The fight for economic justice passed a grim milestone this week. On June 1 sequestration—the automatic spending cuts passed by Congress and implemented by the president—marked a second month of pain for tens of millions, with no end in sight.
The cruel irony is that there was never reason for the cuts. A pivotal study used to justify sequestration was entirely discredited as failing basic mathematical standards only weeks after the drastic cuts began. Yet rather than retrench and reevaluate, Washington continues on the same dangerous, evidence-free economic path while Americans suffer needlessly. After only eight weeks of what’s supposed to be 120 months of budget cuts, sequestration shows just how damaging bad information in the wrong hands can be.
In order to see the scale of what went wrong, it’s important to first review the scope of the harm caused.
There are the big trends: Economic growth last quarter was lower than forecast in part because of sequestration. Unemployment remains high and job growth held back by the newly imposed austerity measures. Consumer confidence, a key indicator for where our economy is headed, has been schizophrenic since the beginning of the year as individuals attempt to make sense of how the cuts will impact them.
But while these top line numbers are unsettling, the localized impact on millions of lives in countless communities is even more shocking and absurd. Thousands of Medicare cancer patients are being denied treatment because of sequestration. These are people already in the fight of their lives, and American austerity has made it that much more difficult. As Jeff Vaicra, head of an oncology practice in New York told the Washington Post, “A lot of us are in disbelief.”
That sense of disbelief extends to Head Start—the early education program for children of the working poor—where 70,000 pre-schoolers are on track to be denied a place. According to Education Week, one program in Alton, Ill., near St. Louis will have to eliminate half the slots in one of its Head Start Centers.
Across the federal government, from health to unemployment benefits to scientific research the story is much the same. The only agencies exempt are the Defense Department and the Federal Aviation Administration—which houses the nation’s air traffic controllers—due to special lobbying and powerful friends. For all the rest, it’s a grim tally.
Though these cuts are astounding, what’s truly outlandish is that there’s no basis for them at all.
As I have written, the present chaos in government has been the right wing’s true aim for 30 years. Their hope is that widespread dysfunction will bring the federal government to its knees. Sequestration is actually a political goal masquerading as an economic one.
But the hidden nature of their goals actually places the right in a conundrum. Because their ideas are more economic fiction than fact, they need the stamp of approval from economic experts in order to be taken seriously. That’s where a report by esteemed academicians Carmen Reinhart and Kenneth Rogoff comes in. It provided the legitmacy of statistics to what is essentially a project to rebalance political power.
In 2010 Reinhart and Rogoff issued a paper entitled “Growth in a Time of Debt, ” which argues that economic growth slows as countries borrow more. Key to their findings was the so-called 90 percent rule. It holds that economic decline ensues when a nation’s total debt is equal to 90 percent of its annual economic output, or GDP as its formally called. Though it’s a technical point, it was just the type of data-driven blundgeon that the Republican Party needed to discredit the Democrats’ pro-growth stimulus spending.
During last year’s campaign, Mitt Romney and Paul Ryan used the 90 percent rule to attack President Obama. Their leading economic advisor, Michael Borkin, wrote just days before the election that “high debt burdens harm the economy considerably more when debt gets above 90 percent or so of GDP.” Earlier this year, John Boehner echoed this sky-is-falling critique in a memo to his caucus to bolster the case for sequestration. He declared “immediate action to address the debt is required to begin to put our country back on a footing for economic growth.”
The problem is that Reinhart and Rogoff’s claims are bogus. As Nobel Prize-winning economist Paul Krugman pointed out, many economists were skeptical of the pair’s results because no other economist could replicate them them. But it took a 28 year-old graduate student, Thomas Herndon, at the University of Massachusetts to put the nail in the coffin of their findings.
Herndon got ahold of the duo’s original numbers and formulas, and reran them. Surprisingly, it turned out that there was no cause and effect relationship between debt and economic growth, and absolutely no 90 percent rule. Why? Shockingly it’s because of a third grade mathematical error.
“It was literally an addition and division problem,” the graduate student told Al Jazeera last month. Reinhart and Rogoff failed to add up an Excel column and were dividing their total sum by the wrong number. Krugman wrote that their failure to add had caused “austerity mania.”
As a consequence, our economy finds itself in a wacky Alice in Wonderland-like place of adhering to economic rules for a world that doesn’t exist. It would not be a stretch to argue that one piece of dodgy data hasn’t done this much damage since the Iraq War.
But rather than make a U turn and figure out something new, Washington has left the country on autopilot. The good news is there’s not a shred of real evidence to support sequestration. Now we just need someone to stand up and do something about it.