Economy: Why is the left rejoicing over a coding error in an influential economic study showing how massive debt hurts economic growth? Because they think it will help open the spending spigot. Not so fast.
The 2010 study by Carmen Reinhart and Kenneth Rogoff found that sky-high national debt impinges on GDP growth. The economists’ findings have been widely cited by policymakers as a reason to hit the brakes on deficit spending.
But University of Massachusetts economists found that Reinhart and Rogoff made a coding error in their Excel spreadsheet, which affected the size of the economic hit once debt levels exceed 90% of GDP.
The left, on hearing the news, burst into a chorus of Hallelujahs.
Left-wing economist Dean Baker said the error should “be the cause for a major reassessment of the deficit reduction policies being pursued in the United States and elsewhere.”
A writer at Think Progress said the paper that “served as one of the principal intellectual justifications for austerity turns out to have been fatally flawed.”
MSNBC’s Steve Benen said Republicans should “reevaluate their misguided assumptions about slashing investments and hurting the economy.”
The liberals’ desire to parade this flaw is understandable, since they think the Reinhart/Rogoff study stands in the way of never-ending federal spending increases.
But Reinhart and Rogoff note that correcting the error still shows a connection between sky-high debt levels and slower growth. Nor was their paper the only one to show this relationship. Research by the International Monetary Fund, the OECD and others came to roughly the same conclusion.
And even those dancing a jig acknowledge that the country faces a long-term debt crisis.
The left’s favorite economist, Paul Krugman, recently admitted, “Eventually we do have a problem. The population is getting older, health care costs are rising…Something is going to have to give.”
The question is, when do you start dealing with it?
Krugman says don’t worry about the debt now, we can cope with that crisis somewhere down the road.
But that will only make the solutions more painful. As the Government Accountability Office put it, “the longer action is delayed the greater the risk that the eventual changes will be disruptive and destabilizing.”
That Reinhart and Rogoff made a coding error in one research paper on the subject doesn’t change that a bit.