The case for austerity was flawed?

There has been a tremendous push for austerity in recent years.  In fact, its been the primary criticism against Obama.  The idea is that Public Sector spending is out of control and that its crowding out legitimate businesses causing stagnation.

The case for austerity got a huge fillip from, among other things, a study done by economists Carmen Reinhardt and Kenneth Rogoff who looked at “data on forty-four countries spanning about two hundred years.  They claimed that the data showed that if debt-to-GDP exceeds 90%, then there is a marked slowdown in growth.

Well, now it turns out that the analysis itself was wrong.  Let me cite the stunning piece by James Downie:

"... three economics professors at the University of Massachusetts at Amherst have been allowed to look at Reinhardt and Rogoff’s original data, and their findings are troubling, to say the least. The Roosevelt Institute’s Mike Konczal summarizes: “First, Reinhart and Rogoff selectively exclude years of high debt and average growth. Second, they use a debatable method to weight the countries. Third, there also appears to be a coding error that excludes high-debt and average-growth countries. All three bias in favor of their result, and without them you don’t get their controversial result.” That “coding error,” by the way, is an incorrect entry in an electronic spreadsheet; as Konczal puts it, this means “that one of the core empirical points providing the intellectual foundation for the global move to austerity in the early 2010s was based on someone accidentally not updating a row formula in [Microsoft] Excel.” 

What does the data actually show? “When properly calculated,” the authors write, “the average real GDP growth rate for countries carrying a public-debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0.1 percent as published in Reinhart and Rogoff.” 

So, let's get this straight.  The foundation of the entire argument for austerity was based on incorrect analysis and the data set actually shows something quite different.

To make matters more interesting as reported by the Huffingtonpost and others,  the IMF has looked at the data and concluded that too much austerity is a bad idea and that Obama probably had it right with the stimulus.

Hmmm ... the opinion in the academic circles has shifted.  You wouldn't know it if you heard the politicians.