The economic framework for austerity is getting even weaker

[Genx87]

Hurray the economics of kicking the can down the road won.

 

[EagleKeeper]

Hurray the economics of kicking the can down the road won.

As long as they can kick the can - there is not end to the argument. Those that kick refuse to pay the piper; things get better, yes; do they get back to the zero point; no

 

[fskimospy]

Hurray the economics of kicking the can down the road won.

The economics of providing the best economic outcome won. 'Not kicking the can down the road' would mean that we would have an even larger debt problem in the future. Since I presume you want to have a smaller debt problem in the future, you should be happy. Right?

 

[Genx87]

The economics of providing the best economic outcome won. 'Not kicking the can down the road' would mean that we would have an even larger debt problem in the future. Since I presume you want to have a smaller debt problem in the future, you should be happy. Right?

If anybody has read Krugman he says these deficits and debts he advocates eventually need to be addressed, just not now. Let people in the future deal with them. Spend spend spend now. The ideology can be summed up as "kicking the can down the road".

 

[Doc Savage Fan]

A new article on from the Daily Ticker nicely sums up the consensus from the past five years of real-world "experimentation" in national debt-loads versus economic outcomes, and slam-dunks the defeat of "Austerianism" by pointing out the embarrassing mathematical error that propped up that house of cards. Advocates - most notably economist Paul Krugman - of more stimulus spending and higher debt-to-GDP ratios are the resounding victors:

http://finance.yahoo.com/blogs/dail...ent-over-paul-krugman-won-150247189.html?vp=1



But is the anti-"big-government" crowd finally going to capitulate and admit that their entire argument was based on a theory that has now been refuted both on theoretical (bad math) and empirical grounds? Of course not. Who needs math? Who needs evidence. Ya just gotta believe.

Bullshit. Reinhart and Rogoff found that GDP growth for countries with government debt-to-GDP ratios exceeding 90% display a very strong negative relationship.

http://www.nber.org/papers/w18015.pdf

We identify the major public debt overhang episodes in the advanced economies since the early 1800s, characterized by public debt to GDP levels exceeding 90% for at least five years. Consistent with Reinhart and Rogoff (2010) and other more recent research, we find that public debt overhang episodes are associated with growth over one percent lower than during other periods. Perhaps the most striking new finding here is the duration of the average debt overhang episode. Among the 26 episodes we identify, 20 lasted more than a decade. Five of the six shorter episodes were immediately after World Wars I and II. Across all 26 cases, the average duration in years is about 23 years. The long duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions. The long duration also implies that cumulative shortfall in output from debt overhang is potentially massive. We find that growth effects are significant even in the many episodes where debtor countries were able to secure continual access to capital markets at relatively low real interest rates. That is, growth-reducing effects of high public debt are apparently not transmitted exclusively through high real interest rates.

http://www.aei-ideas.org/2012/05/new-study-high-u-s-debt-levels-could-mean-a-quarter-century-of-weak-growth/050112debt/

They identified 26 episodes where Debt-to-GDP ratios exceeded 90% of GDP since 1800. They found that in 23 of those 26 episodes, countries experienced lower growth than the average of other years by an annual average of 1.2%. They also found that the average duration of debt overhang episodes was 23 years! Our current debt-to-GDP ratio is now over 100!

There are long-term consequences to high debt levels. We may get a nice little suger high from short-term stimulus...but we pay for it in the long run.

 

[bshole]

They identified 26 episodes where Debt-to-GDP ratios exceeded 90% of GDP since 1800. They found that in 23 of those 26 episodes, countries experienced lower growth than the average of other years by an annual average of 1.2%. They also found that the average duration of debt overhang episodes was 23 years! Our current debt-to-GDP ratio is now over 100!

But did they determine causality? There is as a good chance that lower growth caused the debt rather than the other way around. Just look at America's latest crisis. The debt exploded because of the implosion of the economy. The debt was as an artifact of the bad economy and the drastic reduction in revenues.

