Tag Archives: debt-to-GDP ratio

An Excerpt from Real Fiscal Responsibility, Vol I: the Progressive Give-up Formula

Below is an excerpt from my most recent e-book: Real Fiscal Responsibility, Vol. I: The Progressive Give-up Formula. The book is volume I of II critiquing austerity politics at the Federal level in the United States. It exposes its fallacies, its closed-mindedness and futility, and especially its reliance on wrong-headed conceptions of fiscal sustainability and fiscal responsibility. Continue reading

The Value of the Right Ratio Is Zero

The public debt-to-GDP ratio is, perhaps, the most important measure used in discussions of the relative fiscal sustainability of nations. Nations with high levels of debt-to-GDP are viewed as having more serious fiscal problems than nations with lower levels. Nations having increasing ratios over time are viewed as becoming less fiscally sustainable, while those with decreasing ratios are viewed as more fiscally sustainable.

But is the public debt-to-GDP ratio really a valid measure of fiscal sustainability, or is it a measure that incorporates a neoliberal theoretical bias in its fundamental assumptions? In the United States the total value of public debt subject to the limit at any point is the total principal value of all the outstanding debt instruments sold by the Treasury Department. The GDP is the aggregate value of the production of goods and services in the United States within a particular period of time, adjusted for price changes.

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The Five Worst Reasons Why the National Debt Should Matter To You: Part Four, Three REAL Reasons

By Joe Firestone

This is the concluding post in a four part series on the “Top” reasons why the national debt should matter. In Part One, I considered “Fix the Debt’s” claim that high levels of debt cause high unemployment and argued that this is a false claim. In Part Two, I followed with a review of the historical record from 1930 to the present and showed that it refutes this claim throughout this period, and that there is not even one Administration where the evidence doesn’t contradict “Fix the Debt’s” theory. In Part Three I showed that the other four reasons advanced by “Fix the Debt” also had very little going for them. In this part, I’ll give reasons why the national debt does matter, and why we should fix it without breaking America, or causing people to suffer.

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The Five Worst Reasons Why the National Debt Should Matter To You: Part Three, The Other Four Worst Reasons

By Joe Firestone

In Part One of this series, I considered “Fix the Debt’s” claim that high levels of debt cause high unemployment and gave a few reasons why this is a false claim. In Part Two, I followed with a review of the historical record from 1930 to the present and showed that it refutes this claim throughout this period, and that there is not even one Administration where the evidence doesn’t contradict “Fix the Debts” theory. In this part I’ll continue my examination of the other four “top reasons” why “Fix the Debt” insists that the National Debt should matter to you.

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The Five Worst Reasons Why the National Debt Should Matter To You: Part Two, the Record Since 1930

By Joe Firestone

In Part One, of a critique of the most important of “Fix the Debt’s” reasons for “Why the National Debt Should Matter To You,” I asserted that high debt levels haven’t caused high unemployment in the United States, and that, if anything causation was in the other direction. I didn’t want to disturb the flow of the argument there with a relatively lengthy survey of some of the numbers in the historical record since the 1930s. But let’s test the idea that High debt causes fewer jobs and lower wages in the United States by looking at that record now.

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The Five Worst Reasons Why the National Debt Should Matter To You: Part One, High Debt Levels and Jobs

By Joe Firestone

I came across a post from the “Fix the Debt” campaign last month called “The Top Five Worst Reasons Why the National Debt Should Matter to You.” It’s a post full of debt/deficit lies that cry out for correction. That’s what I’ll provide in this series. Continue reading

Make ‘em Prove the Causality before They Cause Any More Suffering: Part Three, Reinhart – Rogoff Retrospective

This post is a more complete statement of my conclusions based on the analysis in Parts One and Two of this series. As I’ve explained in Part Two, there’s no reason in the Reinhart-Rogoff (R-R) data to believe that the debt-to-GDP ratio has a negative impact on growth. Ironically, that’s because their data set is terribly biased in its incompleteness, and was constructed to try to prove that there was a negative relationship between the debt-to-GDP ratio and economic growth. The interests supporting the RR work, both in its inception, and in disseminating its original results, were clearly trying to develop a basis for saying that since there is such a negative relationship, the right thing to do when the ratio gets too high (over 90%) is to implement a program of austerity aimed at deficit reduction, more or less drastic, depending on the individual case. Continue reading

Make ‘em Prove the Causality before They Cause Any More Suffering: Part Two, the Fall and After

In Part One, I asked whether the Carmen Reinhart/Kenneth Rogoff study and book didn’t show that, on average, nations experiencing debt-to-GDP ratios above 90% had negative rates of economic growth? And I said the answer to the question was “no.” But I didn’t explain why that was true. So, here goes.

The Fall

When Reinhart and Rogoff published their work they did not make their data set available to people to replicate, analyze, critique their findings, and augment to improve the data set. They ignored the scientific norm that you do that when you’re claiming that you’ve made an important empirical discovery. Other researchers wrote them and requested access to their data set in vain for at least the past three years. Continue reading

The Layman’s Case Against Austerity

By Stephanie Kelton

Steve Kraske of The Kansas City Star recently interviewed me for a piece about austerity.  The story ran in today’s paper. It doesn’t provide much depth (unlike bloggers, journalists have strict space constraints!), so I followed up with a few comments on the Star’s website.  I thought I’d share them here, since I’m always trying to improve the way I communicate these ideas with non-economists.  So here’s my best effort to make the anti-austerity case in simple terms. Continue reading

Make ‘em Prove the Causality before They Cause Any More Suffering: Part One

By Joe Firestone

OK, austerity has always been about the causality. The people who are trying their best to get us to cut more and more spending, somewhat less than their best to get us to raise taxes, and who are doing nothing to fix our fraud-laden financial system, or the worst period of dis-employment we’ve experienced since the Great Depression, have been making other people (never themselves) suffer, because they believe the theory that excessive public debt hurts economic growth, and that to get rid of it we must follow a plan of long-term deficit reduction. And I’m being very charitable when I opine that they believe in this theory, because the alternative is that they don’t believe it, but are just using it as an excuse to make other people suffer, and widen the wealth gap between themselves and the rest of the population. Continue reading