One Pagers

The Spreadsheet Goof Behind Global Layoffs

April 25, 2013 2:38 pm ET
As airport delays mount due to the sequester cuts, Republicans in Congress are still refusing to fix the sequester. Meanwhile, the study that GOP lawmakers used to justify such European austerity cuts to America -- a discredited report by economists Reinhart and Rogoff claiming that high debt levels slow economic growth -- continues to spark fallout and even jokes from Stephen Colbert after a graduate student caught simple errors in their Excel spreadsheet and reasoning. Here's what you need to know.

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European austerity for America doesn't make sense in real life or on paper.

Connect: Our leaders should be making budget decisions that reflect our values and sound policy.

Define: Politicians who want European-style budget cuts to America are using two economists' research that's been discredited -- because it was based on simple spreadsheet mistakes and bad assumptions.

Expose: Real life proves that massive spending cuts like the sequester mean massive layoffs, but Republicans in Congress keep pushing for them anyway so they can pay for more tax cuts for the rich.

Lead: The best way to deal with the deficit is to put Americans back to work, which our leaders should be doing anyway because we have a jobs crisis on our hands.


MYTH: "We need austerity cuts to bring our debt under this debt-to-GDP ratio of 90%."

  • This 90% ratio is a made-up tipping point that's been discredited, but politicians are clinging to it to justify massive European-style budget cuts to America. How is that austerity going for Europe?
  • Republican lawmakers keep citing this research by Reinhart and Rogoff, but the fact is that these economists made simple mistakes in their Excel spreadsheet and flawed assumptions that have been repeatedly exposed.
  • These errors include copying over wrong numbers into their Excel spreadsheet and accidentally leaving out the economies of entire countries in their data. In fact, once all their mistakes are fixed, their conclusions are wiped out.
  • The best way to deal with the deficit is to put Americans back to work -- which we should be doing anyway because we have a jobs crisis on our hands, not a debt crisis.

CLAIM: "The Reinhart-Rogoff conclusions about high debt causing slow growth are still valid, even after their original errors are corrected."

  • That claim is flawed, too -- there isn't a tipping point at that 90% debt-to-GDP ratio. The corrected math shows that there isn't a statistically significant dropoff in growth once the countries studied goes over the 90% debt-to-GDP threshold. The number difference is just due to chance.
  • If anything, once the errors are corrected, the data suggests the opposite -- that too little debt compared to the size of the economy is associated with slower economic growth.
  • The bigger problem here is that correlation isn't causation, as the experts say. The evidence shows that lower economic growth -- caused by austerity policies like the sequester -- actually causes higher debt, not the other way around.
  • Our leaders should be making budget decisions that reflect our values and sound policy. The jobs crisis isn't just bad for American families and our kids' future. It's bad for the budget, too. We should be putting Americans back to work, not laying them off.

CLAIM: "It doesn't matter that the Reinhart-Rogoff paper was full of errors. Austerity is still the right policy."

  • Our leaders should be making budget decisions that reflect our values and sound policy, not clinging to discredited economic policies like trickle down and European austerity.
  • Even the savviest investors in the debt markets -- the people with billions of money on the line -- are rejecting austerity policies. Like Bill Gross, the world's best known bond investor, said, short-term austerity has been a mistake for Europe.
  • Austerity is the right policy only if you're interested in turning the recession into a depression, shrinking the middle class, and cutting our investments in America's future -- so you can pay for more tax giveaways to the wealthy.
  • Just take the sequester -- it's expected to lay off 750,000 Americans this year alone, not to mention kick children out of Head Start and put the brakes on lifesaving medical research. And for Republicans in Congress, that just means more money to give big corporations more tax cuts.


  • Putting people back to work is the best way to deal with the deficit because it means more employed taxpayers contributing to revenues, growth in the size of the economy, and smaller and more sustainable deficit levels relative to the economy.
  • Shrinking the economy and laying off people is the worst way to deal with the deficit. Just look at the results of European austerity: European debt has soared, unemployment is at record highs and the recession is coming back or getting worse for countries like Britain and Spain.
  • Republicans in Congress lost their credibility on the budget and fiscal responsibility long ago.
    • The reasons for today's deficits include the Bush tax cuts for the rich they fought for, the two wars they refused to pay for, and the Great Recession they tried to keep going. 
    • Their own budget would add more debt than we've ever seen in a 10-year period in American history.
    • They keep pushing for trickle down tax cuts for the rich as a way to create jobs, but nonpartisan research has repeatedly shown that trickle down doesn't work.
  • The federal budget deficit in the U.S. is actually getting smaller. It's projected to hit a five-year low this year.
  • The GOP budget would mean massive cuts to the things we need but more tax giveaways to the wealthy -- paid for in part by laying off 2 million Americans next year alone.
  • Poll after poll shows that the American people overwhelmingly rank jobs and unemployment as more important priorities than the budget deficit.
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Posted in - Budget - Taxes - Economy - Jobs

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