A wide swath of media figures have cited economists Carmen Reinhart and Kenneth Rogoff's January 2010 finding that a country's economic growth becomes impaired when its debt level exceeds 90 percent of gross domestic product. But the Reinhart-Rogoff paper is premised on an Excel error, revealed when other researchers reviewed the data underlying the commonly-cited debt-to-GDP threshold claim.
Austerity proponents, such as House Budget Chairman Paul Ryan (R-WI), frequently claim that a debt-to-GDP ratio of 90 percent signals economic doom, using Reinhart and Rogoff's work as leverage for imposing sharp cuts that economists agree would do serious harm to economic growth. Media coverage of budget and economic policy throughout the past three years has also repeated that claim, often without a direct connection to the Reinhart-Rogoff work from which the notion derives.
But that work, arguably the lynchpin of the case for imposing austerity in order to deliver economic growth, is crippled by basic errors, as the Roosevelt Institute's Mike Konczal explains:
From the beginning there have been complaints that Reinhart and Rogoff weren't releasing the data for their results (e.g. Dean Baker). I knew of several people trying to replicate the results who were bumping into walls left and right - it couldn't be done.
In a new paper, "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff," Thomas Herndon, Michael Ash, and Robert Pollin of the University of Massachusetts, Amherst successfully replicate the results. After trying to replicate the Reinhart-Rogoff results and failing, they reached out to Reinhart and Rogoff and they were willing to share their data spreadhseet. This allowed Herndon et al. to see how how Reinhart and Rogoff's data was constructed.
They find that three main issues stand out. First, Reinhart and Rogoff selectively exclude years of high debt and average growth. Second, they use a debatable method to weight the countries. Third, there also appears to be a coding error that excludes high-debt and average-growth countries. All three bias in favor of their result, and without them you don't get their controversial result. [...]
So what do Herndon-Ash-Pollin conclude? They find "the average real GDP growth rate for countries carrying a public debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0.1 percent as [Reinhart-Rogoff claim]." Going further into the data, they are unable to find a breakpoint where growth falls quickly and significantly.
Rogoff and Reinhart responded to the criticism, which has since been criticized as a weak rebuttal. But now that those numbers are known to be wrong, the litany of media outlets which have cited them have an opportunity to reexamine their coverage of the austerity premise. Print media, notably The Weekly Standard, The Washington Post, San Francisco Chronicle, and Atlanta Journal-Constitution, have frequently reproduced the Reinhart-Rogoff thesis in covering budget and economic policy. Television and radio media have made frequent use of the Reinhart-Rogoff paper, including prominent mentions on NPR, CNN, and Fox Business.
The Reinhart-Rogoff threshold has long been challenged by fellow economists, such as former Federal Reserve economist Joseph Gagnon, Paul Krugman, and Josh Bivens and John Irons of the Economic Policy Institute, on the grounds that it gets the directionality of causation exactly wrong. These and other economists argue that high debt levels are a consequence of prolonged weak GDP growth, rather than its cause.
As the Center for Economic and Policy Research's Dean Baker notes, however, the newly discovered errors obviate these more intricate economist responses to Reinhart-Rogoff: "we need not concern ourselves with any arguments this complicated. The basic R&R story was simply the result of them getting their own numbers wrong."
Writing in the Atlanta Journal Constitution, syndicated radio host Neal Boortz perpetuated the myth that tax cuts increase revenue to bolster his argument that the Bush tax cuts "worked." Economists have said the Bush tax cuts reduced revenue and had little positive impact on the economy.
Several media figures and outlets have provided Fox News contributor Newt Gingrich a forum to discuss his opposition to the inclusion of a public option and increased insurance regulations in health care reform legislation. But those media have not noted that that his Center for Health Transformation -- a for-profit entity that Gingrich founded and reportedly profits from -- receives annual membership fees from several major health insurance companies, which have a financial interest in preventing the implementation of those policies.
The Atlanta Journal-Constitution reported that Sen. John McCain appeared at a rally in support of Sen. Saxby Chambliss (R-GA), but the article did not note that McCain reportedly criticized as "disgraceful" and "reprehensible" a campaign ad Chambliss used during his 2002 race against then-Sen. Max Cleland (D-GA).
The Atlanta Journal-Constitution reported that the Democratic Senatorial Campaign Committee has purchased ads in support of Georgia Democratic senatorial candidate Jim Martin and quoted Republican Sen. Saxby Chambliss's assertion that Democrats will spend "millions and millions on the airwaves to try to discredit me." But the article did not note that the National Republican Senatorial Committee is reportedly launching a new ad attacking Martin, or that the DSCC and NRSC have reportedly committed similar amounts of money thus far to the Georgia race.
The Atlanta Journal-Constitution reported as fact the false allegation that Sen. Harry Reid received political contributions from Jack Abramoff. While Reid received contributions from Abramoff's firm's PAC (to which Abramoff did not contribute) and from some of Abramoff's partners and clients, a Center for Responsive Politics breakdown of Abramoff's donations confirms that Abramoff himself made contributions only to Republicans, not Democrats.
The Atlanta Journal-Constitution uncritically quoted a Republican National Committee spokeswoman's false assertion that Senate Majority Leader Harry Reid "took nearly $68,000 from [former Washington lobbyist Jack] Abramoff." In fact, Abramoff made contributions only to Republicans, not Democrats.