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There is a huge fight brewing in the hallowed halls of academia -- scholars from the University of Massachusetts against Harvard.
-- It's creating a lot of buzz it hits home.
Because our country's debt to GDP -- your right now is above a 100%.
That is not good no matter how you slice it.
And it widely accepted study from a few years ago says that would certainly stall economic growth and now group from the university Massachusetts says.
It's actually the opposite.
Don't know how that's possible with me -- -- is one of the professors that debunks.
Robert -- former unit -- -- Amherst and we've also got.
From UMass Amherst pardon me we got see more member of the Wall Street Journal's editorial ward.
Professor -- let me start with you see you take apart this study.
That Carmen Reinhart and -- robot put together and the first air that you found was a doozy was mathematical.
He said -- -- mistakes in their excel spreadsheet.
Yeah they did I wanna say it wasn't just me it was myself with my co authors.
Thomas turned and who has a graduate student and my colleague.
And that was the first problem the problem was they simply.
Calculated wrong popular spreadsheet.
OK so there response and that has been.
We do what we do not believe that this regrettable slept.
At -- any significant way the central message.
Of the paper.
Or in our subs can subsequent work what do you think about that.
There were really three errors that was 13 types of -- the net effect of all three errors.
Convey very different picture than the one that's in their paper.
They're pictures there the picture in their paper is that once an economy the US or any other economy.
Has a public debt level in excess of 90%.
You're facing an -- that the economic growth is gonna go down very very sharply.
The result that we produced by working with their own data which is doing it correctly.
Is very different that you see on average a moderate.
Reduction in GDP growth past that 90% threshold and you also see a very wide range.
A round that average such that you really can't tell this story that once you go pass that threshold.
We are going to see anything like a -- GDP growth decline.
-- -- -- -- thought -- that -- yeah yeah I think these press I think these professors -- some pretty you know important stuff flies in the I what I call the R&R study -- -- -- from Reinhart.
I and it's something that really has to be -- drives but my point here you know for people looking at this how to how does -- affect the markets how does data back down economy.
I've never believed that it says some -- you have 90% you go up a club more outside I've never believed that to be true.
I what I do believe and I think the evidence is pretty strong on this that as your dad accumulates is a nation.
You know the negative -- -- of that become more pronounced now whether that's an 80% or 90% -- a 100%.
Quite -- -- -- I don't think we know but we do know what debt burden as large as Europe in the United States that is is getting pretty dangerous.
Professor -- what do you think about that because.
That has a country is overwhelmed with -- impact growth do you not think that's true.
Well of course I think it's true now look the point is I've never -- That when a country.
Accumulates debt indefinitely under any and all circumstances.
That's a positive that is not the point at all.
What we have said his number -- and this is a research paper and we said this major research paper.
Is just wrong so all the people including Paul Ryan including George Osborne.
In the UK the chancellor.
The UK have been -- this work over and over again it's wrong now what do I think about debt and GDP I think -- an economy.
Is I have yet.
-- safe financial crisis of the magnitude we got hit -- and you fall into a severe recession.
Then the single best pop policy tool we have is government spending to create jobs and to bring the economy back.
That every session that is not the case in the eighties and when the economy is growing and they've got that I -- does.
Not at present is that that's a really important point NASA and that and that the truth there's Arthur -- and -- and the Wall Street Journal just about six months ago did a pretty extensive study that showed its not exactly the opposite that in fact.
The countries that did the biggest fiscal stimulus and response to that.
Great Recession we had in 2008 and 2009 that is the governments that spot them -- the most money actually have the weakest.
Recoveries from so that this kind of keynesian idea that's what you want to do when you get hit with a financial crisis and spend and -- we found just the opposite was true.
Maybe maybe professor you have to look at that what if it -- -- And -- said he could we buy just the opposite.
We you know what we've got it -- squeeze it -- We appreciate both of you I love these academic arguments -- you guys are looking at data rather than just having a motion about what you feel would be right for the government to do we're looking at real numbers and -- and -- not solve the problem.
So I really appreciate both of you coming on I hope we can do it again.
Okay thanks a lot -- okay.
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