June 1st, 2013
12:51 PM ET

Krugman on spat with Rogoff, Reinhart

Watch the full interview on GPS this Sunday on "Fareed Zakaria GPS" at 10 a.m. and 1 p.m. ET on CNN

Fareed speaks with Nobel Prize-winning economist and New York Times columnist Paul Krugman about his row with economists Ken Rogoff and Carmen Reinhart.

All right.  I have to ask you about this, the spat between two celebrity economists, Ken Rogoff and Carmen Reinhart. [The] essay which talked about the tipping point at 90 percent debt to GDP, at which countries start growing much, much more slowly. I want to first ask you – they wrote a letter back, because you’ve criticized them...

Right.

…for feeding this austerity mania, which has caused governments to slash spending.  And they say, you have engaged in spectacularly uncivil behavior in the past few weeks.  “You’ve attacked us in very personal terms, virtually non-stop.  You’ve doubled down.  Your characterization of our work is selective and shallow. It’s deeply misleading.”

Now Rogoff and you were graduate students in MIT together, right?

Yes. Right. And we were actually, all of us were graduate students at MIT together.  Almost everybody you’ve heard of.  It’s a village. It’s kind of scary.

So what does it feel like to be embroiled in this?

It’s very unpleasant, because Ken is a magnificent economist.  He’s done fabulous work over the years. And then this one paper, which was thrown out hastily, unfortunately, is the one that has had the greatest impact on policy debate…The fact of the matter is this one result – claimed result – which is that growth falls off a cliff when debt exceeds 90 percent of GDP, that’s what the world picked up. And that result is false. That result is clearly not true. There is a mild negative correlation between debt and growth, but that cliff doesn't exist. It never existed in the data. It certainly isn’t anything anyone should believe now.

That paper of theirs did a lot of damage by giving people who didn't want stimulus, who didn't want any kind of expansionary policy, a way to scare their opponents, to say if we don't do it my way, we'll go over the 90 percent line and terrible things will happen.

And my problem now with Carmen and Ken is that while they’ve said a lot of things that indicate more flexibility, they have never, to my knowledge, said clearly, OK, there is no cliff at 90 percent. And we really need that from them. For them to say, look, you know, we think debt is dangerous, we think it’s a problem. But 90 percent, that was an artifact of some things in our original calculation that don’t appear in subsequent work.

Are you surprised how personal this has gotten?

No, the stakes are high. I guess from my point of view, they went pretty far out on a limb with work which is far weaker than everything else in their careers. And, unfortunately, that became what they’re known for. And then if you said, well, this is really bad work and this had a deleterious effect on policy, which I believe to be the truth, how can it not be personal?

Let me say it, by the way – who cares, right? I mean who cares about my feelings or Carmen Reinhart’s feelings or Ken Rogoff’s feelings? We’re having a global economic crisis which is not over, which we have handled abysmally. We have massive long-term unemployment in the United States. We have massive youth unemployment in Southern Europe.

I don’t think the question of how civil a bunch of comfortable academic economists who went to MIT in the mid-1970s…I don’t think that matters at all compared to the question of the substantive issues and are we doing this wrong, which I think we are.

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Topics: Economy

soundoff (42 Responses)
  1. sand

    krugman is a jew and he must be killed death every jewish child.

    June 1, 2013 at 2:28 pm | Reply
    • GEORGE THORN

      OMG, I CAN'T BELIEVE YOU'D SAY ANYTHING LIKE THAT,..... OR EVEN THINK IT. HORRIBLY SAD.

      June 1, 2013 at 5:42 pm | Reply
      • j. von hettlingen

        Paul Krugman is very intelligent. He was right about the seriousness of the crisis the world's economy is in. His outspokenness had brought him quite a few harsh critics. Yet he's right, there are bigger problems in this world than a bruised ego.

        June 4, 2013 at 9:32 am |
      • PBMAc

        Why was this post allowed to be displayed? Clearly it is hate speech.

