Economic Analysis and Competition Policy Research

Home   •   About   •   Analytics   •   Videos

Did you ever notice that the same neoliberal economists are quoted routinely by economics reporters in the mainstream press? Take Ken Rogoff. He guest authors pieces on public policy at Brookings, is a professor at Harvard, semi-frequently authors op-eds, and is widely quoted in the media. While not quite as high profile as his colleagues Jason Furman and Larry Summers, Rogoff has been extremely impactful. 

To give you an idea, I have compiled some statistics on the number of times famous economists have been quoted in the New York Times and Wall Street Journal since January 2020.

EconomistNew York TimesWall Street Journal
Jason Furman187156
Larry Summers153164
Angus Deaton5012
Joseph Stiglitz4216
Kenneth Rogoff2034
Isabella Weber86
Note: Search results for each economist in pieces since Jan 1, 2020. Current as of June 25, 2024.

As the table shows, Rogoff has been quoted 20 times in the New York Times since the start of the pandemic, trailing Nobel prize-winning progressives Angus Deaton and Joseph Stiglitz by only a small margin. Rogoff’s quotes in the more conservative Wall Street Journal exceeds these progressives, despite their international acclaim. (The table also shows the dependency of these papers of record on Furman and Summers, two Obama-appointed centrists—and disciples of deregulator extraordinaire Robert Rubin—who often reject the progressive policies of Biden.) In any event, the 34 quotes from the Wall Street Journal in a little over four years is an impressive display of influence.

In 2010, Rogoff co-wrote, with Carmen Reinhart, a paper titled “Growth in a Time of Debt” that came to define the acceptable boundaries  of fiscal policy in the 2010s. And, while Rogoff has complained about being dismissed as an austerity-peddler, the fact remains that he and Reinhart became the go-to citation for governments when they slashed welfare spending and imposed sharp cost controls. The analysis that Rogoff and Reinhart (R&R) lean on was flawed from the start, however, and, for anyone without an Ivy League professorship, their oversight probably would have been career-ending. Despite efforts to substantiate his claims about the relationship between debt and growth rates in more recent work, huge methodological and theoretical issues remain. That Rogoff continues to be treated as a credible voice on economic issues is a striking indictment of our media ecosystem.

A Fundamentally Flawed Study

“Growth in a Time of Debt” was published to great fanfare when it came out with the financial crash of 2008 just barely in the rearview. The paper claimed to find a damning reason to pump the brakes on aggressive debt-financed government stimulus programs: When a country’s debt exceeds 90 percent of GDP, R&R asserted, its growth rate takes a massive hit, estimated at a drop of roughly three percentage points annually compared to countries below the cutoff—from 2.9 percent growth for countries with ratios between 30 and 90 percent to -0.1 percent growth for countries with ratios above 90 percent. 

When a student and two professors at the University of Massachusetts—Thomas Herndon, Michael Ash, and Robert Pollin (HAP)—failed to reproduce those findings, they dug into the data and in 2013 found something else instead. R&R had made significant errors in their Excel sheet and sampling that inflated the number. R&R’s calculations excluded several years of data from New Zealand which, when included, lowered the difference in growth rates for countries above and below a 90 percent debt-to-GDP ratio from around three percentage points to just one percentage point. As noted above, R&R estimated real GDP growth to be -0.1 percent for countries with more than 90 percent debt-to-GDP; after correcting R&R’s inaccurate data, the UMass researchers found that the real figure was 2.2 percent. After corrections, the difference between real growth rates for countries above the 90 percent threshold, compared to countries with ratios below 90 percent, shrunk from three percentage points to one percentage point. 

Rogoff and Reinhart did, in fairness, admit the error and correct it, making the same argument but with less dramatic figures. With other colleagues, they also produced more work that continued to show a similar trend. Even absent computational issues, however, there are still methodological issues and theoretical shortcomings that they never overcame. 

For a start, R&R made a causal claim based on only correlational data, as several economists have pointed out. It could be the case that weaker growth leads to more government debt, rather than the reverse. Additionally, that R&R largely treated debt levels as a binary—either equal to or above 90 percent of GDP or below 90 percent of GDP—rather than a continuous variable could play a role. If they were to use debt levels as a continuous variable, they could model a relationship that reveals how each additional point of the debt-to-GDP ratio correlates to growth rates. Their method, however, merely sorted countries into two buckets: those with a “debt overhang” (their term, seemingly coined here, for when debt/GDP is greater than 90 percent) and those without. Then they more or less just took the averages (the averages were country-weighted in the original R&R). 

