April 17, 2013
DON'T KNOW MUCH ABOUT THE MATH I TOOK...:
How an Excel error fueled panic over the federal debt (Michael Hiltzik, April 16, 2013, LA Times)
One of the most fearsome statistics in the war against the federal deficit has always been the country's ratio of debt to gross domestic product. When this ratio reaches 90%, the argument goes, watch out -- lower economic growth is on the horizon. And that's scary, because that's where the U.S. has been heading.This idea comes from Harvard economists Ken Rogoff and Carmen Reinhart, who featured it in a 2010 paper and popularized it in a book entitled "This Time is Different: Eight Centuries of Financial Folly."Since then, the stat has been cited countless times, including by Rep. Paul D. Ryan in rationalizing the draconian spending cuts in his proposed budgets. Now it turns out the authors may have counted wrong.A new study by three researchers at the University of Massachusetts finds that Rogoff and Reinhart made several mistakes that invalidate their thesis.
...but I do know that British debt after defeating Napoleon in the first phase of the Lon War was 260% of GDP and US debt after WWII, just a later phase of the same War, was over 110%. Who would not wish for their country the economic success of 19th century Britain and 20th Century America? The Rogoff-Reinhart hypothesis is inherently silly.
Posted by Orrin Judd at April 17, 2013 3:12 PM
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