        June 9, 2013 at 1:59 pm |
    • michael groom

      I apologize on behalf of every non-Jewish person for the rantings of this anti-semite. No wonder Jews can become paranoid; you would think these comments went the way of the Third Reich.

      June 2, 2013 at 6:11 pm | Reply
    • Billy Bob

      Stop using internet then! The piece of equipment you've been using are invented with significant contribution by Jews (semiconductor technology). The electricity you use (nuclear power) was founded by Lise Meitner, the Jewish-Austrian woman kicked out of Germany because of her Jewish heritage.

      June 2, 2013 at 8:12 pm | Reply
      • PBMAc

        As I said, it is hate speech and it doesn't belong here. NOBODY should have to be subjected to that kind of thing here or any other public place.

        June 9, 2013 at 2:03 pm |
    • Plato Binks

      He doesn't actually think that. He's just running for King of the Trolls.

      June 2, 2013 at 10:01 pm | Reply
    • Tom Bleakley

      Would you be so kind to tell us about your background? As one deeply interested in psychiatry and psychology, I would like to be able to understand this irrational and terrible bigotry and hatred that seethes inside you. Additionally, you need professional help and I suggest you get it.

      June 3, 2013 at 3:11 am | Reply
    • JR_in_Mass

      Doesn't anyone monitor this board? This kind of comment deserves to be removed and the commenter banned.

      June 3, 2013 at 6:38 pm | Reply
      • Mjshep

        Amen.

        June 9, 2013 at 1:26 pm |
  2. GEORGE THORN

    I don't think any of these, too smart for their own good guys, get it. The problems are deep but not that complicated. The collateralized debt instruments depended on models that didn't include commodity pricing fluctuations effect on debt stability. So that when gas went over $4 in the summer of 07, 08, don't remember, the economy froze which in turn clobbered the CDO's. Combine that stupidness with the actual cost of free trade and you manufacture an inevitable collapse. That's all behind door number one, we need to try a different door, maybe door number two.

    June 1, 2013 at 5:52 pm | Reply
    • dstraws

      You can't remember if it is O7 or 08 and can't be bothered to look it up, why should anybody care what else you say.

      June 2, 2013 at 6:35 pm | Reply
    • Plato Binks

      Yes, obviously $4/gallon is a magic threshold beyond which the economy collapses. I'm sure you have an Excel spreadsheet which proves this.

      June 2, 2013 at 10:03 pm | Reply
    • simplesimon

      anybody who tries to conflate gas prices (a commodity) and CDO's (an investment vehicle) is so laughably, ridiculously, incredibly misinformed about anything even close to basic economics (but throws around important-sounding words to impress the stoopid people) deserves to be either tarred and feathered or immediately deleted for rank ignorance.

      June 3, 2013 at 12:03 am | Reply
      • John Lewis

        I am actually a rather unconsequential economist, and have advanced that as a economic argument (Urban Economics). It is a relatively traditional textbook model, which I obviously did not develop (Alonso-Muth model) He isn't(I wasn't) conflating commodity prices of RBOB (gasoline) with Collateralized Debt Obligations. In this case a home is (or even commercial real estate as well is/was impacted) the Asset which backs the security. But the model does say that the value of a piece of urban real estate is related to its commute costs. Lower gasoline prices do encourage sprawl (decrease the cost/penalty of commuting), which we had for most of the housing bubble....(Up to 2006) the commodity spike for 2 years...both 08 and 07 (peaking in 08) did I believe cause the housing bubble to burst... Every economist who works for say Case Shiller knows of this.... in fact the fact that this was known might have really accelerated the collapse...as computer models that built a real estate bust into rising gasoline prices sold off the CDO's, as the commodity markets heated up.

        June 5, 2013 at 12:07 am |
  3. rightospeak

    Most of these economists are good for nothing or we would not be in the trouble that we are in, if they were ignored . No mention of spending money on endless wars that brought us to bankruptcy, no mention of offshored jobs. One does not need a PhD in economics to know that if you spend more than you get paid you will face bankruptcy sooner or later , that unless offshored jobs return the economy is not going to get better, printing dollars by the ton by the Fed can bring on a horrible inflation a la Weimar Republic, shorting gold by paper gold speculation bubble is an opportunity for some but your yo-yo economists keep silent about it. The only economist that makes any sense is the one you guys are trying to shut up- Dr. Paul C. Roberts. He recently wrote a book that is on amazon.com that explains what is really going on.

