Obama’s ‘Excuse’ on Economy Sparks Academic Debate

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Whether President Barack Obama has a good excuse for tepid U.S. economic growth sparked an academic debate between two Harvard economists and advisers to Republican nominee Mitt Romney.

Carmen Reinhart and Kenneth Rogoff, in a Bloomberg View column, dispute analyses by Glenn Hubbard, John Taylor and Kevin Hassett and say the Romney advisers have underestimated the severity of the 2008 financial crisis.

“The aftermath of the most recent U.S. financial crisis has been quite typical of systemic financial crises around the globe in the postwar era,” Reinhart and Rogoff write. “If one really wants to focus just on U.S. systemic financial crises, then the recent recovery looks positively brisk.”

The battle of words stems from Reinhart and Rogoff’s writings that recessions related to systemic banking crises tend to be deep and recoveries slow and halting. The Romney advisers say recoveries after such recessions haven’t been slow, citing a study this year by Michael Bordo, a professor of economics at  Rutgers University in New Brunswick, New Jersey, and Joseph Haubrich, an economist with the Federal Reserve Bank of Cleveland.

As wonky as it may sound, the debate matters because it is at the center of one of the biggest issues of the presidential election campaign — Obama’s performance handling the economy.

In an opinion article published Aug. 15 in the Washington Post, Hubbard and Hassett said Obama’s “excuse” that recoveries after financial crises are slow is inaccurate.

Bordo said the main difference between his research with Haubrich and that of Reinhart and Rogoff lies in the definition of a recovery. Reinhart and Rogoff focus on real per capita GDP from the peak preceding the crisis to the point in the recovery at which the earlier peak is reached, Bordo said in an e-mail today.

“We look at what is called the bounce-back, the pace of recovery from the trough of the business cycle.”

Comparing his and Haubrich’s methodology to Reinhart and Rogoff’s is “like comparing apples with oranges,” Bordo said.

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