Finding a New Macroeconomics: (9) Reinhart, Rogoff, and Ideology

The discovery of an error in an influential research paper by Harvard University economists Carmen Reinhart and Kenneth Rogoff has sparked an academic firestorm. It’s time to sort through the wreckage. — Betsey Stevenson and Justin Wolfers [1]

In the last post in this series, we took a hard first look at the Reinhart/Rogoff thesis, introduced in early 2010, that ratios of public debt to GDP (PD/GDP ratios) over a threshold of 90% cause growth to decline.  This was an influential idea, swiftly gaining control of the political agenda around the world and becoming the alleged economic rationale for “austerity” in government. In the United States, it quickly became the Republican Party’s argument for its austerity-driven federal budget proposals.

My review of this controversial study and its conclusion found that Reinhart and Rogoff, from the outset, lacked a cogent theoretical basis for their idea. A review by the Economic Policy Institute in July of 2010 [2] concluded that the theory was both illogical and unsupported, and when an April 2013 paper by a U. Mass. Graduate student and his faculty advisors [3] revealed empirical errors they had found in the Reinhart/Rogoff study that invalidated the empirical basis for an alleged 90% tipping point, Reinhart and Rogoff admitted their mistakes and reluctantly backed away from that proposition.

Sorting through the wreckage is a larger task than U. of Michigan economists Stevenson and Wolfers seem to have in mind, or at least have discussed. The failure of the Reinhart/Rogoff data to prove their theory, once their errors were corrected, forces a thorough examination of the relationship between growth and public debt. The issues remaining on the table go well beyond fine-tuning statistical results; they extend deeply into the “science” of economics itself, all the way to the long-standing feud between the Keynesian macroeconomic theory of growth and its competitor, “supply-side economics.” As Dean Baker of CEPR put it: “The silly spreadsheet error was important because it allowed for a real debate.” [4]

One thing is certain: Correct data don’t lie, they can only be misinterpreted. To the extent the Reinhart/Rogoff data are sufficiently accurate — and despite their limitations Reinhart and Rogoff have been confident that they are — they reflect reality and, properly interpreted can be relied upon to help explain that reality and to refute false ideologies.

The Reinhart/Rogoff Legacy

The debate thus far is noteworthy for the confused tangle of reactions and ideas it has provoked, which to a large extent reflects substantial confusion within the discipline of macroeconomics on the causes of growth. Understandably, most of the media reports beginning in April 2013 dealt solely with the significance of the statistical errors. An early post by Ann Landrey, as did the subsequent Stevenson/Wolfers article, argued that the computer glitch had not seriously damaged the Reinhart/Rogoff thesis. [5] These were quickly followed by a flurry of articles announcing that a computer glitch had brought about the demise of the austerity doctrine. [6] Veteran Washington Post correspondent Robert J. Samuelson, however, walked us through the statistical issues and concluded: “What’s sobering about this brawl is that it settles nothing.” [7] Dean Baker threw up his hands and declared: “As a general rule, economists are not very good at economics,” adding:

The debt-to-GDP ratio can be thought of as something like the color of a house. Suppose Reinhart and Rogoff told us that people who lived in blue houses had 40 percent less income than people who lived in houses painted other colors. Presumably people would be skeptical of the results, but if their finding was really true, then we would probably want to encourage people in blue colored houses to paint them a different color. [8]

What mostly impressed me about the recent debate was that, despite having been raised in the earlier EPI paper, the crucial question of causality was neglected. Certainly “Top economists screwed up” was a far better headline than “Top economists misapprehend the cause of growth,” so the underlying issues were never destined for mass media. It is for such reasons, however, that there is broad public ignorance about economics, and so many of us are unable to distinguish between science and ideology.

Not many public commenters in this debate asked whether cutting back government spending could ever promote growth. As noted in the previous post, the argument that cutting back government spending will promote growth sufficient to counter a “90% threshold” effect, even if such an effect had been shown to exist, is analogous to the trickle-down argument that tax cuts for the rich and corporations will “pay for themselves.” In other words, the debate ignored the issue of what causes growth and what detracts from it, the fundamental issue in macroeconomics.

