Harvard University economists Carmen Reinhart and Kenneth Rogoff have acknowledged making a spreadsheet calculation mistake in a 2010 research paper, “Growth in a Time of Debt” (PDF), which has been widely cited to justify budget-cutting. But the authors stand by their conclusion that higher government debt is associated with slower economic growth. Here’s what you need to know:
How big is this mistake?
Reinhart and Rogoff wrote in their 2010 paper that average annual growth was negative 0.1 percent in countries with episodes of gross government debt equal to 90 percent or more of GDP between 1945 and 2009. Liberal economists have been critical of their work for years (just economists being their usual cranky selves), but now three economists at UMass say Reinhart and Rogoff made several mistakes and omissions. According to the UMass scholars, the “corrected” number is positive 2.2 percent—which means GDP still grows, even when debt levels are very high.
