Better double-check your Excel spreadsheets. This week, two Harvard economists, Ken Rogoff and Carmen Reinhart, admitted they had made a mistake in the Microsoft Excel spreadsheet they used in their report on GDP and growth.
The original report said that when a country owes more than 90 percent of their GDP, it slides into recession. It had been used in budget policy decisions in the U.S. as a reason for reducing government spending.
The economists responded by saying that other studies support the overall research and results. Could this change the U.S.'s budget policies in the future?
"Look, debt is still a problem. I don't think anybody would disagree with that," said Fortune magazine's Leigh Gallagher. "You can see the 'Saturday Night Live' skit being written...you have to note the irony. It's like when I go to my hairdresser -- I don't know how to do what he does, but I do expect him to cut it evenly, you know?"
"It's actually even more basic than that," Reuters' Felix Salmon countered. "If you can't literally just add up a row of numbers in an Excel spreadsheet? And the other thing is that people really took this 90 percent number to heart.
"If there's one thing that everyone in the world knows about Reinhart and Rogoff, it's that 90 percent is really dangerous; after this level you go into this kind of red zone. And it turns out, even if things become worse, gradually, slowly as you get more debt, there's nothing special about 90 percent."
Listen to the full audio for additional analysis and more on the new Simpson-Bowles deficit reduction plan.
The Wrappers offer their weekend #longreads picks.
Felix Salmon suggests:
- Christopher Maag on acoustic engineering in the NYC subway.
- Felix Gilette in Bloomberg on the latest resurgence of Rupert Murdoch.
- The New Republic's Jonathan Cohn on the hell of American daycare.
Leigh Gallagher picks:
France said discreet talks to free the family had been ongoing but that no ransom was paid.
The Mississippi's stakeholders met recently to discuss the river's pressing needs, any common ground and how to speak with one voice in advocating for the nation's largest river system. Currently, the river has what one stakeholder calls "800 parents" — and that leaves the river an orphan.
Many of you at home have written to us about how hard it is to confront your husbands and wives and sons and siblings about money problems -- especially problems that your loved ones contribute to. So we figured while we're doing our seasonal personal finance housekeeping, why not help you tidy up the loose ends in some of these situations? We asked you on Facebook about who in your life costs you a lot of money. And we've pulled in consumer finance expert Dayana Yochim of The Motley Fool to lend a hand in helping you figure out what you can do about it.
We talk with Mary Beth, whose brother is disabled and cannot work. She and her sister are struggling to help keep him financially afloat. And we speak with Viviano, who is helping pay his fiancee's higher education. The problem? He has two kids, but his fiancee costs plenty more than they do! A full-time physics major can add up to a lot of cash, even with assistance. Click play on the audio player above to hear Yochim's advice.
And chime in with your own thoughts. Who costs you a lot of money? Let us know on our Facebook page or leave a comment below and we may reach out to you to offer some friendly advice.
Here is a sampling of some of your responses from Facebook:
Well I have 86 year old father and sister that cares for him. He did not plan well and only lives on SS and her very part time job, so we give money each month plus pay another family member to shovel and care for winter care, house repairs and two in college, paying all extras besides rent and other things. If we stopped paying or other family helped pay I would not need to work 50+ hours a week.
$5800 a month at what should have been rehab care for my
87 year mom, but it never ends, my daughter's music lessons amount to $600 or so month, depending on how many weeks
My daughter was accepted to several excellent private colleges but she chose the state university because she knows we will be able to pay the in-state tuition without too much debt. And if she gets a school job, maybe she can save for a semester abroad.
Friends who are musicians that i pay to see and support! about $20-$50 on cover charges a month to see them perform. Worth the money but then comes the cost of adult beverages which increases the monthly cost to $75-$125 potentially on supporting friends and personal enjoyment of friends performances.
hmmm, child support costs me about half my income and yet I see my kids (if lucky) 3-4 times a year. Apparently the courts think the non-custodial parents don't have to have a roof over their heads, or food to eat, or money to travel to see their kids. Maybe I should cut that out of my spending...sure the courts would love that lol
My daughter,32. Married, one child, no health insurance due to her husbands job in a small business,stays at home to homeschool. I have provided 3 cars and still pay her phone bills,and buy clothes and shoes for my granddaughter. And she owes $$ for her graduate school loans.