The Reinhart/Rogoff Perspective

Reinhart and Rogoff themselves are mainly responsible for deflecting this deeper discussion. Presenting their argument as a “stylistic fact” tended to avoid a direct debate on the austerity doctrine. They did not say that they reject Keynesian economics, but before errors were found in their study invalidating their “stylistic fact,” they pressed a decidedly “supply-side” view of the economic universe.

In their August 11, 2010 article — apparently written in response to the Irons and Bivens contention that GITD’s “90% threshold for gross government debt” rests on an “exceptionally shaky foundation” and “should not be used as a guide for U.S. fiscal policy” [9] — they argued that their study is both timely and impliedly significant because it has explored “the contemporaneous link between debt, growth, and inflation at a time in which the world[‘s] wealthiest economies are confronting a peacetime surge in public debt not seen since the Great Depression of the 1930s and indeed virtually never in peacetime.” And, they added:

One need look no further than the stubbornly high unemployment rates in the U.S. and other advanced economies to be convinced how important it is to develop a better understanding of the growth prospects for the decade ahead. [10]

Arguably, they implied, their study contributes to such a better understanding. Laid between the lines is the inference that levels of public debt (PD/GDP ratios) will be a crucial, if not the determinative, factor controlling U.S. growth and prosperity in the coming decade. However, they had been unable all along to offer a reasoned case that increases in public debt can cause employment and production to decline. It doesn’t read that way, but at this point they were basically trying to save their theory. It’s a very clever obfuscation, so I’ll spell it out:

1. The process by which declining income growth causes increased debt in the U.S., in the current circumstance of continuing deficits, is effectively axiomatic; declining private sector growth creates a corresponding reduction in federal income tax revenue which automatically leads to more federal debt. Reinhart and Rogoff know this, but they have no cogent argument for reverse causality — that growing debt causes growth to decline. Thus, they had no basis for disagreeing with the observation that Irons and Bivens listed as their first major finding:

The GITD report examines yearly growth and debt levels, with no allowance for an impact over time, or a more complicated dynamic relation between growth and debt. There is no compelling theoretical reason why the stock of debt at a given point in time should harm contemporaneous economic growth. (Emphasis added) [11];

2. The best they could do, to avoid abandoning their thesis altogether, was to offer bi-directional causality in support of their initial results:

But where do we place the evidence on causality? For low-to-moderate levels of debt there may or may not be one; the issue is an empirical one, which merits study.  For high levels of debt the evidence points to bi-directional causality. [12]

The unexplained assertion that high levels of debt cause growth to decline, the basis for their argument, could not be defended; but it could not be retracted either if they wanted to stay in the game. So they couched their challenge to the Irons and Bevins point in the concept of “bi-directional causality.”;

3. They then retreated behind the shield they had initially erected of the preeminence of econometrics, arguing that the core issue of causality between public debt and growth is essentially an empirical one, but then ducked that question entirely by electing not to test it empirically:

We examine average and median growth and inflation rates contempo-raneously with debt. Temporal causality tests are not part of the analysis. The application of many of the standard methods for establishing temporal precedence is complicated by the nonlinear relationship between growth and debt (more of this to follow) that we have alluded to. [13];

4. Here, they take the apparent “out” offered by Irons and Bevins, that their mistake was their reliance on contemporaneous data instead of looking for “temporal” or time-series correlation — i.e., if there is a problem, it’s not with their theory, but with the way they chose to test it.  At this point, though, they basically retracted their econometric position: If their study cannot show that very high public debt actually causes growth to substantially decline, because it merely correlates contemporaneous data, why did they ever maintain that it did? And if it couldn’t show that, what does it show?

This is a fascinating demonstration of how intelligent, creative thinking can attempt to save a bad economic idea. Actually, I believe Reinhart and Rogoff are correct that correlations of contemporaneous data, especially 200 years of it, contain elements of causality that would likely be more reliably demonstrated by a temporal study. It turned out that the major problem with GITD was not its econometrics — it was the theory. When the errors were corrected, the apparent 90% tipping point evaporated. Notably, Reinhart and Rogoff elected to jettison their econometric position before they would give up on their “idea.” In the end, though, nonsensical ideas that defy reality simply are not going to be borne out by real data.

Put another way, correct Keynesian growth theory prohibits factual support for the Reinhart/Rogoff idea, virtually ensuring that there had to have been mistakes in their study, a thought that may well have occurred to Herndon, Ash and Pollin when they decided to run a double-check on the Reinhart/Rogoff results.