    June 2, 2013 at 6:23 pm | Reply
    • Some Body

      You definitely don't need a PhD in economics to spout out the bunch of BS you've just written, rightospeak. There's literally not one true sentence in your entire litany (as much as I'd like to agree with you on the wars, even that is not the case – the US is nowhere near bankrupt and is not expected to be any time soon – and the rest is just a basic misunderstanding of what national debt is). There was a time when people were embarrassed to show their ignorance. Now they take pride in it.

      June 2, 2013 at 6:33 pm | Reply
  4. Bob in SE PA

    If the disgracefully anti-semetic remarks of the anonymous and ignorant coward "Sand" are not removed posthaste, I will never return to cnn.com nor will I ever again tune in to CNN TV. And BTW I am not Jewish.

    June 2, 2013 at 8:11 pm | Reply
    • C_Tircuit

      Not to mention the death threat. I'm surprised as well that there is no moderation or way to mark comment as dangerous or offensive.

      June 2, 2013 at 8:26 pm | Reply
      • John

        Yes it is disgusting (of course the comment is) that CNN hides behind their "Terms of Service " policy to permit open discourse. "But you agreed to be civil" We expect this of certain blogs, but this irresponsibility on the part of a player with the size and influence of CNN is very disturbing.

        June 2, 2013 at 9:21 pm |
  5. rlindsl

    This is not a substantive forum. I would recommend Alphaville in the Financial Times if you want to read more indepth Economic discussion. The Khan academy has some econ classes that are pretty accessible. Most conservatives understand Keynesian economics, the tax cut part during a contraction, so there is some hope. The unfortunate thing is that we have a tiny fraction of our population with incredible power who throw the "mom and Pop at the dinner table balancing their budget" as "economics". It ain't. It is similar to comparing Newtonian mechanics to quantum physics, Newtonian mechanics don't have entanglement and juxtapositions, like personal finance doesn't have "set your mortgage rate" or "increase money supply".

    Our National dialogue is mostly one of profound ignorance. We should not charge tuition for higher education, it is making our Nation stupid, profoundly ignorant and unfortunately proudly so, as if doing math is a sign of weakness. R&R made a math error and then stood by the incorrect answer even after being exposed.

    Cutting Public spending during a contraction, is as wrong as raising taxes on lower incomes, both take more spending out of the economy at precisely the wrong moment. A rising GDP (as is currently being shown) is the best way to cut debt, much more effective then trying to cut spending. It is complicated and requires math literacy to understand. Those who oppose this idea are either innumerate or disingenuous.

    June 2, 2013 at 9:56 pm | Reply
  6. NativeSonKY

    First of all, I am NOT in any way smart enough to get into an economics debate with anyone. I just wonder if allowing corporations to stash their money in tax havens overseas, while collecting that money from sales in the United States, which should be taxed and contribute to the country, isn't a recipe for disaster? I am sure it's not the whole problem, but somehow it seems that it would be unlawful. I'm sure if I tried to not pay my taxes I'd be in jail. I just don't see why those who generate all that money – the people who work and pay bills and buy goods, and keep these corps. afloat, can't expect them to pay into the system like we all do. If corporations are people, aren't American corps. American people?

    June 2, 2013 at 11:04 pm | Reply
    • qed

      Lets visit another place here ... to jog everybody awake!

      The ABSOLUTE anti-God and the so high-so-called-moral ABSOLUTE God-Allah-Fearing – now and have always been French Kissing in the bedrooms – the biggest 521 Million Hogs/Year pork eaters in the world and the most anti-pork in the world – FRENCH KISSING - what a farce ha haaa hhaaaaa !

      CLEAR EVIDENCE!

      What Taliban Wiseman are we looking at, but, illiterates !!!

