Brooks is one of the national commentators I admire the most. Knowledgeable, insightful, articulate, and humane, he’s moderate with strong conservative credentials. He worked for William F. Buckley, the Hoover Institute and the Wall Street Journal. He is strong in philosophy, sociology and even in developments in neuroscience. The economy is its weak point. He’s not really up to speed with the research of the past 50 years, nor does he seem to keep up with the big current debates within the discipline.
Ed Lotterman: Flawed logic in the GDP-national debt debate | Ed Lotteman
A “truism” is something obvious at first glance and universally accepted. The sun rises in the east, the water flows downhill, the ice cream tastes good, pancreatic cancer is often fatal, all are truths.
There are truisms among economists: market signals from supply and demand often allocate resources efficiently; sometimes markets “fail”; international trade is not zero-sum, it generally improves the situation of the two trading nations; emissions taxes should be a first choice to control pollution.
However, the idea that a nation’s debt value exceeding 100% of a year’s worth of production must hurt its economy is not a truism. It never has been. Indeed, find 51% of economists who think it would be difficult now and at any time in the past. In 40 years of college teaching, I have never encountered this in a textbook.
Yes, individual economists have made this argument, notably Carmen Reinhart and Kenneth Rogoff, whose unpaired article published in the 2010 American Economic Review claimed that when “a country’s gross external debt reaches 60% of GDP, its annual growth decreases by 2% ”and“ above 90% ”GDP growth has been“ approximately halved ”. This article is probably the source underlying Brooks’ statements. But it has been very controversial among economists and strongly refuted. It has certainly never been a truism or even a simple consensus.