Former member of George H.W. Bush's Council of Economic Advisors and Hoover Institution Fellow John Taylor stated he agreed with the central premise of Reinhart and Rogoff's paper that too much debt is perilous for economies on Tuesday's "Santelli Exchange."
Harvard economists Carmen Reinhart and Kenneth Rogoff have been the subjects of recent economic debate following the discovery a spreadsheet error in their research.
With no changes to entitlement spending, the U.S. debt to GDP ratio will far outstrip Reinhart and Rogoff's original 90 percent debt to GDP danger zone, rendering the debunking of the exact 90 percent threshold meaningless Taylor said:
RICK SANTELLI: Mr. Taylor, Reinhart/Rogoff has really gotten smashed a lot lately. And to me, I think it's a bit of a hatchet job. Countries don't like to implement austerity because it's actually a medicine that may work. If it's applied properly, do you believe the central theme of Reinhart and Rogoff which is that an economy saddled with debt over a period of time will underperform it's own bogey? Do you agree with the original premise of that paper, sir?
JOHN TAYLOR: Well I agree with the premise that too much debt is dangerous and our projections [are] we're going to go a lot more than the numbers Reinhart and Rogoff talked about. I mean, it's much more than 90 percent if we don't make a correction. So the sensible thing would be to reduce try to spending gradually. Try to get the budget in balance gradually. We're not talking about austerity, we're talking about to getting back to where we were before the mess began in 2007. I think that message is important, to talk a spreadsheet error trivializes the whole thing, it's a much more serious problem than that.