About that R/R paper: “everyone should have been suspicious from the start”

About that R/R paper: "everyone should have been suspicious from the start"

by digby

This is such a heavy news week that it's hard to know what to focus on at any given moment. But I really hope that this exposure of the Reinhardt- Rogoff paper as a fraud doesn't get lost in all the shuffle. (Actually it probably won't, at least among the policy wonks because it's a really juicy story that raises many questions about ... everything.)

Anyway, there has been a lot written about it this week, but I think Krugman does the right thing by also focusing on the fundamental political problem:

The fact is that R-R was controversial right from the beginning; and very early on, although we didn’t know about the coding error, we knew that they had made a major blooper by citing the US contraction after World War II as an example of debt overhang, when it was actually just postwar demobilization. That should have made everyone suspicious from the start.

Yet the VSPs not only grabbed hold of the alleged result, they wrote again and again as if this highly disputed claim was a known fact. Thus just a few months ago the Washington Post, attacking those who wanted to reduce the focus on deficits, wrote,

If [debt projections are] even slightly off, debt-to-GDP could keep rising — and stick dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth.
Not “some economists”, let alone “some economists who have been sharply criticized by other economists with equally good credentials”, but “economists”.

This is deciding what you want to believe, finding someone who tells you what you want to hear, and pretending that there are no other voices. It’s deeply irresponsible — and you can’t blame Reinhart-Rogoff for that mistake.

The fact is that there is often disagreement among scientists and academics and it's not easy to know who to believe if you're a layperson. But this one wasn't really that difficult because even if it was correct, the policies the VSPs were producing (and using the report as evidence for their necessity) wouldn't address the problem. Cutting Social Security won't solve the problem of soaring health care costs and lord knows Europe has shown that austerity only makes deficits worse. You don't have to be an economist to see that this entire argument served as an excuse to do what people wanted to do anyway.

After all, the Reinhart-Rogoff Debt Paper was published in 2010. President Obama said this in early 2009:

President-elect Barack Obama will convene a "fiscal responsibility summit" in February designed to bring together a variety of voices on solving the long term problems with the economy and with a special focus on entitlements, he said during an interview with Washington Post reporters and editors this afternoon.

"We need to send a signal that we are serious," said Obama of the summit.

Those invited to attend will include Senate Budget Chairman Kent Conrad (N.D.), ranking minority member Judd Gregg (N.H.), the conservative Democratic Blue Dog coalition and a host of outside groups with ideas on the matter, said the president-elect.

Obama's comments came in a wide-ranging, hour-long interview that came just five days before he will be inaugurated as the 44th president of the United States and become the first African American to hold that title.

Obama said that he has made clear to his advisers that some of the difficult choices--particularly in regards to entitlement programs like Social Security and Medicare - should be made on his watch. "We've kicked this can down the road and now we are at the end of the road," he said.

The desire to use the financial crisis as an excuse to dramatically cut future spending, particularly on the "welfare state" was on the agenda long before R/R wrote that paper.  They just conveniently supplied some new reasoning for what the politicians already wanted to do.