AMHERST, Mass., April 16 (UPI) -- A Harvard study used to justify fiscal austerity in government was flawed by mathematical and software errors, University of Massachusetts researchers said.
The Harvard study -- by economists Ken Rogoff and Carmen Reinhart -- postulated a debt-to-gross domestic product ratio above 90 percent is detrimental to the health of an economy.
The Los Angeles Times reported Tuesday Rogoff and Reinhart came up with the 90 percent threshold in a research paper in 2010 that became the basis of a book titled "This Time Is Different: Eight Centuries of Financial Folly."
The U Mass study says Rogoff and Reinhart erroneously tossed out three sample countries whose data would have taken some of the punch out of the claim, and came up with a formula for minimizing growth rates for some countries where the debt to GDP ratio was not favorable to their claim. The U Mass study asserts Rogoff and Reinhart failed to include the ratios of five countries in their final analysis, which would have made the average growth rate in their headline theory 2.2 percent, rather than minus 0.1 percent.
The U Mass researchers said if calculations had been carried out properly, it would show current debt-to-GDP ratios have a more moderate fiscal effect.
Rogoff and Reinhart, while not responding directly to the U Mass study, said Tuesday it found lower economic growth in high-public debt economies, the Times reported.
Several European governments have adopted austerity measures to replace strategies of economic stimulus, based on a fear that a high debt-to-GDP ratio cripples growth. The Rogoff-Reinhart study has been used by many proponents of austerity -- including U.S. Rep. Paul Ryan, R-Wis. -- to bolster the argument for deep federal spending cuts.