![]() As he explained:īeing a bit of a doubting Thomas on this coding error, I wouldn’t believe unless I touched the digital Excel wound myself. Mike Konczal obtained a copy of the spreadsheet. It also overstates growth in the lowest public debt/GDP category (0 to 30 percent) by +0.1 percentage point and understates growth in the second public debt/GDP category (30 to 60 percent) by −0.2 percentage point. This spreadsheet error, compounded with other errors, is responsible for a −0.3 percentage- point error in RR’s published average real GDP growth in the highest public debt/GDP category. The omitted countries are selected alphabetically and, hence, likely randomly with respect to economic relationships. The paper describes what it calls a “coding error”: The paper stresses that this omission was necessary to achieve the negative-growth finding. The biggest gaffe is a spreadsheet error which rather conveniently omitted five countries, Australia, Austria, Belgium, Canada, and Denmark, entirely. The paper goes through a litany of what is wrong with their analysis. So the widely touted finding is wrong on its face. That is, contrary to RR, average GDP growth at public debt/GDP ratios over 90 percent is not dramatically different than when debt/GDP ratios are lower. Our finding is that when properly calculated, the average real GDP growth rate for coun- tries 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. Five years later, now that the Reinhart/Rogoff work is widely accepted as true, they finally sent their “working spreadsheet” to the PERI team. Reinhardt and Rogoff refused to share their underlying computations. In addition, a number of economists tried replicating the Reinhart-Rogoff results for years, with no success. A number of economists had challenged the findings for asserting causality when all it showed was a correlation. This paper claimed that when debt rose over the scary 90% to GDP level, growth fell to -0.1%. That belief in turn was based on a paper “Growth in the Time of Debt” by Carmen Reinhardt and Kenneth Rogoff, which did a 20 country comparison from 1946 to 2009. That admission was based on the miserable results it has produced when implemented.īut now, a new paper by Thomas Herndon, Michael Ash and Robert Pollin of PERI, “ Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff,” is a devastating takedown of the factoid commonly bandied about by austerians, that if government debt rises above 90% of GDP, growth suffers. The IMF has already ‘fessed up that it does not work in practice, that cutting government spending when growth is weak simply leads the economy to contract further, making debt to GDP levels even worse than before. There appears to be no intellectually honest defense of austerity left standing. ![]()
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