 

[fskimospy]

Bullshit. Reinhart and Rogoff found that GDP growth for countries with government debt-to-GDP ratios exceeding 90% display a very strong negative relationship.

http://www.nber.org/papers/w18015.pdf

http://www.aei-ideas.org/2012/05/new-study-high-u-s-debt-levels-could-mean-a-quarter-century-of-weak-growth/050112debt/

They identified 26 episodes where Debt-to-GDP ratios exceeded 90% of GDP since 1800. They found that in 23 of those 26 episodes, countries experienced lower growth than the average of other years by an annual average of 1.2%. They also found that the average duration of debt overhang episodes was 23 years! Our current debt-to-GDP ratio is now over 100!

There are long-term consequences to high debt levels. We may get a nice little suger high from short-term stimulus...but we pay for it in the long run.

Uhmmmm.... you realize that Reinhart and Rogoff are the exact two economists whose shoddy work was completely trashed and prompted this thread, right? Their underlying arguments for the effects of debt and growth turned out to be based on shit.

Furthermore, did you know that the regression coefficients are higher in reverse than they are for R&R's thesis? That means that slow growth is more highly correlated with high debt than high debt is correlated with slow growth. Think about that for a minute and realize what a catastrophic problem that is for your argument.

 

[Doc Savage Fan]

Uhmmmm.... you realize that Reinhart and Rogoff are the exact two economists whose shoddy work was completely trashed and prompted this thread, right? Their underlying arguments for the effects of debt and growth turned out to be based on shit.

Furthermore, did you know that the regression coefficients are higher in reverse than they are for R&R's thesis? That means that slow growth is more highly correlated with high debt than high debt is correlated with slow growth. Think about that for a minute and realize what a catastrophic problem that is for your argument.

The "shoddy work" was an Excel data error that biased their conclusion that debt-to-GDP ratios in excess of 90% lead to dramatically slower economic growth. The 90% figure was arbitrary and this error inadvertently biased the breakpoint; however, it does not invalidate their conclusion that high debt adversely affects growth. Other papers show the breakpoint at 80% and 85% as noted in the quote below.

http://seekingalpha.com/article/136...to-the-reinhart-rogoff-row?source=google_news

The irony is that now that a data error has been found, progressives wish to inflate the significance of Reinhart-Rogoff and pretend as though it was the sole basis for concern about elevated public debt levels. This is nonsense: numerous studies found that increased levels of public debt were associated with slower growth and they generally identified a lower threshold. The Bank for International Settlements (2011) found that debt overhang problems become aggravated once debt hits 85% of GDP. A 2013 paper from a former Fed Governor and famous econometrician found that economies are especially vulnerable to a debt crisis when debt exceeds 80% of GDP.

 

[fskimospy]

The "shoddy work" was an Excel data error that biased their conclusion that debt-to-GDP ratios in excess of 90% lead to dramatically slower economic growth. The 90% figure was arbitrary and this error inadvertently biased the breakpoint; however, it does not invalidate their conclusion the high debt adversely affects growth. Other papers show the breakpoint at 80% and 85% as noted in the quote below.

http://seekingalpha.com/article/136...to-the-reinhart-rogoff-row?source=google_news

Multiple problems with your post here. First, that was FAR from the only problem with R&R's analysis. They excluded areas of high debt and high growth for very weak reasons and their weighting method for all of their 'buckets' was utterly absurd. Why should a country with one data point be counted as the equal of a country with 20 data points? I mean that's the kind of stuff that gets you marked down in a basic grad paper. That's probably why their paper was never peer reviewed, it was shit work.

Furthermore, you didn't address why if high debt causes low growth why is the correlation STRONGER in reverse? That is the truly damning point against what you're arguing. The data indicates far more strongly that low growth causes high debt, not high debt causing low growth.

As for those other studies, the BIS one has also not been peer reviewed as best as I can tell, and the final one doesn't even have to do with GDP growth.