My 16 year old son - from $400 parking tickets (handicap!) to cell phone bills to clothes to spending money to tutors to counseling to medications. I would probably save $1000 a month...but he is my son.
My late grandfather, who didn't plan well for his death and left me with a cluster so bad that I'd rather go to jail than spend another minute on this estate.
My beer brewing partner (Home Brew). We just split $600 in supplies yesterday. Buying fridges, and other brewing equipment gets expensive. I probably spent a few grand last year on my "hobby".
I met my boyfriend ... and my downfall. He is an avid skier. My first season: $800 for the clothes, $1000 for the equipment, at least $1000 for lessons, lift tickets, weekends away. The payoff: getting out of NYC on a regular basis.
I have a pet, never thought they would be the one that breaks my bank, but how do you put a price tag on the well being of your furry friend? You don't, you just write the check, swallow hard and wonder how long it will be before you are both eating cat food because it's cheaper than ramen.
Lake Erie. I love her, hate her, want to protect her, and want to leave her. But my life is intertwined with her. The amount of money I spend on sailing, fishing, swimming, teaching my daughter, and sitting in her grasp as my therapist has long since ceased to be documented.
Does my classic car count? My fianacee would love if I cut her out of my spending.
Children, definitely - but cutting them out of my spending isn't an option. Already ditched the high-maintenance, high-spending spouse.
My two kids. We pay around $1500 per month in daycare (my wife and I both work). They also eat a lot, which increases the cost. My wife and I joke about how much money we will have when they go to school, although then I'm sure there will be other expenses. But, they are worth every penny we spend to care for them!!
My son is 31, working full-time and still trying to get fully on his feet in this economy. Covering his shortfalls is a stress, but he is worth every penny. If we cut him out of our spending, we could not live with ourselves. There are many ways to measure ROI...
Between the bombing in Boston and the deadly explosion in Texas there are hundreds of Americans still in the hospital, many of them facing large hospital and rehab costs. After tragedies like these, home-grown charities usually pop up immediately to help with expenses. Ken Berger, president and CEO of Charity Navigator, a website which ranks philanthropic organizations based on performance, joins us to talk about donating.
"We're seeing a variety of charities popping up, none of them that have any track record that we know of. For example, there's a group in Boston called TUGG that's raising funds. Of course, in the case of Boston -- as was the case in New Jersey after Hurricane Sandy -- the governor has organized a fund," says Berger.
Berger says people have given a lot -- millions of dollars have already been raised. But how do you choose which charity to give to?
"A lot of it has to do with risk and expectations. The faster you want to see your money move, the higher the risk. If you're willing to wait a while, you lower your risk substantially, but the concern is victims and family need support right away. So it's a trade off. So there's no easy answer," says Berger. "Our general recommendation is to go slow because then you know for certain it's a reputable organization with a track record or even a new organization like one organized by the governor and the mayor that has the gravitas that eventually the money will get there. That's really the key: the faster you go, the higher the likelihood you're going to get ripped off."
If you're looking for a charity to help victims in the Boston bombing, Charity Navigator has these suggestions:
Injured Marine Semper Fi Fund
- The four time 4-star Injured Marine Semper Fi Fund has created the Boston Marathon Relief Fund. Money raised will support the charity's efforts to send "staff, volunteers, and amputees wounded in Iraq and Afghanistan to Boston, to provide encouragement, guidance and immediate financial support to victims and their families."
- To contribute to this effort, they're instructing donors to visit the America's Fund website (a program of the Injured Marine Semper Fi Fund) and designate their donation to the Boston Marathon Relief Fund (by scrolling down to reads: "Is this donation in support of an event, campaign, or fundraiser?" checking "yes" and selecting Boston Marathon Relief Fund from the drop-down menu.)
