Representative Paul Ryan, chairman of the House Budget Committee, declared this month that the U.S. national debt “is hurting our economy today.” It’s an idea embraced by almost every Republican and even some Democrats.
Economic data -- on jobs, housing and investment -- don’t support that claim. And economists across the political spectrum dispute the best-known study of the subject, by Carmen Reinhart and Kenneth Rogoff, which found that nations with debt loads greater than 90 percent of their economies grow more slowly.
“Across both advanced countries and emerging markets, high debt/GDP levels (90 percent and above) are associated with notably lower growth outcomes,” Reinhart and Rogoff wrote, drawing on data from 44 countries over a 200-year period.
Testing the upper limit of debt sustainability would be foolish, he said. Maintaining today’s debt load would leave the U.S. unable to easily respond to a future financial crisis by ramping up spending. Plus, when interest rates rise from current low levels, the government’s annual interest burden -- the CBO projects it will be $224 billion this year -- will mushroom.
Reinhart and Rogoff rocketed to prominence following the global financial crisis. Their 2009 book “This Time It’s Different,” which made The New York Times bestseller list and was translated into 20 languages, drew applause from politicians in both parties.