Crunching the Numbers

At what point does public debt become a problem?  If you ask many Republicans  when the debt hits 90% of GDP we’re in trouble.  Given that the Federal Debt is above this level you can see why there is a push for budget control if not outright austerity.  But where did that magic figure come from?

The answer is a  work by two Harvard economists, Reinhart and Rogoff’s 2010 paper “Growth in a Time of Debt.”  But now that this magic number has been debunked in spectacular style, will the call for austerity ease?  Given how the sides have retrenched, no way.  But it is true that a certain level of debt is indeed a problem – it just isn’t something you can pull from a formula and throw onto autopilot.

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