 

[First]

The "shoddy work" was an Excel data error that biased their conclusion that debt-to-GDP ratios in excess of 90% lead to dramatically slower economic growth. The 90% figure was arbitrary and this error inadvertently biased the breakpoint; however, it does not invalidate their conclusion that high debt adversely affects growth. Other papers show the breakpoint at 80% and 85% as noted in the quote below.

http://seekingalpha.com/article/136...to-the-reinhart-rogoff-row?source=google_news

eskimospy already demolished the notion that there is a strong causal link; we can't possibly conclude that R-R's study shows that high debt countries will have slow growth or that slow growth countries will have high debt based on R-R's study. I already linked you an article with the scatter-plot, reproduced below;

To any thinking person, this is a) not a strong correlation and b) does not suggest a causal effect. In other words, the significance of the study is far, far less than originally thought due to the Excel error alone, as the magnitude of the correlation between high debt load resulting in slow growth is entirely the same as the opposite conclusion based on the same data (that slow growth leads to higher debt, presumably through lower corporate tax receipts among many other such factors).

 

[fskimospy]

A quick descriptor of other problems with R&R as mentioned elsewhere.

Weighting: one year of data for New Zealand was considered the informational equivalent of 19 years of data for the economy of the UK. Get that? One year of New Zealand's data was considered nearly twenty times as important as a year's worth of data from one of the largest economies on earth.

Exclusion: for New Zealand too: their one year 'over 90%' average was -7.6%. If you include the data R&R omitted, New Zealand's 'over 90%' growth rate was 2.6%. They misjudged New Zealand by more than 10%.

lol.

 

[Doc Savage Fan]

A quick descriptor of other problems with R&R as mentioned elsewhere.

Weighting: one year of data for New Zealand was considered the informational equivalent of 19 years of data for the economy of the UK. Get that? One year of New Zealand's data was considered nearly twenty times as important as a year's worth of data from one of the largest economies on earth.

Exclusion: for New Zealand too: their one year 'over 90%' average was -7.6%. If you include the data R&R omitted, New Zealand's 'over 90%' growth rate was 2.6%. They misjudged New Zealand by more than 10%.

lol.

Let's just step back a second. Will you concede the point that lower debt correlates with higher growth and that higher debt correlates with lower growth?

 

[fskimospy]

Let's just step back a second. Will you concede the point that lower debt correlates with higher growth and that higher debt correlates with lower growth?

Sure.

 

[Doc Savage Fan]

Sure.

Thank you.

BTW....here's their 2012 paper which fixes the spreadsheet error and addresses the "selectively excluded" data criticism. Please note that their conclusion hasn't substantially changed.

http://online.wsj.com/public/resources/documents/JEP0413.pdf

Conclusion

We identified 26 episodes since 1800 of public debt overhang in advanced economies: that is, cases where the ratio of gross public debt to GDP exceeded 90 percent in a given country for more than five years. Taken as a whole, these episodes suggest several lessons about public debt overhang. First, once a public debt overhang has lasted five years, it is likely to last 10 years or much more (unless the debt was caused by a war that ends). The average duration of our debt overhang episodes was 23 years. Second, it is quite possible to have a “no drama” public debt overhang, which doesn’t involve a rise in real interest rates or a financial crisis.

Indeed, in 11 of our 26 public debt overhang episodes, real interest rates were on average comparable, or lower, than at other times. Third, the weight of the evidence suggests that a public debt overhang does slow down the annual rate of economic growth, and given the length of these episodes of public debt overhang, losing even 1 percentage point per year from the growth rate will produce a substantial decline in the level of output, and a massive cumulative loss.

 

[fskimospy]

Thank you.

BTW....here's their 2012 paper which fixes the spreadsheet error and addresses the "selectively excluded" data criticism. Please note that their conclusion hasn't substantially changed.

http://online.wsj.com/public/resources/documents/JEP0413.pdf

Not only are they building off their original flawed study, but for the third time I have to mention their enormous problem with reverse correlation.

Can you answer what I've asked multiple times now? How do you account for the fact that the correlation between slow growth -> high debt is stronger than high debt -> slow growth? How does that not completely blow all of their conclusions out of the water?

