Ever since a minor spreadsheet error was discovered in a 2010 study evidencing the plainly obvious fact that increased debt loads hinder economic growth, pundits from the left have been gleefully jumping over this molehill pretending it’s a mountain. Apparently completely forgetting that the conclusion of the paper in question is broadly supported by empirical data the world over, these ideologues now loudly proclaim that the final nail in the coffin of the “austerians” has been placed and that any idea of fiscal responsibility is now dead.
Reinhard and Rogoff Don’t Matter
It’s true, and I can prove it with a simple question: If interest payments consume all available revenue, by what mechanism can an economy grow?
This is all it takes to drive the spendthrift maniacs in to an episode of verbal diarrhea and flimsy excuses. The obvious answer is that an economy in such a predicament cannot grow, it can’t even reduce it’s debts. Thus there is a clear mathematical limit on how much debt an economy can sustain as well as a clear impact on growth rates. If there is no economic surplus, there can be no investment. Without investment, there can be no growth. To make the claim that growth can occur without investment is to profess a belief in nothing less than magic and negate the very foundations of economics, no matter what theories one ascribes to.
While Reinhard and Rogoff’s paper may not have provided iron-clad proof that debt above 90% of GDP is dangerous, the left’s reaction to its revision surely has provided iron-clad proof that they have abandoned reality in its entirety.