Public Debt

What's the Cost of an Excel Error?

If you haven't acquainted yourself with the saga of Reinhart-Rogoff, read this post by Mike Konczal. According to Konczal, an error in the Excel coding of Reinhart-Rogoff's major study on public debt casts the entire study into doubt (and it was quite an error.)

The American Enterprise Institute's James Pethokoukis highlights Reinhart-Rogoff's response to Konczal, and then offers his own thoughts on what these new findings mean for long term debt management. Key quote:

The tipping-point argument is a distraction from more important macro fiscal issues: a) Higher debt can hurt growth by crowding out private investment, b) nations with larger public sectors tend to grow more slowly, and c) the coming wave of entitlement spending risks driving US debt to unsustainable levels. All these argue for a long-term debt plan instituted ASAP. I have argued that reducing debt/GDP by half over the next two decades might be a reasonable goal.