EDIT: Additionally their findings, when corrected, show higher growth in recent years from countries with 90%+ debt/GDP than for countries with 60%-90% debt/GDP. That's not promising.

 

[Doc Savage Fan]

Not only are they building off their original flawed study, but for the third time I have to mention their enormous problem with reverse correlation.

Can you answer what I've asked multiple times now? How do you account for the fact that the correlation between slow growth -> high debt is stronger than high debt -> slow growth? How does that not completely blow all of their conclusions out of the water?

They addressed the "flaws" you previously noted in their original study...have new "flaws" been found?

I don't know of any evidence that answers your question regarding the possibility of reverse correlation. Perhaps you have information which might be helpful and shed some light on this.

 

[fskimospy]

They addressed the "flaws" you previously noted in their original study...have new "flaws" been found?

I don't know of any evidence that answers your question regarding the possibility of reverse correlation. Perhaps you have information which might be helpful and shed some light on this.

They didn't address them, they didn't even know of them when they made that study.

As for evidence of reverse correlation....uhmmm...their data set. The correlations are stronger in reverse from their own data. Total failure.

 

[shira]

Thank you.

BTW....here's their 2012 paper which fixes the spreadsheet error and addresses the "selectively excluded" data criticism. Please note that their conclusion hasn't substantially changed.

Conclusion
.
.
.
Third, the weight of the evidence suggests that a public debt overhang does slow down the annual rate of economic growth, and given the length of these episodes of public debt overhang, losing even 1 percentage point per year from the growth rate will produce a substantial decline in the level of output, and a massive cumulative loss.

http://online.wsj.com/public/resources/documents/JEP0413.pdf

Notice how they slipped in that bolded part, as if a 1% annual loss in growth was somehow justified by the data? They're so desperate to prop up their discredited study that they've added that gratuitous comment about the effects of what is essentially a MASSIVE (and unsupported) annual 1% decrease. They could equally have added the statement that ADDING even of 1 percentage point per year to the growth rate would produce a substantial INCREASE in the level of output, and a massive cumulative GAIN.

Duhhhh. An annual 1% loss in growth would be a really bad thing over the long term? But what does that have to do with your study? ha ha ha ha

Honestly, these two so-called "economists" are right now laughing stocks.

 

[Doc Savage Fan]

They didn't address them, they didn't even know of them when they made that study.

I think you're confused...the original paper with the errors was done in 2010, the corrected paper that I linked above was done on 2012.

As for evidence of reverse correlation....uhmmm...their data set. The correlations are stronger in reverse from their own data. Total failure.

Again I think you're confused...the paper notes correlation but does not ascribe root cause of the correlation.

There are two other papers that indicate significant breakpoints in the 80-85% range and I believe that there's another that suggests a more linear relationship. To me, arguing about the validity of breakpoints or spreadsheet/data errors in a 2010 paper (that's since been corrected) is moot and only obfuscates the point --> there is more than ample evidence to conclude that high government debt as a percentage of GDP negatively impacts GDP growth over long periods of time. If you have contrary information...now would be a good time to provide.

Willfully increasing spending during a recession has short-term benefits and long-term consequences. If you look at the US, it's quite clear that spending caused our debt-to-GDP ratio to soar...so if you're hung up on causation, you might want to start there.

 

[fskimospy]

I think you're confused...the original paper with the errors was done in 2010, the corrected paper that I linked above was done on 2012.

No, definitely not confused about that.

Again I think you're confused...the paper notes correlation but does not ascribe root cause of the correlation.

There are two other papers that indicate significant breakpoints in the 80-85% range and I believe that there's another that suggests a more linear relationship. To me, arguing about the validity of breakpoints or spreadsheet/data errors in a 2010 paper (that's since been corrected) is moot and only obfuscates the point --> there is more than ample evidence to conclude that high government debt as a percentage of GDP negatively impacts GDP growth over long periods of time. If you have contrary information...now would be a good time to provide.

Willfully increasing spending during a recession has short-term benefits and long-term consequences. If you look at the US, it's quite clear that spending caused our debt-to-GDP ratio to soar...so if you're hung up on causation, you might want to start there.

