Dear Austerity Mavens...

[kalm]

...you're doing it wrong.

That's not to say 90% debt is good and shouldn't be addressed, but still...

In 2010, economists Carmen Reinhart and Kenneth Rogoff released a paper, "Growth in a Time of Debt." Their "main result is that...median growth rates for countries with public debt over 90 percent of GDP are roughly one percent lower than otherwise; average (mean) growth rates are several percent lower." Countries with debt-to-GDP ratios above 90 percent have a slightly negative average growth rate, in fact.

This has been one of the most cited stats in the public debate during the Great Recession. Paul Ryan's Path to Prosperity budget states their study "found conclusive empirical evidence that [debt] exceeding 90 percent of the economy has a significant negative effect on economic growth." The Washington Post editorial board takes it as an economic consensus view, stating that "debt-to-GDP could keep rising — and stick dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth."

Is it conclusive? One response has been to argue that the causation is backwards, or that slower growth leads to higher debt-to-GDP ratios. Josh Bivens and John Irons made this case at the Economic Policy Institute. But this assumes that the data is correct. From the beginning there have been complaints that Reinhart and Rogoff weren't releasing the data for their results (e.g. Dean Baker). I knew of several people trying to replicate the results who were bumping into walls left and right - it couldn't be done.

In a new paper, "Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff," Thomas Herndon, Michael Ash, and Robert Pollin of the University of Massachusetts, Amherst successfully replicate the results. After trying to replicate the Reinhart-Rogoff results and failing, they reached out to Reinhart and Rogoff and they were willing to share their data spreadhseet. This allowed Herndon et al. to see how how Reinhart and Rogoff's data was constructed.

They find that three main issues stand out. First, Reinhart and Rogoff selectively exclude years of high debt and average growth. Second, they use a debatable method to weight the countries. Third, there also appears to be a coding error that excludes high-debt and average-growth countries. All three bias in favor of their result, and without them you don't get their controversial result....

This error is needed to get the results they published, and it would go a long way to explaining why it has been impossible for others to replicate these results. If this error turns out to be an actual mistake Reinhart-Rogoff made, well, all I can hope is that future historians note that one of the core empirical points providing the intellectual foundation for the global move to austerity in the early 2010s was based on someone accidentally not updating a row formula in Excel.

So what do Herndon-Ash-Pollin conclude? They find "the average real GDP growth rate for countries carrying a public debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0.1 percent as [Reinhart-Rogoff claim]." Going further into the data, they are unable to find a breakpoint where growth falls quickly and significantly.

Read more: http://www.nextnewdeal.net/researchers- ... z2QoizqEze" onclick="window.open(this.href);return false;

[Ibanez]

Here's a problem

"found conclusive empirical evidence that [debt] exceeding 90 percent of the economy has a significant negative effect on economic growth."

You know what grinds my gears, a study was conducted to tell us this. What a waste of resources. Of cource 90% will have a negative impact. Can we get some people in Congress who aren' afraid of the political risks and make the hard decisions. Eliminate wasteful spending, renogiate the debt and fix tax loopholes (for starters). Lets eliminate duplicative programs and agencies. Do we still need a Bureau of Indian Affairs? Let's abandon the War on Drugs (legalize weed, keep the criminalization of drugs like meth, heroin, etc...) free non violent, first time offenders like the 23 yr old who is sitting in jail for having an ounce on him. Let's reduce our foreign aid and invest that money in improving our infrastructure. Raise the retirement age, toughen up welfare, reduce unemployment benefits (I feel for these people, but we can't afford it. How about they go get a shitty job and at least contribute again.) THere are so many things we can do. We have a mentality (entitlements) crisis that affects corporations as well as individual peoples. We need to change this. I won't be easy nor will it be overnight. But we have to at least try.

[YoUDeeMan]

Here's a problem

"found conclusive empirical evidence that [debt] exceeding 90 percent of the economy has a significant negative effect on economic growth."

You know what grinds my gears, a study was conducted to tell us this. What a waste of resources. Of cource 90% will have a negative impact. Can we get some people in Congress who aren' afraid of the political risks and make the hard decisions. Eliminate wasteful spending, renogiate the debt and fix tax loopholes (for starters). Lets eliminate duplicative programs and agencies. Do we still need a Bureau of Indian Affairs? Let's abandon the War on Drugs (legalize weed, keep the criminalization of drugs like meth, heroin, etc...) free non violent, first time offenders like the 23 yr old who is sitting in jail for having an ounce on him. Let's reduce our foreign aid and invest that money in improving our infrastructure. Raise the retirement age, toughen up welfare, reduce unemployment benefits (I feel for these people, but we can't afford it. How about they go get a shitty job and at least contribute again.) THere are so many things we can do. We have a mentality (entitlements) crisis that affects corporations as well as individual peoples. We need to change this. I won't be easy nor will it be overnight. But we have to at least try.

