NEW YORK CITY (AP) — (Grandmaster) Kenneth Rogoff never intended to be a political actor. But since the financial crisis hit, politicians and pundits have evoked the Harvard economist’s research when warning about the perils of borrowing too much.
Expect to hear his name even more between now and August 2. That’s the deadline the Treasury Dept. has given Congress for raising the federal government’s debt ceiling without risking a default.
Rogoff’s research with fellow economist Carmen Reinhart found that recovering from a financial crisis often takes longer than anyone expects. Deep debts weigh on economic growth, making countries vulnerable to another blow. “It’s like being a little more run down,” he says. “It’s easier to get sick.”
Rogoff and Reinhart also revealed that when a country’s debt surpasses 90 percent of its economy, the economy often turns sluggish. The U.S. is now at 96 percent.
These findings, written in the pair’s 2009 best-seller, “This Time is Different: Eight Centuries of Financial Folly,” have taken on a life of their own in political circles. When you hear Republican leaders like Rep. Paul Ryan say the U.S. needs to slash spending, they often quote Rogoff’s work.
For his part, Rogoff doesn’t believe the country’s debt trouble can be solved quickly or through deep spending cuts. “You just can’t do this overnight,” he says. “If we tighten too fast, we would slam growth.”
Rogoff, 58, served as the International Monetary Fund’s chief economist for two years and as an adviser to John McCain’s 2008 presidential campaign. In graduate school at the Massachusetts Institute of Technology, Rogoff befriended Ben Bernanke, the current chairman of the Federal Reserve.
… Q. At Bernanke’s first press conference in April, he joked that playing chess with you was a “big mistake.” Most people don’t know you’re an International Grandmaster. Did Bernanke ever ask for a rematch?
No. I went cold turkey after leaving graduate school. I teach my children how to play (chess) but that’s it. I’m completely addicted and need to guard myself from playing. I still think about chess all the time.
Q: Has your expertise in chess helped inform your work?
A: Chess teaches you to think about what the other person is thinking. Obviously, there are other ways besides chess to come to that. Chess is just a disciplined approach. At the IMF, we had crises in Argentina, Brazil, Turkey and Lebanon. And it helped to put myself in their position: “What are they thinking.”