Tuesday, April 23, 2013

Conservative Pseudo-Scientific Economic B.S. is Exposed

I thought it was simply a stunning revelation last week that a mere graduate student, 28-year-old University of Massachusetts student Thomas Herndon,  could so easily un-cover the economteric failures of  blue-chip Ivy League and former IMF economists, which underpin the Paul Ryan budget and so many other Republican and Conservative debt-o-phobic and recession-exacerbating policies:  See "How a Student Took on Eminent Economists on the Debt Issue--And Won" (Reuters) It turns out that economic growth does not slow dramatically after debt-to GDP ratios rise above 90%, after all. 

Princeton economist and New York Times columnist Paul Krugman, who has been arguing all along that debt fears are exaggerated (at least in the U.S., where the luxury of being able to borrow in one's own currency makes low interest rates even lower), appears to have been powerfully vindicated by the discovery of this "statistical error"(!)  His April 21, 2013 piece, "The Jobless Trap" picks up on the latest news to drive home the political and ideological causes of the sluggish, jobless recovery:

"And let’s be clear: this is a policy decision. The main reason our economic recovery has been so weak is that, spooked by fear-mongering over debt, we’ve been doing exactly what basic macroeconomics says you shouldn’t do — cutting government spending in the face of a depressed economy. 
It’s hard to overstate how self-destructive this policy is. Indeed, the shadow of long-term unemployment means that austerity policies are counterproductive even in purely fiscal terms. Workers, after all, are taxpayers too; if our debt obsession exiles millions of Americans from productive employment, it will cut into future revenues and raise future deficits. 
Our exaggerated fear of debt is, in short, creating a slow-motion catastrophe. It’s ruining many lives, and at the same time making us poorer and weaker in every way. And the longer we persist in this folly, the greater the damage will be."

Similar simple-minded obsessions with debt have threatened to undermine common sense in Canada, at both federal and provincial levels.  Let's make sure that they don't get away with it.

1 comment:

Mark Crawford said...

P.S. Of course, high personal debt levels also help to account for the sluggishness of the recovery; people have less to spend and to save because of high debt due to mortgages, etc. But that does not imply that the government should throttle the economy in the name of reducing (public) debt. They are basically two separate things.