The world of anti-austerians is abuzz (and maybe somewhat gleeful?) this afternoon about news that a paper by Carmen Reinhart and Kenneth Rogoff — the paper for those policymakers looking for serious academic work to back up their proposals for debt-slashing cutbacks — has some serious issues (Josh Keating summarizes those problems on his War of Ideas blog here)
Why is this causing such a stir? One of the conclusions of the paper is that when countries hit a debt-to-GDP ratio of 90 percent, they reach a tipping point after which they’ll start experiencing serious growth slowdowns. It’s a conclusion that many have found either important or useful, depending on your level of cynicism.
Take a look at some of the ways Reinhart and Rogoff — and their conclusions — have been marshaled in the austerity vs. Keynesianism debate that has dominated much of the post-financial crisis discussion about fiscal policy:
This House Budget Committee response to President Obama’s budget proposal from just a few days ago cites R&R by name before going on:
Instead of taking steps to reduce the excessive burden of debt, the President’s budget, even if fully implemented, never reduces gross federal debt below the important 90 percent threshold.
Olli Rehn, European Commission vice president on Economic and Monetary Affairs and the Euro (and noted austerity champion) pulls out the R&R 90-percent rule in this February call for continued "fiscal consolidation":
It is widely acknowledged, based on serious academic research, that when public debt levels rise above 90% they tend to have a negative impact on economic dynamism, which translates into low growth for many years.
Sen. Tom Coburn (R-OK), in this excerpt from his book, rhapsodizes about a briefing Reinhart and Rogoff gave before a group of forty senators:
"Reinhart echoed Conrad’s point and explained that countries rarely pass the 90 percent debt-to-GDP tipping point precisely because it is dangerous to let that much debt accumulate. She said, "If it was not risky to hit the 90 percent threshold, we would expect a higher incidence."
"Thank you for your depressing presentation," Senator Dick Durbin, D-Ill., said in closing, to self-conscious laughter around the room."
These are just a few examples that turned up from a quick search in English — who knows what a search in Italian, Greek, or German would yield.