      On May 24, 2013, this writer had detailed the case of a Chinese supervisor, Lee Ping, as being the first foreigner to be involved in a blasphemy case in Pakistan (POK actually).

      The writer had also speculated whether Mr. Lee would be able to escape the justice meted out to those guilty of blasphemy by doing a kind of Raymond Davis act.
      Lo and behold, Mr. Lee has been able to do just that.
      Two news items, one tucked away in the inner pages and the other more prominent, have escaped the notice of most.
      The more prominent item was that EXIM Bank of China has signed an agreement with the Government of Pakistan to provide 448 million dollars for the 969-megawatt Neelum-Jhelum Hydropower Project.
      Hello! This is the same project being executed by – you guessed it – Mr. Lee's company.
      The other news item, tucked away in the middle pages, was that Mr. Lee had been found not guilty of charges of blasphemy and released.
      Quite Easily Done.
      The views expressed in the above article are that of Mr. Salim Haq.
      By Salim Haq (ANI)

      June 3, 2013 at 2:05 am | Reply
    • MoeizW

      You've hit the nail on the head! Now, once you figure that stashing profits overseas and not paying taxes is a recipe for disaster, our economic and political elites need to come up with rationale as to why corporations can get away with this; this is called supply-side economics and austerity – economies need to work for the benefit of individuals and corporations (bank bailouts, tax havens, low tax rates, right-to-work laws) at the detriment of everyone else (cut funding for EVERYTHING).

      June 3, 2013 at 7:27 am | Reply
  7. QED

    The ABSOLUTE anti-God and the so high-so-called-moral ABSOLUTE God-Allah-Fearing – now and have always been French Kissing in the bedrooms – the biggest 521 Million Hogs/Year pork eaters in the world and the most anti-pork in the world – FRENCH KISSING - what a farce ha haaa hhaaaaa !

    CLEAR EVIDENCE! QED PERIOD! DUMB PERIOD!

    What Taliban "Wiseman FROM WIZEIRISTAN" are we looking at, but, illiterates !!!

    On May 24, 2013, this writer had detailed the case of a Chinese supervisor, Lee Ping, as being the first foreigner to be involved in a blasphemy case in Pakistan (POK actually).

    The writer had also speculated whether Mr. Lee would be able to escape the justice meted out to those guilty of blasphemy by doing a kind of Raymond Davis act.
    Lo and behold, Mr. Lee has been able to do just that.
    Two news items, one tucked away in the inner pages and the other more prominent, have escaped the notice of most.
    The more prominent item was that EXIM Bank of China has signed an agreement with the Government of Pakistan to provide 448 million dollars for the 969-megawatt Neelum-Jhelum Hydropower Project.
    Hello! This is the same project being executed by – you guessed it – Mr. Lee's company.
    The other news item, tucked away in the middle pages, was that Mr. Lee had been found not guilty of charges of blasphemy and released.
    Quite Easily Done.
    QED

    June 3, 2013 at 2:01 am | Reply
    • QED

      i.e.

      The intimately and innately hypocritical society of Pakistan – FRENCH KISSING – The gleeful and porkfull China for last 55 years!!!!

      June 3, 2013 at 2:12 am | Reply
      • Max

        Is this guy talking code about some kind of plot? Seems more likely than what he's saying makes sense, even to himself.

        June 3, 2013 at 8:41 am |
  8. Eclectic Obsvr

    I think Krugman nailed it when he made the point about hurt feelings not mattering in the bigger picture. For my own take, I think he has been less harsh with them than others– e.g Dean Baker. What I think is outrageous is that their own testimony in various forums contradicts what they assert in the letter about never saying what they've been accused of saying. Pure speculation, but I think they wanted a Nobel and thought that debt studies where the vehicle and that led them to be a little to anxious to get out front on an issue and explains why they are so defensive now.
    R & R did bad work in the first place and never really answered some of the initiial criticism so when it was found that the actual research data analysis was flawed they were already set up for verbal beatings. Also, I think too many Economists are just jealous of Krugman.

    June 3, 2013 at 10:30 am | Reply

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