Tom Ferguson and Rob Johnson on Debt, Growth, and Austerity

Deficit Fantasies in the Great Recession

Long before the recent controversy, INET Director of Research Projects Tom Ferguson and INET Executive Director Rob Jonhnson produced a paper titled “A World Upside Down?: Deficit Fantasies in the Great Recession,” which adressed both the Reinhart and Rogoff research and the Alesina paper on so-called expansionary contraction.

Ferguson and Johnson show that the RR data from the “Growth in a Time of Debt” paper excludes Britain’s industrial revolution, where Britain had Debt/GDP ratios of over 200% and still maintained high growth rates.

Figure 1 (reproduced below) shows the graph for the British data, which contradicts RR’s conclusions in “Growth in a Time of Debt.”

The full paper from Ferguson and Johnson is attached below.