Unbelievable! Bowles and Simpson Release New Deficit-Reduction Plan Based on Discredited Austerity Research
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, 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 reports, “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.
As New York magazine’s Jon Chait has pointed out, that same discredited research has been used by Bowles and Simpson to formulate their deficit-reducing austerity plans.
Let’s take a look at some ugly chronology.
January 2010: Reinhart and Rogoff release their famous paper, “Growth in the Time of Debt” (early versions of the paper had been circulating since 2009) to widespread acclaim.
February 2010: President Obama announces the Bipartisan National Committee on Fiscal Responsibility, otherwise known as the Simpson-Bowles Commission (also the Catfood Commission), chaired by Erskine Bowles and Alan Simpson.
June 2010: The notorious 2010 Toronto Summit takes place, in which G-20 leaders agree to pursue austerity policies instead of addressing the jobs crisis in the wake of the 2007-2008 financial meltdown.
December 2010: Bowles and Simpson release “The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform” which warned of increased government spending and called for cuts in benefits for the elderly, veterans and many government employees.
There is no question that Bowles and Simpson were doing their dirty work as the influence of Rogoff and Reinhart’s paper had given rise to a misguided Washington consensus on deficit reduction, and that they regularly cited the paper to add an academic sheen to their political recommendations.
There is also no question that Bowles and Simpson, two wealthy white men equipped with an outsized sense of their own entitlement, have always appeared shockingly out of touch as they have tried to foist “shared sacrifice” on the public (Simpson famously sneered that Social Security was a "milk cow with 310 million teats"). But do they not even turn on the news? Do they not employ some staff person who could warn them of beclowning themselves by sending out their package the same week as the Reinhart and Rogoff revelations?
Apparently, their prejudices and mental confusion are blithely immune to reality. Once reporters started to ask for explanations, Bowles came out with a breezy dismissal of those unpleasant incumbrances known as "facts." As reported on The Hill, Bowles said, “I have obviously read the report and have referenced it a number of times. I know they had a worksheet error in the report and my understanding is that does make a difference.”
Undaunted, Bowles and Simpson have launched a campaign to reignite congressional interest in a $2.5 trillion package of spending cuts and tax increases. Their plan represents the height of fiscal irresponsibility and moral insensibility given the current and growing retirement crisis Americans are facing, and it is particularly egregious given the new revelations about the academic underpinnings of their economic theory.
There has never been any economic justification for their cynical attempts to rob ordinary people of more of their hard-earned money, but now, as the intellectual dishonesty of cutting government spending in the name of deficit hysteria is on full display, Bowles and Simpson should be booed off the national stage once and for all.
How many people have suffered -- indeed, how many people have died? -- as a result of deficit hysteria promoted by the likes of Bowles and Simpson?