The big news in economics last week was the paper by a UMASS Grad Student showing that economists Kenneth Rogoff and Carmen Reinhart had made an Excel spreadsheet blunder in their famous paper arguing that as debt-to-GDP goes above 90%, growth slows dramatically.

It's easy and tempting to overstate the influence of Reinhart and Rogoff. Even if they had never existed, there would have still been an austerity movement. The "90%" paper just provided a nice science-like sounding datapoint for austerity advocates to point do.

But the refutation could still be significant.

Paul Krugman pointed out in a recent blog post:

The point is that the next time Olli Rehn, or George Osborne, or Paul Ryan declares, sententiously, that we must have austerity because serious economists (i.e., not Krugman and friends) tell us that debt is a terrible thing, people in the audience will snicker — which they should have been doing all along, but now it has become socially acceptable.

There's already signs that this is happening.

The FT has a new story up about bond investor Bill Gross, and how he's attacking the UK austerity movement.

Here's how it goes.

“The UK and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not,” Mr Gross told the Financial Times in an interview. “You’ve got to spend money.”

His comments come as economists debate the effect of statistical errors in widely cited academic research by Kenneth Rogoff and Carmen Reinhart on the case for fiscal austerity. With governments in the developed world struggling to boost economic growth, the International Monetary Fund has also argued that Germany, the US and the UK are tightening their belts too fast.

For one thing, it's interesting that Gross is now slamming austerity.

Also it's interesting that the paragraph about Excel-gate is just dropped in there, as one of those perfunctory things that you now have to include when talking about debt and deficits.

Again, a lot of austerity is just politics, and people will look for any excuse to advocate it. But in mainstream circles, the case for trying to cut debt just for the sake of cutting debt is looking a lot more tenuous.

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