Thursday, August 12, 2010

Chart of the Day

House Republicans recently released this ominous prediction:

source: House GOP chart package at 21

Check out pages 3-7 of the same document for a confirmation of AVI's thesis. And read Carmen Reinhart & Kenneth Rogoff:
In the current context, even a cursory reading of the recent turmoil in Greece and other European countries can be importantly traced to the adverse impacts of high levels of government debt (or potentially guaranteed debt) on county risk and economic outcomes. At a very basic level, a high public debt burden implies higher future taxes (inflation is also a tax) or lower future government spending, if the government is expected to repay its debts.

There is scant evidence to suggest that high debt has little impact on growth. Kumar and Woo (2010) highlight in their cross-country findings that debt levels have negative consequences for subsequent growth, even after controlling for other standard determinants in growth equations.
(via The Corner)

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