R&R’s arbitrary 90 percent threshold is also worth discussing. For a start, the way that this threshold is determined is somewhat ambiguous, but it seems pertinent that when R&R published their most influential paper in 2010, that was a level that seemed to be fast approaching for many wealthy countries. Yet when HAP corrected the computational errors, the entire difference in growth rates was determined by the extreme outliers—that is, countries with debt-to-GDP ratios below 30 percent or above 120 percent. The UMass paper showed that, without those extreme outliers, there was no longer any strong correlation between debt and economic growth. 

Another issue with the use of debt-to-GDP is that it does not account for government assets. Governments can raise revenue at any point by selling off ships, planes, tanks, land, buildings, and more or by selling intellectual property rights or exclusive leasing or permitting to companies. That there isn’t a serious effort to do so after countries hit that 90 percent threshold (or even go well past it) seems to indicate that in practice, the impacts of a debt overhang are preferable to taking extreme measures to stay below the red line. 

Now R&R have insisted that they were never pushing austerity—and in fairness, they did include the caveat that fiscal stimulus should have been rolled back slowly. They never seemed to mind, however, that they were made famous by politicians like former Speaker of the House Paul Ryan and former British Chancellor George Osborne, who constantly cited R&R as a reason to impose austerity as rapidly as they could. In the wake of the controversy created by HAP’s 2013 debunking of “Growth in a Time of Debt,” journalist John Cassidy pointed out how R&R’s protestations in response to the austerity-pusher critiques completely clashed with the way R&R had marketed the paper when it was first published. Indeed, R&R were among 20 economists who publicly backed Osborne’s austerity policy in an open letter to The Sunday Times in February of 2010. 

The revelation of terrible data management and the defensive response from R&R was enough for Cassidy to question whether listening to any economists at all was worthwhile. You would think, at the very least, economic reporters would discount R&R’s opinions on fiscal matters, but they haven’t even done that. For a mistake that would have likely derailed anyone with a less impressive pedigree, R&R have bounced back, still producing research, still pushing a (somewhat) toned down version of their argument from “Growth in the Time of Debt,” and still opining on economic policy in the media. Rogoff, in particular, is still quoted aggressively (as shown in the table above) and is using the new era of high interest rates to try and resurrect his old pet theory. 

Old Wine in New Bottles

To be clear, unsustainably high levels of debt can be extremely problematic. But remember, that is not what R&R were saying. They were arguing that countries that experienced a debt overhang suffered long-term (economically significant) negative effects to their growth rates. Trying to use present circumstances to say, “See, we were right all along and all those people who decried our calls for fiscal responsibility were fools,” which is essentially what Rogoff has argued in a couple of op-eds this year, relies on a mischaracterization of both what R&R actually said and what their critics argued. In particular, Rogoff points to Adam Tooze using the word “austerity” over 100 times in his book Crashed. It is true that not all fiscal responsibility is austerity, and that not all austerity is fiscally responsible. But when Rogoff says things like Biden and Trump would both “blow up the debt,” he’s clearly hinting that mere “responsibility” is not all that he’s after. 

After President Biden’s 2024 State of the Union address, Rogoff told Bloomberg that “Biden’s speech suggested blowing up the debt.” This is simply false, as Biden called for his policy proposals to be funded by higher taxes on the wealthy. Plus, this story ran after the president released his budget proposal, which includes cutting the deficit by $3 trillion annually. Maybe, Rogoff was interviewed before that, but anyone serious about advising policy as a neutral expert would have offered an updated statement. Would the debt continue to grow under Biden’s plan? Yes. Would it “blow up”? No.

And while Rogoff also asserts that Trump would likely blow up the budget, he includes the caveat that “we really have no idea what Donald Trump will do.” Anyone who creates this level of false equivalency between Biden and Trump on responsible budgeting is either oblivious or a total hack. Rogoff is known for Republican leanings; he advised John McCain in 2008 and reportedly “warmed up” to Trump after he took office. 

Add it all up and we have a conservative economist who helped create a global push for austerity trying to resurrect that narrative, implying that Biden is no better than Trump on budget issues. 

Rogoff’s legacy is one of creating cover for conservative governments to prematurely abandon fiscal stimulus, leaving millions of people out of work. What rocketed “Growth in a Time of Debt” to its high status among economists was how clear and dramatic it found the risk of high debt to be. That was proven to be bunk. But it was deeply rooted in the ethos of the austerity movement, so much so that the hawks at the Committee for a Responsible Federal Budget felt the need to defend their own position in the wake of the R&R controversy. Why is Rogoff still in reporters’ rolodexes?