Reinhart-Rogoff Rebuttal Says UMass Critics Politicized Debt
Harvard University economists Carmen Reinhart and Kenneth Rogoff have defended the technical aspects of a 2010 paper that’s been cited in the U.S. and Europe to bolster arguments to drive down budget deficits, saying their critics have “politicized the issue.”
“Our critics seem to suggest that they can ignore everything else we have done because we are somehow going around placing great emphasis on one outlier estimate for growth,” Reinhart and Rogoff wrote in a New York Times Op-Ed piece today. “This is wrong. We have never used anything but the conservative median estimate in our public discussions.”
The economists acknowledged on April 17 that they had inadvertently left some data out of their calculations in the study, in response to a paper released on April 15 by three researchers from the University of Massachusetts at Amherst. Still, the error didn’t change the basic findings of their research, they said.
Reinhart and Rogoff today addressed the technical issues raised by their critics -- Ph.D. candidate Thomas Herndon and professors Michael Ash and Robert Pollin -- in particular that they had committed serious errors of “selective exclusion of available data” and “unconventional weighting of summary statistics.”
“Growth in a Time of Debt” concluded that countries with public debt in excess of 90 percent of gross domestic product suffered measurably slower economic growth. It has been cited by U.S. House Budget Committee Chairman Paul Ryan and European Union Economic and Monetary Affairs Commissioner Olli Rehn in defense of their arguments against high budget deficits.
The study “included both median and average estimates for growth, at various levels of debt in relation to economic output, going back to 1800,” Reinhart and Rogoff said today. “The paper gave significant weight to the median estimates, precisely because they reduce the problem posed by data outliers.”
The risk in the current focus on deficit reduction, say exponents of more stimulus, is not only that Congress squanders the chance to borrow at record-low costs to bolster the economy and make lasting investments for the future.
A study by University of California at Berkeley economist Bradford DeLong and and former Treasury Secretary Lawrence Summers concluded that stimulus could generate so much growth that it would pay for itself.
The economists’ message has so far had little influence on the debate in Washington, where lawmakers clash in standoff after standoff over how to reduce, not expand, the federal budget. As much as $85 billion of spending cuts this year started on March 1 after Congress and President Barack Obama failed to agree on a deal to postpone the reductions or come up with a like amount of deficit reduction.
Nobel laureate Paul Krugman argued that the economy needed a bigger jolt as Obama, advised by Summers, was putting together a spending proposal in early 2009, and has continued to be one of the most vocal critics of fiscal cuts.
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