncategorized, Univerity Of Mass Study
For at least three years now Republicans in Congress have been calling for reductions in spending at a time the economy was weak despite assertions that a reduction in government spending would hurt the recovery and the people dependent on it. This call for a slash in spending at any cost to defense and entitlements was based on a study by two Harvard proffessors (Reinhart-Rogoff) who published a paper that alleged that when spending exceeded 90% of the Gross National Product a tipping point would occur and the economy would go in to a decline. Recently it has been revealed that the economists made fundamental errors in Excel coding and materials included in the study that showed it be wrong. Paul Krugman, a Nobel Prize winning economists points out in a N.Y. Times Op-Ed article as follows;
“So the Reinhart-Rogoff fiasco needs to be seen in the broader context of austerity mania: the obviously intense desire of policy makers, politicians and pundits across the Western world to turn their backs on the unemployed and instead use the economic crisis as an excuse to slash social programs.
What the Reinhart-Rogoff affair shows is the extent to which austerity has been sold on false pretenses. For three years, the turn to austerity has been presented not as a choice but as a necessity. Economic research, austerity advocates insisted, showed that terrible things happen once debt exceeds 90 percent of G.D.P. But “economic research” showed no such thing; a couple of economists made that assertion, while many others disagreed. Policy makers abandoned the unemployed and turned to austerity because they wanted to, not because they had to.” All based on statistical errors and an Excel coding error.
THE FULL ARTICLE CAN BE FOUND HERE
The Excel Depression http://nyti.ms/116mPk5
THE TAKE AWAY: THIS SAME BLIND BOWING TO AN ALLEGED AUTHORITY FIGURE LED THE REAGAN ADMINISTRATION TO EMBRACE AND PROMOTE THE FREE MARKET ILLUSIONS OF MILTON FRIEDMAN, WHICH LED TO THE SAVINGS AND LOAN CRISIS UNDER BUSH I, THE LONG TENURE OF THE BESOTTED FREEMARKETEER ALAN GREENSPAN, THE SAVAGING OF THE BOND MARKET BY WALL STREET AND THE COLLAPSE OF THE ECONOMY UNDER BUSH II. SO AGAIN WE HAVE A FLAWED ECONOMIC REPORT USED BY THE 1% TO LOWER TAXES AND CUT SPENDING ON UNEMPLOYENT COMPENSATION, ENTITLEMENSTS AND EVEN DEFENSE TO PROTECT THEIR INTERESTS TO THE DISADVANTAGE OF THE 99%.
Reinhart and Rogoff: Responding to Our Critics http://nyti.ms/17ZGGEm
Debt and Growth: A Response to Reinhart and Rogoff Responding To Our Critics http://nyti.ms/ZSGaXU (UMASS proffessors responding to Reinhart defence on austerity policy.)
Take Away: Reinhart and Rogoff made excel mistakes and excluded data to reach a conclusion: A conclusion that conservative politcians in Europe and The United States are trying to make into law and policy that will damage our economies. China didn’t follow Reinhart et. al. and injected money into their economy and are growing faster that Western economies.