Here, then, is the deeper Reinhart/Rogoff legacy: There is no basis in Keynesian macroeconomic theory for a causal relationship between aggregate public debt, even high public debt, and aggregate growth. Hence, as would be expected, their corrected study fails to show, over two hundred years for 44 countries, that such a relationship exists.

Moreover, the Reinhart/Rogoff “tipping point” theory is merely a variation (the inverse) of the austerity doctrine:

1. The “tipping point” theory: Increasing public debt (at high levels) leads to reduced growth;

2. The “Austerity” doctrine: Reducing public debt (at high levels) leads to increased growth.

The correction of the errors in their study is, therefore, enormously significant: To the extent their corrected study disproves the “tipping point” theory, it stands as disproof of the austerity doctrine itself.

There is an important caveat that must be added here: The corrected Reinhart/Rogoff study has revealed, as they point out, that throughout the entire range PD/GDP ratios, higher levels of public debt are consistently associated with at least modestly lower growth; this effect is demonstrated in the chart for the United States in the previous post (here). Thus, the question remains whether there actually is a compelling reason for the stock of public debt to harm subsequent growth.

There is indeed, but it is all but invisible in this debate between neoclassical Keynesians and supply-side promoters. It relates to the redistribution of wealth and income, which both sides in this debate have ignored. The surprising implications of inequality growth for the Reinhart/Rogoff debate are developed in my next blog post. But first, let’s finish reviewing the fallacies and consequences of ideological thinking. 

Growth, “Trickle-Down,” and the “Austerity Doctrine”

The Reinhart/Rogoff thesis does not merely rest on a “shaky” theoretical foundation, per Irons and Bevins; it rests on only an ideological one. It could have no merit unless income can grow without an increase in demand and demand can increase without income growth. Neither is possible, however, without an expansion of the money supply; such notions overlook the nature and role of the money supply in an economy, effectively assuming, to borrow an old cliché, that “money grow on trees.” [14]

 “The Law of Effective Demand”

John Maynard Keynes established, beyond any credible doubt, that the level of economic activity (and growth) depends on the level of effective demand. His reasoning was set forth in the third chapter of The General Theory of Employment, Interest, and Money; because of their length, I’ve posted the most important paragraphs from Chapter 3 separately and linked them (here).

Because of its infallibility, I’ll call Keynes’s rationale “The Law of Effective Demand.” It’s as irrefutable as “Say’s Law,” but explains a great deal more. In its most irreducible form, Say’s Law says: “Every sale is a purchase.” Reduced to its essence, The Law of Effective Demand says: “You can’t buy anything if you don’t have any money.” No, I’m not being facetious: If you want more growth, you need to create more demand and more employment. The private sector cannot do it without more money in circulation, and the government cannot do it without more progressive taxation and greater tax revenue. [15]

The current state of the U.S. economy serves to illustrate the point: More than four years since the Crash of 2008, interest rates remain extremely low in an effort to encourage investment and growth (although that is changing), but as nearly everyone from Ben Bernanke to Reinhart and Rogoff have acknowledged, the U.S. economy on its current course is, even as reckoned by neoclassical growth, [16] many years away from full employment. In a recent Oped, Paul Krugman explained how Ben Bernanke’s recent (June 2013) suggestion that he might tighten the Fed’s monetary policies and reduce its emphasis on stimulus has had an immediate contractionary impact. Even suggesting such a change, Krugman argued, was the wrong thing to do in a depression:

The trouble is that this is very much the wrong signal to be sending given the state of the economy. We’re still very much living through what amounts to a low-grade depression — and the Fed’s bad messaging reduces the chances that we’re going to exit that depression any time soon.

The first thing you need to understand is how far we remain from full employment four years after the official end of the 2007-9 recession. It’s true that measured unemployment is down — but that mainly reflects a decline in the number of people actively seeking jobs, rather than an increase in job availability. Look, for example, at the fraction of adults in their prime working years (25 to 54) who have jobs; that ratio fell from 80 to 75 percent in the recession, and has since recovered only to 76 percent.