Why do any of that when you can focus your efforts on passing ineffective gun control, taxing the bad rich guys, and killing brown people all over the world?

[Ibanez]

Here's a problem



You know what grinds my gears, a study was conducted to tell us this. What a waste of resources. Of cource 90% will have a negative impact. Can we get some people in Congress who aren' afraid of the political risks and make the hard decisions. Eliminate wasteful spending, renogiate the debt and fix tax loopholes (for starters). Lets eliminate duplicative programs and agencies. Do we still need a Bureau of Indian Affairs? Let's abandon the War on Drugs (legalize weed, keep the criminalization of drugs like meth, heroin, etc...) free non violent, first time offenders like the 23 yr old who is sitting in jail for having an ounce on him. Let's reduce our foreign aid and invest that money in improving our infrastructure. Raise the retirement age, toughen up welfare, reduce unemployment benefits (I feel for these people, but we can't afford it. How about they go get a shitty job and at least contribute again.) THere are so many things we can do. We have a mentality (entitlements) crisis that affects corporations as well as individual peoples. We need to change this. I won't be easy nor will it be overnight. But we have to at least try.

Why do any of that when you can focus your efforts on passing ineffective gun control, taxing the bad rich guys, and killing brown people all over the world?

Because the rest is "easy"?


Is that the answer?

[kalm]

Here's a problem

"found conclusive empirical evidence that [debt] exceeding 90 percent of the economy has a significant negative effect on economic growth."

You know what grinds my gears, a study was conducted to tell us this. What a waste of resources. Of cource 90% will have a negative impact. Can we get some people in Congress who aren' afraid of the political risks and make the hard decisions. Eliminate wasteful spending, renogiate the debt and fix tax loopholes (for starters). Lets eliminate duplicative programs and agencies. Do we still need a Bureau of Indian Affairs? Let's abandon the War on Drugs (legalize weed, keep the criminalization of drugs like meth, heroin, etc...) free non violent, first time offenders like the 23 yr old who is sitting in jail for having an ounce on him. Let's reduce our foreign aid and invest that money in improving our infrastructure. Raise the retirement age, toughen up welfare, reduce unemployment benefits (I feel for these people, but we can't afford it. How about they go get a shitty job and at least contribute again.) THere are so many things we can do. We have a mentality (entitlements) crisis that affects corporations as well as individual peoples. We need to change this. I won't be easy nor will it be overnight. But we have to at least try.

You're missing the point. A study was conducted by two Harvard economists that showed going back 110 years, for countries with a plus 90% debt to GDP ration, there was a "significant negative effect on growth". That study has been used by folks like Paul Ryan to push for tougher austerity measures. The new report on the study, after the data that was used in the original was released, indicates that key numbers were omitted from the research and that there is a far less signicant effect on growth. In fact, historically, some have prospered and grown out of that debt.

[YoUDeeMan]

[A study was conducted by two Harvard economists...

Well, there's the problem. Harvard people are way too far removed from reality to have their work mean anything of substance.

Oh, and economists are like snowflakes...no two think alike.

[Ibanez]

If only we hadn't cut taxes, blown our surplus and waged two wars on credit.

If only...

[UNI88]

You're missing the point. A study was conducted by two Harvard economists that showed going back 110 years, for countries with a plus 90% debt to GDP ration, there was a "significant negative effect on growth". That study has been used by folks like Paul Ryan to push for tougher austerity measures. The new report on the study, after the data that was used in the original was released, indicates that key numbers were omitted from the research and that there is a far less signicant effect on growth. In fact, historically, some have prospered and grown out of that debt.

So to summarize, the authors of the study omitted key numbers so their results are questionable thus calling into question Conks use of the study in their arguments.

I haven't had time to read the report but you state "some have prospered and grown out of that debt." So I ask how many have prospered and grown out of that debt compared to those that haven't? Is it 45/55 or is 10/90? Because there is a huge difference in the odds of that debt leading to a positive result.

And this whole concept of let's use money we don't have (that will be raised through taxes on income that our children and grandchildren haven't even earned yet) to spend our way out of this recession because it will all be sunshine and roses in the end is the Donk equivalent of trickle-down voodoo economics.

Ibanez nailed it in the 2nd post but we don't have politicians with the kahunas to do the right thing. Donks argue that the Constitution should be a living, breathing document that adapts to the times but are unwilling to apply the same principles to the government bureaucracy.

[Ibanez]

You're missing the point. A study was conducted by two Harvard economists that showed going back 110 years, for countries with a plus 90% debt to GDP ration, there was a "significant negative effect on growth". That study has been used by folks like Paul Ryan to push for tougher austerity measures. The new report on the study, after the data that was used in the original was released, indicates that key numbers were omitted from the research and that there is a far less signicant effect on growth. In fact, historically, some have prospered and grown out of that debt.

