Back in 2010, Harvard economists Carmen Reinhart and Kenneth Rogoff published research that seemed to go against everything we thought we knew about how to respond to recessions, depressions and economic downturns.
Keynesian ecomonics, as proven out by Roosevelt during the Great Depression, and common sense as well, tells us that in times of economic slowdown in the private sector, increased government spending will help restimulate the economy.
Reinhart and Rogoff's study, counter-intuitively and incorrectly, contends the opposite - that government spending must be cut, and debt must be paid down as quickly as possible before the private sector can emerge from its downward trend.
This study has been used as proof for conservatives globally (and in the US) to justify harsh austerity measures that have resulted in the suffering of many.
In the U.S., conservatives who were content to let Republican President George W. Bush not only blow a huge budget surplus, but spend us into a huge hole and derail our whole economy, have fetishized debt cutting under Democratic President Obama. Remember, none of them took issue when Republican Vice President Dick Cheney said "deficits don't matter."
It's almost as if Republicans want to keep strangling the economy to justify killing social safety net programs, cutting regulations and taxes and to play party politics.
Two new studies from the Univesity of Michigan and University of Massachusetts debunk Reinhart and Rogoff's work and bolster what we at the Shank, and people like Nobel prize-winning economist Paul Krugman have been arguing for years, that the best, most effective way to get out periods of economic decline is through robust increases in goverment spending.
So the larger question is, why is this study from these Harvard economists so bad? Are they just terrible economists or were they simply trying to fix data to support austerity, and if so, why?
And finally, and most importantly, now that we know that austerity only makes things worse, what are we (and the world) going to do about it? Or will the mainstream media continue to use the conservative framing of the economic crisis - that is has something to do with debt when data shows that the opposite is true?