- This fundraising appeal promises that “all proceeds will be donated completely to programs working with victims of the attacks. We are consulting with the Mayor's office, the hospitals that cared for the patients, and other responder teams to assess the most pertinent needs and to deliver funding directly to those impacted”
- TUGG is a 501 c 3 public charity, but it is too small yet for Charity Navigator to rate.
- In 2011, TUGG spent $84,000 on fundraising and nothing on administrative fees or program fees (this is the category that charities show their spending on their charitable mission).
The One Fund
- This fundraising effort was established on April 16th by Massachusetts Governor Deval Patrick and Boston Mayor Tom Menino “to help the people most affected by the tragic events that occurred in Boston on April 15, 2013.”
- Kenneth Feinberg, who has overseen funds for victims of 9/11, the BP oil spill and mass shootings in Aurora, Colo., and at Virginia Tech, will oversee The One Fund.
- The group has applied for nonprofit status, but does not yet have it. The notice about the fund’s creation does properly note that “although the Fund cannot guarantee that the IRS will make a determination that the organization qualifies as a 501(c)(3) tax-exempt entity, if approval is received within the expected time frame, the determination will be retroactive to the date of the Fund’s formation.”
- We’ve seen similar efforts after other disasters, including Superstorm Sandy in which the Governor of New Jersey and his wife started a fund. At the time, it too did not have nonprofit status (it does now).
Plus, here are tips to remember before you donate:
- Collectively, donors have the power to hold these funds accountable for distributing the funds to the victims in a timely manner. That’s not to say we don’t want the funds to take enough time to ensure the money is going to real victims in need, but we also don’t want years to pass before the funds are released.
- Be suspicious of online appeals, especially in light of the fact that hundreds of new website URLs have popped up since the bombing that use keywords related to the tragedy.
- Seems silly to have to say, but remember, a victim isn't going to know your personal email address to send you a direct appeal for help. This happens after every tragedy and sadly, some people, giving from their heart, don’t stop to think before they click on an email and give their personal financial information.
- You may also want to consider other ways to help such as donating blood, signing up to get trained as a disaster volunteer, or volunteer in your time or donating to a charity in your local communit.
What about giving to home-grown charities -- people who have friends or family members who are victims and start charities on Kickstarter and similar crowdfunding platforms?
"The general rule of thumb there is some of them are wonderful and some of them are terrible. So if you live in the local area and you can eyeball the organization yourself, then by all means go for those local home-grown organizations if you really feel they're going to do some good work right away," says Berger. "But if you're in another state and you have to make an assessment from a distance, you run a risk that the charities are not that well vetted, that they are a scam."
As for people who have the urge to set up a charity for victims of a tragedy, Berger says the first step you should take is look around and see if there are other people or organizations who have the same goals as yours. The U.S. has more charities than anywhere else in the world. So Berger says you should try to hook your efforts up with other people -- which will help you get expertise and traction that you might not otherwise have.
Images collected from social media show veritable ghost towns Friday after local residents were ordered to "shelter in place" during a manhunt for a suspect in the Boston Marathon bombings.
Area residents found themselves stuck inside of a crime scene Thursday night and Friday morning. Pictures taken behind window screens and on top of roofs gave the world a look at what people were seeing.
With a manhunt underway for a suspect in Monday's bombings, the area in and around Boston has been virtually shut down. Transit isn't running, and most businesses and schools are closed. Most people are safe at home, but many are unnerved.
The two suspects in Monday's deadly Boston Marathon explosions and the Thursday night murder of a police officer at the Massachusetts Institute of Technology are brothers from a former Soviet republic who were in the United States legally for years and lived together in a Cambridge, Mass., apartment.
Author Dennis Lehane talks with Fresh Air's Terry Gross about his New York Times op-ed, "Messing with the Wrong City," which expressed his love for his hometown.
Charles Sennott, vice president, executive editor and co-founder of GlobalPost, talks with Fresh Air's Terry Gross about the ongoing manhunt in Boston. Seth Mnookin, a contributing editor at Vanity Fair, describes live-tweeting the events at MIT.