So to summarize, the authors of the study omitted key numbers so their results are questionable thus calling into question Conks use of the study in their arguments.

I haven't had time to read the report but you state "some have prospered and grown out of that debt." So I ask how many have prospered and grown out of that debt compared to those that haven't? Is it 45/55 or is 10/90? Because there is a huge difference in the odds of that debt leading to a positive result.

And this whole concept of let's use money we don't have (that will be raised through taxes on income that our children and grandchildren haven't even earned yet) to spend our way out of this recession because it will all be sunshine and roses in the end is the Donk equivalent of trickle-down voodoo economics.

Ibanez nailed it in the 2nd post but we don't have politicians with the kahunas to do the right thing. Donks argue that the Constitution should be a living, breathing document that adapts to the times but are unwilling to apply the same principles to the government bureaucracy.

Semantics aside, the problem is that we have Politicians and not Statesmen.

[GannonFan]

I don't get all this angst against austerity from kalm. For countries like Greece, where the options are continue to spend tons of money they don't have, forever, or until the people that loan them money decide to just stop, with little to show for it. Or pull themselves back to only spend what they can afford, and hope to bring back investors who will invest in the country, it's really an easy choice - they have to go simple austerity. They need to stop spending so much.

For the US, it's never been that simple, for a whole host of reasons (size, importance in world markets, etc). We've never tried real austerity, nor will we ever do so. But that doesn't mean we should try to combat any spending reductions, or even just reductions in the amount of annual spending increases (which are not spending reductions, per se, just a slowing down of what are still spending increases) by trying to paint them as true austerity measures. But at the end of the day, why America's economy will grow or not will not depend on some disproven aspect of Keynesian economics (that being that any government spending, on anything, will grow the economy) but on the creative and innovative spirit of our country.

[ASUG8]

It feels like we're closer to solving the origin of the universe than figuring out world economics on this pale blue dot.

I had a brilliant econ professor in grad school that could run all kinds of simulations, tell you what the impact of a particular policy would be in other aspects of the economy, etc. And with all his wiz bang calculations and iterations he was probably right around 50.5% of the time.

[mrklean]

Here's a problem

"found conclusive empirical evidence that [debt] exceeding 90 percent of the economy has a significant negative effect on economic growth."

You know what grinds my gears, a study was conducted to tell us this. What a waste of resources. Of cource 90% will have a negative impact. Can we get some people in Congress who aren' afraid of the political risks and make the hard decisions. Eliminate wasteful spending, renogiate the debt and fix tax loopholes (for starters). Lets eliminate duplicative programs and agencies. Do we still need a Bureau of Indian Affairs? Let's abandon the War on Drugs (legalize weed, keep the criminalization of drugs like meth, heroin, etc...) free non violent, first time offenders like the 23 yr old who is sitting in jail for having an ounce on him. Let's reduce our foreign aid and invest that money in improving our infrastructure. Raise the retirement age, toughen up welfare, reduce unemployment benefits (I feel for these people, but we can't afford it. How about they go get a shitty job and at least contribute again.) THere are so many things we can do. We have a mentality (entitlements) crisis that affects corporations as well as individual peoples. We need to change this. I won't be easy nor will it be overnight. But we have to at least try.

Start with the DOD. Talk about wasteful spending. Its all over the place.

[Ibanez]

Here's a problem



You know what grinds my gears, a study was conducted to tell us this. What a waste of resources. Of cource 90% will have a negative impact. Can we get some people in Congress who aren' afraid of the political risks and make the hard decisions. Eliminate wasteful spending, renogiate the debt and fix tax loopholes (for starters). Lets eliminate duplicative programs and agencies. Do we still need a Bureau of Indian Affairs? Let's abandon the War on Drugs (legalize weed, keep the criminalization of drugs like meth, heroin, etc...) free non violent, first time offenders like the 23 yr old who is sitting in jail for having an ounce on him. Let's reduce our foreign aid and invest that money in improving our infrastructure. Raise the retirement age, toughen up welfare, reduce unemployment benefits (I feel for these people, but we can't afford it. How about they go get a shitty job and at least contribute again.) THere are so many things we can do. We have a mentality (entitlements) crisis that affects corporations as well as individual peoples. We need to change this. I won't be easy nor will it be overnight. But we have to at least try.

Start with the DOD. Talk about wasteful spending. Its all over the place.

It's everywhere.

[houndawg]

[A study was conducted by two Harvard economists...

Well, there's the problem. Harvard people are way too far removed from reality to have their work mean anything of substance.

Oh, and economists are like snowflakes...no two think alike.

