How can you even know if it's not a problem?

"Not One Word"

From Ash and Pollin's response to "Reinhart-Rogoff Data Problems":

For starters, let's just be clear that there is not one word in our paper that suggests that one should never, categorically, worry about high sovereign debt loads.

They are quite clear, I think. And they make a good point: It is important not to write things off, not to simply dismiss things that could be a problem, not to be categorical about things, ever.

Crossing 90

The blue line on the graph below shows Gross Federal Debt relative to GDP. That's the thing that may or may not become a problem when it crosses 90%, per Ash and Pollin.

The green line is 90%.

The red line is the problem.

BLUE: Gross Federal Debt as a Percent of GDP
RED: Debt Other Than Federal Debt, as a Percent of GDP
GREEN: Shows 90% of GDP

A Thing Unseen

At Econbrowser, James Hamilton reproduces Reinhart and Rogoff's summary of differences in the bottom-line claims between their "Growth in a Time of Debt" paper and the Herndon/Ash/Pollin takedown paper:

1945-2009
	RR AER (2010)		HAP (2013)
Debt/GDP	Mean	Median	Mean	Median
0 to 30	4.1	4.2	4.2	NA
30 to 60	2.8	3.9	3.1	NA
60 to 90	2.8	2.9	3.2	NA
Above 90	-0.1	1.6	2.2	NA
RR AER (2010) (Table 1)
1800-2009
0 to 30	3.7	3.9	NA	NA
30 to 60	3.0	3.1	NA	NA
60 to 90	3.4	2.8	NA	NA
Above 90	1.7	1.9	NA	NA
RRR JEP (2012),
1800-2011	Mean
Below 90	3.5
Above 90	2.4

What's missing from all these numbers?

There is absolutely no reference to private debt. It's all a look at public debt. All of it. And let me point out, not only Reinhart and Rogoff but also Herndon, Ash and Pollin ignore private debt. As does James Hamilton.

How are you gonna solve a problem if you never look at it? How can you even know if it's not a problem?


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