Well, for one: http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/c3.pdfp

Here's a post showing the fundamental logical failures in the idea that debt depresses growth:
http://www.nextnewdeal.net/rortybomb/guest-post-reinhartrogoff-and-growth-time-debt

Here's one on the negative effects of austerity during a recession, showing that even if debt IS a problem like you claim austerity actually makes things worse, not better:
http://www.imf.org/external/pubs/ft/wp/2012/wp12190.pdf

I can go on and on.

So in short, there is most certainly not 'more than ample evidence to conclude that high government debt as a percentage of GDP negatively impacts GDP growth over time'. Writing that after what you said in the rest of your post is simply baffling to me. What do you mean 'hung up on causation'? THAT'S THE WHOLE POINT.

You have still refused to answer the issue of reverse correlation. If high debt is a causal factor for slow growth, then high debt has costs that need to be accounted for. If low growth causes high debt, that's an entirely different issue. The US is a perfect example of the fundamental wrongness of assuming high debt -> low growth. When the fiscal crisis hit, US tax revenues went down almost 20% while safety net spending skyrocketed. Did high government debt cause the financial crisis and ensuing low growth, or did the financial crisis and cause high US debt? The answer is obvious.

So not only is the problem you describe far from certain, your solution makes things worse.

 

[Doc Savage Fan]

No, definitely not confused about that.

The paper referred to in the link within your original post was done in 2010 (http://www.nber.org/papers/w15639.pdf).

The 2012 paper I previously linked addressed the major criticisms of the 2010 paper. (http://online.wsj.com/public/resources/documents/JEP0413.pdf)

http://www.nytimes.com/2013/04/17/business/economy/response-from-reinhart-and-rogoff.html?_r=0

There still appears to be some confusion on this point.

Well, for one: http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/c3.pdfp

Broken link.

Here's a post showing the fundamental logical failures in the idea that debt depresses growth:
http://www.nextnewdeal.net/rortybomb/guest-post-reinhartrogoff-and-growth-time-debt

Here's one on the negative effects of austerity during a recession, showing that even if debt IS a problem like you claim austerity actually makes things worse, not better:
http://www.imf.org/external/pubs/ft/wp/2012/wp12190.pdf

I can go on and on.

So in short, there is most certainly not 'more than ample evidence to conclude that high government debt as a percentage of GDP negatively impacts GDP growth over time'.

That link cites a grad student paper that has not been peer reviewed. Have you suddenly lowered your standards?

The fact that a grad student found some errors in one paper that was later corrected does little to convince me that the papers conclusion wasn't correct...there are some very heavy hitters in the field of economics that have written several papers which seem to confirm that high debt does indeed depress growth. Here are just a few papers for your reading pleasure.

http://www.imf.org/External/Pubs/FT/issues/issues34/
http://www.imf.org/external/pubs/ft/wp/2010/wp10174.pdf
http://www.bis.org/publ/othp16.pdf

It believe it's clear that spending austerity has (1) to be real and (2) needs to be balanced with tax increase austerity as well as (3) include timing in a way to minimize adverse impact to the economy.

Writing that after what you said in the rest of your post is simply baffling to me. What do you mean 'hung up on causation'? THAT'S THE WHOLE POINT.

You have still refused to answer the issue of reverse correlation. If high debt is a causal factor for slow growth, then high debt has costs that need to be accounted for. If low growth causes high debt, that's an entirely different issue. The US is a perfect example of the fundamental wrongness of assuming high debt -> low growth. When the fiscal crisis hit, US tax revenues went down almost 20% while safety net spending skyrocketed. Did high government debt cause the financial crisis and ensuing low growth, or did the financial crisis and cause high US debt? The answer is obvious.

So not only is the problem you describe far from certain, your solution makes things worse.

Of course it's obvious that the financial crisis caused high US debt. It's also obvious that stimulus spending significantly increased US debt as well. The point is that there appears to be a debt-to-GDP tipping point where, when reached, suggests a high probablility of long term,stunted GDP growth. That's the conclusions presented by the papers I linked above.

