Unbelievable! Bowles and Simpson Release New Deficit-Reduction Plan Based on Discredited Austerity Research

By Lynn Stuart Parramore

April 21, 2013  |  On April 19th, just after I had written about how the key academic research used to bolster austerity policies was exposed by a 28-year-old grad student at U Mass-Amherst [3], I got a surprise in my email inbox: Erskine Bowles and Alan Simpson giddily announced their new deficit-reduction plan, which includes, among other things, a recommendation to increase the eligibility age for Medicare. Their plan would reduce debt as a share of GDP below 70 percent by 2023, and as the Washington Post  [4]reports [4], “seeks far less in new taxes than the original, and it seeks far more in savings from federal health programs for the elderly.”

 

What’s incredible is that over the last week, the study by Harvard economists Carmen Reinhart and Ken Rogoff that famously warned of the dangers of government debt has been proven to be riddled with errors and questionable methodology. To recap: R&R’s paper purported to show that countries with public debt in excess of 90 percent of gross domestic product suffered negative economic growth. Austerity hawks everywhere used it to justify cuts that have cost people jobs and vital services. The original spreadsheet used by R&R was obtained by a U Mass grad student, who found that in addition to the mistakes already noted by several economists, there was a coding error in their Excel spreadsheet that significantly changed the results of their study.