How big a problem is the UK’s public debt?

Flip Chart Fairy Tales

How much of a problem is high public debt? The government claims it is a serious problem and we need to reduce it, urgently. Others maintain that it isn’t really much of an issue. We’ve had higher debt-to-GDP ratios in the past so what’s the problem?

The reaction of some on the left to the row about Reinhart and Rogoff a couple of years ago struck me as a mirror image of the right-wing fuss about estimates of glacial melting. In massive leaps of logic, a few errors and over-claims here and there were taken as ‘proof’ that climate change isn’t happening or that government debt doesn’t matter.

It meant nothing of the sort, of course, as Diane Coyle said:

[W]e ‘know’ there might be a threshold for sovereign debt, but it varies over time and across countries, it’s a correlation whose causal direction and mechanism is unclear, and there isn’t enough data for any estimates to be…

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