I think we need a thread for public blunders...
Los Angeles Times
Michael Hiltzik
4/16/13
How an Excel error fueled panic over the federal debt
Quote:
One of the most fearsome statistics in the war against the federal deficit
has always been the country's ratio of debt to gross domestic product.
When this ratio reaches 90%, the argument goes, watch out --
<snip>
This idea comes from Harvard economists Ken Rogoff and Carmen Reinhart,
who featured it in a 2010 paper and popularized it in a book entitled
"This Time is Different: Eight Centuries of Financial Folly."<snip>
A new study by three researchers at the University of Massachusetts finds
that Rogoff and Reinhart made several mistakes that invalidate their thesis.<snip>
Most important, they made a spreadsheet error that resulted in their leaving five countries
out of an all-important average of countries with higher than 90% debt-to-GDP ratios.
By restoring the full average, the UMass authors say, the growth rate for countries
in that range becomes 2.2%, not the -0.1% cited by Rogoff and Reinhart.
That makes the average growth rate at that ratio "not dramatically different
than when debt/GDP ratios are lower."<snip>
Rogoff and Reinhart haven't yet responded to the UMass paper.
But if the new analysis holds up, it knocks a key leg out from under the argument
that our economic growth depends on cutting the deficit and reducing the national debt without delay.
<snip>
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Now, who will be the first to quote Regan and Chenney