Economists are about as useful as astrologers.

[HI54UNI]

Well, there's the problem. Harvard people are way too far removed from reality to have their work mean anything of substance.

Oh, and economists are like snowflakes...no two think alike.

Economists are about as useful as astrologers.

And global warming scientists.

[kalm]

You're missing the point. A study was conducted by two Harvard economists that showed going back 110 years, for countries with a plus 90% debt to GDP ration, there was a "significant negative effect on growth". That study has been used by folks like Paul Ryan to push for tougher austerity measures. The new report on the study, after the data that was used in the original was released, indicates that key numbers were omitted from the research and that there is a far less signicant effect on growth. In fact, historically, some have prospered and grown out of that debt.

So to summarize, the authors of the study omitted key numbers so their results are questionable thus calling into question Conks use of the study in their arguments.

I haven't had time to read the report but you state "some have prospered and grown out of that debt." So I ask how many have prospered and grown out of that debt compared to those that haven't? Is it 45/55 or is 10/90? Because there is a huge difference in the odds of that debt leading to a positive result.

And this whole concept of let's use money we don't have (that will be raised through taxes on income that our children and grandchildren haven't even earned yet) to spend our way out of this recession because it will all be sunshine and roses in the end is the Donk equivalent of trickle-down voodoo economics.

Ibanez nailed it in the 2nd post but we don't have politicians with the kahunas to do the right thing. Donks argue that the Constitution should be a living, breathing document that adapts to the times but are unwilling to apply the same principles to the government bureaucracy.

Good questions, '88. I haven't looked at the study in-depth either but I assume since countries like New Zealand and Canada were cited it's probably dealing with OECD type nations. If that's the case, I don't remember too many of these nations failing as a result of their debet and it's not as if you and I consider ourselves as paying off the debt of WWII or Viet Nam. In fact, Obama could be hanged with how his stimulus package was handled.

The problem is inefficient spending, not government spending in general. There are many examples of government spending that have stimulative affects. If conks could focus on the former I would listen more. But blanket statements like government is the problem and more spending can't lead to more growth are a turn off.

[kalm]

Economists are about as useful as astrologers.

And global warming scientists.

Especially when they disagree with conk talking points.

[UNI88]

So to summarize, the authors of the study omitted key numbers so their results are questionable thus calling into question Conks use of the study in their arguments.

I haven't had time to read the report but you state "some have prospered and grown out of that debt." So I ask how many have prospered and grown out of that debt compared to those that haven't? Is it 45/55 or is 10/90? Because there is a huge difference in the odds of that debt leading to a positive result.

And this whole concept of let's use money we don't have (that will be raised through taxes on income that our children and grandchildren haven't even earned yet) to spend our way out of this recession because it will all be sunshine and roses in the end is the Donk equivalent of trickle-down voodoo economics.

Ibanez nailed it in the 2nd post but we don't have politicians with the kahunas to do the right thing. Donks argue that the Constitution should be a living, breathing document that adapts to the times but are unwilling to apply the same principles to the government bureaucracy.

Good questions, '88. I haven't looked at the study in-depth either but I assume since countries like New Zealand and Canada were cited it's probably dealing with OECD type nations. If that's the case, I don't remember too many of these nations failing as a result of their debet and it's not as if you and I consider ourselves as paying off the debt of WWII or Viet Nam. In fact, Obama could be hanged with how his stimulus package was handled.

The problem is inefficient spending, not government spending in general. There are many examples of government spending that have stimulative affects. If conks could focus on the former I would listen more. But blanket statements like government is the problem and more spending can't lead to more growth are a turn off.

I would be careful about making blind assumptions based on high level information that's probably what Paul Ryan did and it's blowing up in his face.

I have no problem with increasing government spending in a strategic manner. But IMO that strategy should be result in a net decrease in spending. As Ibanez posted we need to cut the fat out of government. And you're right about Obama's spending increases, those are generally meant to placate his union supporters (repaving roads) and demonstrate an inability or unwillingness to dream big. I'm not a fan of the New Deal but at least the many of the things that were done with that stimulus package are still with us and providing some value. I believe I've been clear that I spending on infrastructure and I consider infrastructure to be transportation, education, research & development (NASA, DARPA, etc.) and more. And let's unbundle education funding from these no child left behind type of requirements and let the states experiment with how to best allocate the funds.

If we're going to spend money, let's spend it on things that are going to have a positive impact on our long-term competitiveness.

[BDKJMU]

Our debt to GDP ratio is over 100%, has been so since 2012, and is growing.

[kalm]

Our debt to GDP ratio is over 100%, has been so since 2012, and is growing.

Truth...

http://www.bloomberg.com/news/2013-03-2 ... gains.html" onclick="window.open(this.href);return false;