That thing about “Debt and Economic Growth”

By now you may have seen that meme that is making away around the internet – you know the one, about the relationship with national debt and economic growth?  Saw this in the Times this morning….

The basic premise laid out by Reinhart and Rogoff was that:

Once debt exceeds 90 percent of gross domestic product, they claimed, economic growth drops off sharply

Which is great and all, until you look at the data.  First, the correlation doesn’t exactly jump off the page at you.  But the kicker?  An excel error lying at the heart of their calculations.  And really, anyone who has worked a lot with excel can appreciate a formula error.  It’s just that most errors don’t take on a life of their own in the national press.  

 

X