Kenneth Rogoff is mad as hell, and he's not going to take it any more.
The Harvard economist has taken a beating since the discovery that much of his research on government debt and growth, which was used to justify austerity measures in the U.S. and Europe, was mistake-based. He and co-author Carmen Reinhart, also of Harvard, have defended themselves repeatedly, and on Thursday Rogoff struck out on his own, with a piece of commentary blasting the Keynesian economists, such as Paul Krugman, who have been dancing on his career's perhaps premature grave.
But Rogoff seems to have let his understandable fury at the intellectual heirs of the British economist John Maynard Keynes, who advocated stimulus over austerity, cloud his judgment: His piece doesn't exactly make sense. Instead it is a big ball of defensiveness and range and inconsistency, with some good ideas mixed in.
"There is no magic Keynesian bullet for the eurozone’s woes," he writes at the top of the column, called "Europe's Lost Keynesians," published at Project Syndicate. "But the spectacularly muddle-headed argument nowadays that too much austerity is killing Europe is not surprising. Commentators are consumed by politics, flailing away at any available target, while the 'anti-austerity' masses apparently believe that there are easy cyclical solutions to tough structural problems."
Meow, tell us how you really feel, Ken Rogoff! But seriously, Rogoff is once again pedaling feverishly away from the austerity movement that he helped inspire, and which he did nothing to discourage until he got caught with Excel spreadsheet errors all over his face. He flags several statements he and Reinhart have made in the past that show they don't think austerity is the only answer to Europe's problems. At the same time, however, he is also not backing down from his core idea, that too much government debt is a bad thing that slows growth and must be eradicated posthaste.
He seriously undermines himself right away with the dubious claim that austerity is not hurting Europe. Not even former austerity fanatics such as Olli Rehn -- who once approvingly quoted Rogoff in pushing austerity -- believe this any more. As the Financial Times' Martin Wolf argues convincingly, with many brightly colored charts, austerity brought the eurozone's recovery from the financial crisis of 2008 to a screeching halt.
Confronted with evidence of the damage austerity has done throughout Europe, including devastating harm to people's health, Rehn and other austerians have recently loosened some of the fetters they had placed on Greece and other countries in exchange for bailout money.
Undaunted, Rogoff also argues that, rather than stimulating the economy with some kind of "magic Keynesian bullet," a better idea is to write off a bunch of the bad debt of struggling eurozone countries -- which is actually a great idea, at least in theory. But it is also an idea that economist John Maynard Keynes, who popularized the concept that governments should spend money to stimulate their economies in the short term, could get behind.
In fact, In his 1919 book "The Economic Consequences Of The Peace," Keynes proposed writing off Germany's debt after World War I, as part of his opposition to the Treaty of Versailles. Keynes feared that onerous peace terms for Germany would crush its economy, and he suggested that Germany might end up being an even more freakishly desperate adversary as a result.
Speaking of Germany, Rogoff acknowledges that writing down Greek and Portuguese debt would add to the debt burden of Germany, which has ended up bankrolling the rest of the eurozone. But this is an acceptable price to pay in the short term, Rogoff says. He does not add the Keynes quote, "In the long run we are all dead," but he might as well.
Rogoff also suggests that Europe could stand to have a little more inflation, and that it ultimately needs to be a stronger union. Both of those are also ideas you could imagine Keynes supporting.
In the end, though, he rejects the idea of juicing the eurozone economy with more Keynesian stimulus, saying his debt writeoff plan will be more effective. His aversion to stimulus is an attitude that is widely shared in Europe, as demonstrated by the European Central Bank's plodding approach to monetary policy. That has helped make Europe's recession longer and more painful. It doesn't have to be that way. In fact, short-term stimulus can reduce long-term debt burdens, according to a recent paper by another Harvard economist, Larry Summers, and Berkeley economist Brad DeLong, which was echoed on Wednesday by Federal Reserve Chairman Ben Bernanke.
"Unlike what Rogoff implies, debt writedown and stimulus aren't substitutes; they are complements," yet another Harvard economist, Dani Rodrik, tweeted. That Harvard economics department's Christmas party is going to be awkward.