THE BOOKS WERE COOKED
Johann Wagener 4-24-13
It turns out that austerity policies in times of financial hardship is counter productive to recovery. Except for the 1% who hoard the wealth needed for the 99% to recover.
In a “David and Goliath” story the truth was exposed by a graduate student who knew how to read Excel spread sheets.
An economic report that has been used frequently to justify austerity measures in the U.S. and Europe has one flagrant flaw: an Excel error.
The 2010 report by prominent U.S. economists Carmen Reinhart and Ken Rogoff, titled “Growth In A Time Of Debt,” argues that national economies whose public debt rises above 90 percent of GDP are doomed to stagnate.
But when a team of economists at the University of Massachusetts, Amherst tried to duplicate the study using the spreadsheet that Reinhart and Rogoff used, they soon saw that the rationale for austerity relied on significant errors. For instance, five countries—Australia, Austria, Belgium, Canada, and Denmark—were mistakenly excluded from the Excel calculations.
As Mark Gongloff points out, the coding error, as well as numerous other questionable aspects of the research, changes the report’s findings significantly:
The most important error appears to be a failure to include years of data that showed Australia, Canada and New Zealand enjoying high economic growth and high debt at the same time. Including all the years of data boosts New Zealand’s average economic growth rate under high debt to 2.58 percent, from negative 7.6 percent. Given the small amount of data used in Reinhart and Rogoff’s study, this has a huge impact on the overall findings.
For those of us who can’t; which includes most Republicans in Congress, Stephen Colbert does an excellent job in laying it out for us;