Given this grim reality — plus very low inflation — you have to wonder why the Fed is talking at all about reducing its efforts on the economy’s behalf. [17]

The lesson here is the same as the lesson of the Great Depression. Krugman points here to the sustained inability of monetary policy to stimulate investment and growth over the last four years by offering virtually cost-free money. Investment is flagging because demand is not growing and is not expected to grow.

In the linked passages from his third chapter, Keynes also demonstrated a complete grasp of the mechanism for inequality growth. He understood that wealth and income concentration reduce aggregate demand (the aggregate “propensity to consume”). He appeared to clearly appreciate the drag that growing income and wealth concentration has on growth, and seemed to be only one lap around the track from finding a way to incorporate income distribution into his “full employment” model. He didn’t do that, however, so “mainstream” economics has regressed back into a neoclassical synthesis.

Because the Law of Effective Demand is a tautology, it is reflected in every piece of macroeconomic data ever generated, including the Reinhart/Rogoff database. Still, because he claimed to have solved the poverty problem, at their expense, the wealthy elite have disliked Keynes from the beginning and promoted ideas designed to undermine his General Theory; and at one level — the neoclassical level — the General Theory was vulnerable to such attacks. The two most influential of those ideas are invoked here:


This is the idea that the less corporate earnings and top incomes are taxed, the more the economy will grow. Conversely, it holds that higher taxes at the top will discourage investment and employment. This is a flat-out rejection of Keynes’s General Theory, which reasons that there will be no current investment in producing goods and services that are not expected to sell: Investments require the expectation of future profitability, expectations of future growth and profitability are constrained by experience, and experience is constrained by the Law of Aggregate Demand.

Trickle-down is not only based on faulty psychology, it is physically impossible: money is created and destroyed in specific ways. Trickle-down imagines that when the existing money supply is being used for contraction (i.e., redistributed into wealth and income at the top), the people below the top who are losing their share of the money supply will somehow magically increase their consumption, as if they still possessed that money, and the economy will somehow magically grow. [18] Thus, this is a “pixie dust” ideology that flatly violates the Law of Effective Demand.

Recent experience in the U.S. has provided ample and dramatic proof of that, as I pointed out in a recent blog post (here):

In their April 27, 2001 report “The Economic Impact of President Bush’s Tax Relief Plan” (The Heritage Foundation, Center for Data Analysis Report #0101, April 27, 2001, here), D. Mark Wilson and William Beach predicted that the Bush plan would significantly increase economic growth and family income while “substantially reducing federal debt.” In fact, they predicted, the Bush plan would greatly increase government revenue, so much so that “the national debt would effectively be paid off by FY 2010.” In other words, they argued that the Bush tax cuts would more than pay for themselves, by an incredible amount.

What actually happened, however, is that the federal debt, which was at about $6 trillion in 2001, increased to about $13.6 trillion by the end of 2010 (Treasury Directhere). The Heritage Foundation’s estimate of supply-side “stimulation” was off by almost $14 trillion, nearly one year’s GDP. In those years the economy suffered stagnation, not growth, climaxing with the Crash of 2008 and the Great Recession. [19]

Back in the 1960s, trickle-down mythology was generally understood by economists to be insensible; but one-half century later, just as we are learning how deadly it really is, it has gained the endorsement of influential economists and triumphed politically. Grover Norquist has famously obtained pledges from the vast majority of Republicans in Congress never to increase taxes (here); and Chris Mooney points to evidence that Mitch McConnell has endorsing trickle-down as the official economics of the Republican Party. As Mooney observes, trickle-down claims have moved well beyond the basic argument that cutting taxes at the top will encourage investment and growth, reaching the preposterous claim that a tax cut will actually more than “pay for itself” through growth and increased government revenues.  Mooney concludes:

It isn’t just misinformation about taxes, deficits, and how our economy came to ail so badly – though there’s plenty of that.  But we’re also talking about putting the entire U.S. economy and way of life in jeopardy on the basis of questionable economics. . . [20]

Although budget deficits and the national debt can be reduced either by cutting government spending or by raising taxes, it is noteworthy that neither side in the Reinhart/Rogoff debate discusses taxation; the only reference to taxation I can recall seeing is the fleeting reference by Reinholt and Rogoff to Robert Barro’s study on optimizing the choice between taxation and public borrowing. This debate has been almost entirely focused on the option of reducing debt by cutting government spending.


