REINHART AND ROGOFF: We Never Said Austerity Was The Only Solution

Wikimedia CommonsEconomists Carmen Reinhart and Ken Rogoff have been the targets of vicious attacks after UMass graduate students exposed in error in their research.

Specifically, Thomas Herndon, Michael Ash and Robert Pollin found that Reinhart and Rogoff made a computational error in their 2010 paper “Growth in a Time of Debt.”

This paper has been used around the world by political leaders to advance austerity because it appeared to show that economic growth slowed significantly when debt–to-GDP exceeded 90%.

Since the UMass paper was published, Reinhart and Rogoff have furiously defended their work, arguing that their basic conclusion connecting high debt with low growth is intact.

In a new op-ed in the New York Times, Reinhart and Rogoff continue their defence.

They address the topic of austerity head on by noting that they never specifically made a call for austerity:

The politically charged discussion, especially sharp in the past week or so, has falsely equated our finding of a negative association between debt and growth with an unambiguous call for austerity.

We agree that growth is an elusive goal at times of high debt. We know that cutting spending and raising taxes is tough in a slow-growth economy with persistent unemployment. Austerity seldom works without structural reforms — for example, changes in taxes, regulations and labour market policies — and if poorly designed, can disproportionately hit the poor and middle class. Our consistent advice has been to avoid withdrawing fiscal stimulus too quickly, a position identical to that of most mainstream economists.

In some cases, we have favoured more radical proposals, including debt restructuring (a polite term for partial default) of public and private debts. Such restructurings helped deal with the debt buildup during World War I and the Depression. We have long favoured write-downs of sovereign debt and senior bank debt in the European periphery (Greece, Portugal, Ireland, Spain) to unlock growth.

So, while you may criticise them for their Excel error, you should be careful not to associate all of the world’s ills their work.

Indeed, Reinhart and Rogoff write that the attacks have gone too far.

Our research, and even our credentials and integrity, have been furiously attacked in newspapers and on television. Each of us has received hate-filled, even threatening, e-mail messages, some of them blaming us for layoffs of public employees, cutbacks in government services and tax increases. As career academic economists (our only senior public service has been in the research department at the International Monetary Fund) we find these attacks a sad commentary on the politicization of social science research. But our feelings are not what’s important here.

Read the whole Op-Ed at

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