You can spin a reverse correlation theory if you like; however, the bottomline is that historical evidence tells us that economies don't grow very well for countries with high debt-to-GDP ratios. To argue the cause of high debt-to-GDP ratios is moot in my opinion. It's likely the combination of high spending and low GDP growth, not one or the other. Please read the three papers I posted.

 

[First]

The paper referred to in the link within your original post was done in 2010 (http://www.nber.org/papers/w15639.pdf).

The 2012 paper I previously linked addressed the major criticisms of the 2010 paper. (http://online.wsj.com/public/resources/documents/JEP0413.pdf)

http://www.nytimes.com/2013/04/17/business/economy/response-from-reinhart-and-rogoff.html?_r=0

There still appears to be some confusion on this point.


Broken link.



That link cites a grad student paper that has not been peer reviewed. Have you suddenly lowered your standards?

The fact that a grad student found some errors in one paper that was later corrected does little to convince me that the papers conclusion wasn't correct...there are some very heavy hitters in the field of economics that have written several papers which seem to confirm that high debt does indeed depress growth. Here are just a few papers for your reading pleasure.

http://www.imf.org/External/Pubs/FT/issues/issues34/
http://www.imf.org/external/pubs/ft/wp/2010/wp10174.pdf
http://www.bis.org/publ/othp16.pdf

It believe it's clear that spending austerity has (1) to be real and (2) needs to be balanced with tax increase austerity as well as (3) include timing in a way to minimize adverse impact to the economy.


Of course it's obvious that the financial crisis caused high US debt. It's also obvious that stimulus spending significantly increased US debt as well. The point is that there appears to be a debt-to-GDP tipping point where, when reached, suggests a high probablility of long term,stunted GDP growth. That's the conclusions presented by the papers I linked above.

You can spin a reverse correlation theory if you like; however, the bottomline is that historical evidence tells us that economies don't grow very well for countries with high debt-to-GDP ratios. To argue the cause of high debt-to-GDP ratios is moot in my opinion. It's likely the combination of high spending and low GDP growth, not one or the other. Please read the three papers I posted.

 

[fskimospy]

The paper referred to in the link within your original post was done in 2010 (http://www.nber.org/papers/w15639.pdf).

The 2012 paper I previously linked addressed the major criticisms of the 2010 paper. (http://online.wsj.com/public/resources/documents/JEP0413.pdf)

http://www.nytimes.com/2013/04/17/business/economy/response-from-reinhart-and-rogoff.html?_r=0

There still appears to be some confusion on this point.

No, there's no confusion. Their second paper does not address the same things as their first. There is no correction of the problems with it within the scope of this argument. I feel like you may have become confused as to what this argument is about, which could explain why you keep writing this.

That link cites a grad student paper that has not been peer reviewed. Have you suddenly lowered your standards?

The paper linked is the one that showed methodological flaws in R&R that the authors themselves concede.

The fact that a grad student found some errors in one paper that was later corrected does little to convince me that the papers conclusion wasn't correct...there are some very heavy hitters in the field of economics that have written several papers which seem to confirm that high debt does indeed depress growth. Here are just a few papers for your reading pleasure.

http://www.imf.org/External/Pubs/FT/issues/issues34/
http://www.imf.org/external/pubs/ft/wp/2010/wp10174.pdf
http://www.bis.org/publ/othp16.pdf

It believe it's clear that spending austerity has (1) to be real and (2) needs to be balanced with tax increase austerity as well as (3) include timing in a way to minimize adverse impact to the economy.

Of course it's obvious that the financial crisis caused high US debt. It's also obvious that stimulus spending significantly increased US debt as well. The point is that there appears to be a debt-to-GDP tipping point where, when reached, suggests a high probablility of long term,stunted GDP growth. That's the conclusions presented by the papers I linked above.

