Now that I have the Syrian stuff out of my system I will return to righting the wrongs put forth by the lunatics on the Right…..and now I bet you think this will be some rambling about the IRS or the DOJ and AP…..SURPRISE! I will those for lesser minds!
Later this year the circus will return to the budget and the deficit and there is something you need to know………
This is an economic post….I give warning because when it is talked about too many people glaze over and move on…..why? They get all their info from BS sources……but to pretend that one knows all about politics without a knowledge of economics is just plain stupid…..and there are those that will not let facts change their position.
If you are smart enough to turn on your TV then you know all about the budget deficit and the debate around the issue…….if you are paying attention then you have heard all the flap about the debt as percent of GDP….how this is killing jobs and bankrupting the country……right? But there is a problem with this rhetoric……with all this choking debt the nation’s GDP is still rising, slowly but rising, 2.5% for the 1st quarter of 2013….now if the toilet math of the GOP were correct would not the GDP be dropping?
Well the GOP talking point that debt is 90% of GDP and economic growth will cease and may even start to decline…….they got this information from a report by two economists, Reinhart and Rogoff……..a good piece was written and cited on any given day but Repubs time after time…….the problem is…..it is WRONG!
Yes I said WRONG! Not mistaken but outright WRONG!
I will bet you think since you believe me a liberal that I will go about quoting economists like Krugman…..am I right?
Well, just like the Reinhart/Rogoff paper, you and your friends in the conserv movement…..would be WRONG! Yes, I emphasized the word WRONG!
………….the most recent period of 2000-2009, which in almost all cases will be the most relevant set of experiences with respect to current policy debates, average GDP growth when public debt is above 90 percent of GDP is higher than when the public debt/GDP ratio is between 60 and 90 percent. The findings in our paper are clearly not consistent with the notion that we consistently observe a sharp fall-off in economic growth when the public debt/GDP ratio exceeds 90 percent. As for the misconceptions concerning causality, I encourage people to read the contribution by my professor Arin Dube. His treatment of the topic is highly readable and offers strong evidence that causality runs from slow growth to high debt.
There is not one word in our paper which suggests that a high level of government indebtedness is never a problem. It would be absurd to think that governments never have to worry about their level of indebtedness. The aim of our paper was much more narrowly focused. We show that, contrary to R&R, there is no definitive threshold for the public debt/GDP ratio, beyond which countries will invariably suffer a major decline in GDP growth. The implication for policy is that, under particular circumstances, public debt can play a key role in overcoming a recession. The current historical moment, with historically high rates of mass unemployment in both the U.S. and Europe and with interest rates on U.S. Treasury bonds at historic lows, is precisely the set of circumstances under which we would expect public borrowing to have large positive effects, with comparably fewer costs. Moreover, it is precisely the set of circumstances under which we expect austerity to have substantial negative effects.
Click here to read Herndon’s full paper >
But do not take my word for this……..the PhD candidate’s findings are linked above……read it and decide……..I will also post this article in full in a latter post today….read it……
I realize that the mindless regurgitation on the right will not read this or embrace it….and most likely will not understand anything that is not boiled down to a slogan….I would like to believe that Conservs are not idiots just misinformed…..I said I would like to believe it….but I have seen nothing about them that would lead me to think better of them…..