Why the Left Cannot be Trusted, Part LMXXXI

The statist left is on a jihad against this mythical government "austerity," they keep blathering on about. Their latest gambit is to latch onto an error in an immaterial threshold measurement of a study they hate. Their goal is to convince the world that we can borrow our way to prosperity, and this is their big chance:

Last week, careful research by UMass-Amherst professors found that the seminal paper by Ken Rogoff and Carmen Reinhart contained a data error that biased their conclusion that debt-to-GDP ratios in excess of 90% lead to dramatically slower economic growth. 

The 90% of GDP figure was arbitrary with no theoretical basis.  As a result, it’s not terribly surprising to find that its significance was oversold.  Yet, the basic contention that high levels of public debt weigh on growth was and remains perfectly reasonable.

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. (Hysteric Response to The Reinharg-Rogoff Row)

The error made by Rogoss and Reinhart is real, but immaterial, as Robert Samuelson explains:

Although the newly discovered errors in Reinhart and Rogoff’s 2010 paper (“Growth in a Time of Debt”) are embarrassing, they do not alter one of its main conclusions: High debt and low economic growth often go together. (The Reinhart-Rogoff Brawl)

Unlike the fleck spittle shouters on the left, Samuelson has no dog in the fight. Samuelson also shows just how ridiculous Krugman's outlandish question is:

“Did an Excel coding error destroy the economies of the Western world?” asked economist Paul Krugman in his New York Times column.

Well, no. The Reinhart/Rogoff paper was published in January 2010, more than a year after Lehman Brothers’ failure and the onset of the financial crisis. At that point, all the ingredients of Europe’s debt crisis (housing bubbles in Spain and Ireland, huge budget deficits in Greece, weak banks throughout the continent) were also in place.

He them proceeds to explain that Merkel in Germany and Cameron in England both crafted their austerity policies while the Reinhart-Rogoff paper was just being published and no one was yet even discussing it. So, this is why the left has no credibility with me. Once you dive into the numbers yourself and perform your own investigation, you realize how wrong they are.

Some are wrong through the laziness of simply parroting their "experts," but their "experts" are purposely, schemingly wrong, misguiding people in pursuit of their own narrow agenda of convincing people we can borrow and spend ourselves into prosperity. The modern day fairy tale of spinning straw into gold.

The brawl over Reinhart-Rogoff is thus less a serious economic debate than it is a political exercise to turn more of the private economy over to government hands. (WSJ: Debt and Growth)