You can spin a reverse correlation theory if you like; however, the bottomline is that historical evidence tells us that economies don't grow very well for countries with high debt-to-GDP ratios. To argue the cause of high debt-to-GDP ratios is moot in my opinion. It's likely the combination of high spending and low GDP growth, not one or the other. Please read the three papers I posted.

I'm genuinely not even sure what you're trying to argue anymore. I think you may have lost track of what you're trying to argue as well.

From my understanding you started off arguing in this thread that austerity was a good policy to undertake in current economic conditions, considering you were disputing my OP that stated that the academic underpinnings for austerity now are for all intents and purposes, completely gone. Then you appear to have changed the argument to that debt depresses long term growth, which is a very different argument. Lets take that debt depresses growth for granted. (I notice that you were quite fond of the IMF for this!) That means that in order for austerity to be a good idea now, that austerity must reduce overall debt. The only problem is that the IMF now rates fiscal multipliers from government spending to be from 0.9 to 1.7.

http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/c1.pdf (p43)

Basically what they are saying is that their analysis from the time period you were citing... was wrong. At any fiscal multiplier over 1.0, austerity makes the debt/GDP ratio WORSE, not better. I already linked to this earlier. So, if you think long term debt is a problem and you accept IMF economic analysis, you should be vehemently opposing austerity by your own arguments and sources. It is unclear why you wish to pursue policies that the IMF says will increase debt/GDP ratios because of fears of debt that you attribute in no small part to IMF analysis. Can you explain this?

There is one other reason you could support this however, and that's if at some particular debt/GDP point growth was disproportionately impacted to such an extreme level that even a short term time over it would have long lasting negative consequences. There was a paper that once said that, but it has since been discredited, which was in fact the whole point of this thread.

Oh, and if you want some considerably more recent analysis by the IMF on whether or not there is actually a debt break point as your three year old analysis claimed:
http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/c3.pdf

They have changed their mind. Similarly they have changed their mind about fiscal multipliers in the face of additional evidence and thus austerity. This is your most often cited source. Does that make you reconsider your position?

If nothing else, can you clarify that you are still arguing that austerity in current economic circumstances is the best policy?

 

[Zorkorist]

That whole study is oblivious to the fact that debt/growth ratios, were unknown in the time before computers... you might call it modern government two.

They are citing middle age debt, versus growth.

They are talking about things in 1918.

Today, it is quite obvious, that austerity, and not spending, are at least a partial solution to the problem of Government.

-John

 

[cubby1223]

eskimospy, you are absolutely obsessed with the subject, don't let your obsession and your need to be superior to the rest of ATP&N cloud your judgment. Like I stated a long time ago in this thread, your original link includes as a major point an exclusion of some data during the 1940's. Seriously, no one gives a flying fuck about how the debt, spending, and economic growth levels of that time period relate to today because they don't. It's a vastly different world today than then.


I will just throw out scenarios I believe is entirely plausible, see what you have to say:

A country has within it emerging businesses, emerging manufacturing, products and services that are new and in demand across the globe. The government, although in high debt, sees the potential and increases spending to help the businesses within the country grow. Investors, lenders, also see the growth potential of the private businesses and are more willing to lend money to fund the government's increased spending.

Or, a country is loaded with debt, it's manufacturing base is out-dated, infrastructure out-dated, there are no new technologies, or innovative products/services of large scale to promote out to the world. Investors and lenders see higher risk and are more weary of lending money to the country's government.



It is entirely reasonable to be able to find examples of situations matching increased spending with increased growth, along with examples of decreased spending with decreased growth. You want to claim that the growth is a product of the spending levels. I would say that growth and spending levels are linked together, but not driven primarily by the spending levels, both being driven by other situations taking place within the country.

There are so many factors that go into whether a country grows economically or suffers. You found some computations that feed your ego, yet no where do they indicate they are relevant to the current situation this country is currently facing. I mean, fuck, your linked articles seem to take for granted an assumption that economic growth happens just because it is supposed to naturally happen. Growth largely happens when there is a breakthrough in technology, or a major shift in the way people in the world live/work/communicate/travel/etc., something kind of unpredictable and cannot be dictated by government spending levels.