Austerity is the idea that cutting government spending can actually stimulate economic growth. Like trickle-down, this theory must contend with The Law of Aggregate Demand, and even more directly. Each spending reduction is itself a constrictive reduction in demand; so how might austerity stimulate growth, that is, “pay for itself”? Wikipedia (a recent addition, last modified on June 1, 2013) provides a reasonably objective description of the austerity idea [21], which can be summarized as follows:

1. High PD/GDP ratios can signify inadequate government “liquidity” to creditors;

2. In adverse conditions, governments can demonstrate liquidity by spending less and increasing tax revenues;

3. The macroeconomic effect of reducing government spending is to reduce growth and GDP, hence reducing the PD/GDP ratio;

4. Thus, austerity does not improve growth, unless growth improves pursuant to a controversial theory called “expansionary fiscal contraction”:

In macroeconomics, reducing government spending generally increases unemployment. * * * Under the controversial theory of expansionary fiscal contraction (EFC), a major reduction in government spending can change future expectations about taxes and government spending, encouraging private consumption and resulting in overall economic expansion.

The EFC theory, attributed to Francesco Giavazzi and Marco Pagano (1990), holds that in some circumstances “a major reduction in government spending that changes future expectations about taxes and government spending will expand private consumption, resulting in overall economic expansion.” [22] The abstract of the Giavassi/Pagano paper [23] elaborates:

According to conventional wisdom, a fiscal consolidation is likely to contract real aggregate demand. It has often been argued, however, that this conclusion is misleading as it neglects the role of expectations of future policy; if the fiscal consolidation is read by the private sector as a signal that the share of government spending in GDP is being permanently reduced, households will revise upward the estimate of their permanent income, and will raise current and planned consumption.

I doubt this theory has “often” been argued because, like trickle-down, it is extremely anti-Keynesian — it violates the Law of Effective Demand.  A permanent reduction in government spending means less economic activity and growth, so a perception of declining government spending would likely cause households (especially those dependent on small business income) to revise their expectations of future income downward.  Moreover, while growth expectations determine current and planned investment, current consumption is constrained by current income, especially for low- and middle-income households who have precious little ability in a depression to raise current and planned consumption, in response to anything.

Paul Krugman, perhaps America’s most vocal anti-austerian, in a recent Oped belittled a more recent (2009) Alesina/Ardagna version of expansionary fiscal contraction, “Large Changes in Fiscal Policy: Taxes Versus Spending” (2009), [24] along with the Reinhart/Rogoff study, for lacking a real-world factual foundation:

The dominance of austerians in influential circles should disturb anyone who likes to believe that policy is based on, or even strongly influenced by, actual evidence. After all, the two main studies providing the alleged intellectual justification for austerity — Alberto Alesina and Silvia Ardagna on “expansionary austerity” and Carmen Reinhart and Kenneth Rogoff on the dangerous debt “threshold” at 90 percent of G.D.P. — faced withering criticism almost as soon as they came out. And the studies did not hold up under scrutiny. By late 2010, the International Monetary Fund had reworked Alesina-Ardagna with better data and reversed their findings. [25]

The Institute for America’s Future, a progressive think tank, has also released an anti-austerity statement signed by over 460 American economists, arguing:

There is no theory of economics that explains how we can deflate our way to recovery. Businesses are not basing investment decisions on how much Congress cuts the debt in 2023. As Great Britain, Ireland, Spain and Greece have shown, inflicting austerity on a weak economy leads to deeper recession, rising unemployment and increasing misery.

In a deep recession, deficit reduction is a moving target. If you cut spending and consumer purchasing power in an already depressed economy, unemployment rises and revenues fall — and the goal of a smaller deficit keeps receding like a mirage in a desert. When private purchasing power is depressed by the aftermath of a financial collapse, only public investment can make up the gap.

The budget hawks have the sequence backwards. Public outlay for jobs and recovery come first, growth is restored, and revenues follow. Budget cuts in a deep slump lead only to a deeper slump. [26]

It is good to know that real economists are still out there, but they are fighting an uphill battle against the prevalent media and “big money” economics.

The Reckless Republican Plan 

Here is the familiar chart from Paul Ryan’s 2012 House budget proposal:

Pages from pathtoprosperity2013b

The first premise of this chart, represented by the down-sloping green line, is that austerity is the path to prosperity. The claim, released on the same day (March 20, 2012) by both Paul Ryan in the House Budget Committee’s Fiscal Year 2012 Budget Resolution (here) and James Pethokoukis of the American Enterprise Institute (here), is that that the budget plan will eliminate the national debt by 2050. This is an audacious replay of the Heritage Foundation’s predictions for the effect of the Bush tax cuts, and it suffers from exactly the same denial of economic reality.

Beyond the false claim that austerity will increase growth, the trickle-down and austerity ideologies also maintain that not doing austerity reduces growth, and this is where Reinhart and Rogoff and the other austerians come in.  The big red triangle and the upward-sweeping projection called “current path” represents that “debt as a share of the economy” will rise exponentially if the austerity path is not followed. By 2050, the assertion is, the PD/GDP ratio will rise to 350%. Importantly, as shown in post #8 in this series (here), Irons and Bevins (EPI) prepared a chart of all of the Reinhart/Rogoff observations of the U.S. PD/GDP ratio plotted against contemporaneous growth.

Significantly, that chart shows that since 1800 the public debt/GDP ratio has rarely exceeded 80%, and never exceeded 130%, the point it approached in 1946 immediately following WW II. After the record decline in 1946, the U.S. economy began to grow as the U.S. government pursued an expansionist policy with a top marginal income tax rate around 90% and heavy investment in a middle class economy; and the PD/GDP ratio declined rapidly thereafter. Thus, the high debt did not cause declining growth; instead, progressive taxation permitted improved growth and declining debt in following years.

It’s entirely unlikely that any government, without an extremely regressive tax system, could reach the point of holding debt at 350% of GDP (never mind 800% as projected by Ryan for 2080), which for the U.S. would be over $50 trillion, based on the current level of GDP); nor would it last very long if it did, as real growth would be greatly inhibited by the extremely high cost of servicing that much debt. Certainly, to avoid default, very highly progressive taxation would be required long before such a point was reached, if there were any rich people in the economy left to tax. But it’s worth asking: How could the U.S. have borrowed $50 trillion in the first place? And where, is it imagined, has the $50 trillion of borrowed money in this scenario gone?

This Republican plan even ignores the austerians’ own caveat that budget cuts should be accompanied by tax increases to help reduce the PD/GDP ratio and enhance liquidity; instead, the Ryan budget proposes huge tax cuts at the top. A double whammy of failed austerity and failed trickle-down, both guaranteed by the Law of Effective Demand, would virtually guarantee the rapid collapse of the already depressed U.S. economy.

This isn’t just non-economics, it’s sloppy non-economics. Such false, uneconomic ideas have gained more than a patina of legitimacy in the last 50 years, reflecting the degree to which the economics profession has fallen under the influence and control of wealth and serves the interests of wealth. The point of the supply-side (trickle-down and austerity) ideologies has always been to protect the rich and their corporations from taxation, and these ideologies have been hugely successful in doing so.

That success is evident here: This entire Reinhart/Rogoff debate, so far as I can determine, has taken place with no mention of taxation. Not only have the insights of John Maynard Keynes been all but forgotten, but the mediating role of taxation on inequality that Keynes and his contemporaries took for granted has also been forgotten. Today, virtually all economists continue to ignore the very real, and paramount, macroeconomic implications of income and wealth redistribution.

JMH – 6/12/2013 (edited, 6/13/2013; revised 6/20-29)


[1] “Refereeing Reinhart-Rogoff Debate,” by Betsey Stevenson and Justin Wolfers, Bloomberg, April 28, 2013 (here).

[2] “Government Debt and Economic Growth: Overreaching Claims of Debt ‘Threshold’ Suffer from Theoretical and Empirical Flaws,” by John Irons and Josh Bivens, Economic Policy Institute, Briefing Paper #271, July 26, 2010, pp. 1-2 (here).

[3] “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” by Thomas Herndon, Michael Ash, and Robert Pollin, Political Economy Research Institute (PERI), U. Mass. Amherst, April 2013 (here).

[4] “Excel Spreadsheet Error, Ha Ha! Lessons From the Reinhart-Rogoff Controversy,” by Dean Baker, The Blog, Huffington Post, May 27, 2013 (here).

[5] “A Study That Set the Tone for Austerity Is Challenged,” by Ann Lowry, The New York Times, April 16 (here); “Refereeing Reinhart-Rogoff Debate,” by Betsey Stevenson and Justin Wolfers, Bloomberg, April 28, 2013 (here).

[6] “Austerity Fanatics Refuse To Admit They’ve Just Been Completely Discredited,” by Mark Gongloff, The Huffington Post, April 22, 2013 (here); “Reinhart And Rogoff Make More Mistakes While Admitting To Research Flaws, by Mark Gongloff (report), The Huffington Post, April 22, 2013 (here); “Who Is Defending Austerity Now? The Excel error heard ’round the world has deficit-cutters backpedaling,” by Matthew O’Brien, The Atlantic, April 22, 2013 (here); “Austerity doctrine is exposed as flimflam,” by Katrina vanden Heuvel, The Washington Post, April 23, 2011 (here).

[7] “The Reinhart/Rogoff brawl,” by Robert J. Samuelson, The Washington Post, April 24, 2001 (here).

[8] “Reinhart-Rogoff One More Time: Why the 90 Percent Never Should Have Been Taken Seriously,” by Dean Baker, Center for Economic and Policy Research (CEPR), May 11, 2013 (here).

[9] “Government Debt and Economic Growth: Overreaching Claims of Debt ‘Threshold’ Suffer from Theoretical and Empirical Flaws,” by John Irons and Josh Bivens, Economic Policy Institute, Briefing Paper #271, supra, (here).

[10] “Debt and Growth Revisited,” by Carmen M. Reinhart and Kenneth Rogoff, VOX, August 11, 2010 (here).

[11] “Government Debt and Economic Growth: Overreaching Claims of Debt ‘Threshold’ Suffer from Theoretical and Empirical Flaws,” by John Irons and Josh Bivens, supra, p. 2.

[12] Debt and Growth Revisited, op. cit.

[13] Ibid.

[14] In thinking this through, consider that money is created and destroyed in specific ways, and that the level of economic activity at any point in time is constrained by the amount of money in active circulation.

[15] I’ll devote a post to this point soon: The government function of controlling income and wealth distribution is quite difficult in the advanced state of inequality growth in the United States. All income growth is now taking place high within the top 1%, and the economy is structurally hard-wired to ensure continuous, massive transfers of wealth, also mostly high within the top 1%.

[16] I.e., even not taking the additional growth of income and wealth inequality into account.

[17] “Et Tu, Bernanke?,” by Paul Krugman, Oped, The New York Times, June 24, 2013 (here).

[18] No, borrowing money and increasing household debt to provide the needed additional demand is not magic, but it just makes matters worse: It effectively defers the real income needed to support the demand.

[19] “Amygdalas Economicus: Perspectives on Taxation,” by J. M. Harrison, January 24, 2013 (here).

[20] Chris Mooney, The Republican Brain: The Science of Why They Deny Science – and Reality, John Wiley & Sons, NY, 2012, Ch. 10, “The Republican War on Economics,” p. 190.

[21] “Austerity,” Wikipedia, last modified June 1, 2013 (here).

[22] “Expansionary Fiscal Contraction,” Wikipedia, last modified March 13, 2013 (here). (The quoted language is from the Wiki-summary, not the authors.)

[23] “Can Severe Fiscal Contractions be Expansionary? Tales of Two Small European Countries,” by Francesco Giavazzi and Marco Pagano, NBER Macroeconomics Annual, Vol. 5, 1990, JSTOR, Chicago Journals, Abstract (here); For Giavazzi’s broader discussion of public debt issues, see also, “Fiscal Policy after the Financial Crisis,” Introduction by Alberto Alesina and Francesco Giavazzi, NBER conference held December 12-13, 2011 (here).

[24] “Large Changes in Fiscal Policy: Taxes Versus Spending,” by Alberto F. Alesina and Silvia Ardagna, NBER, Working Paper 15438, October 2009 (here).

[25] “The 1 Percent’s Solution,” by Paul Krugman, The New York Times, April 25, 2013 (here).

[26] “Jobs and Growth: Not Austerity,” Institute for America’s Future (here), February 1, 2013 (here).

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