Is high debt a drag on economic growth? Or is a recession born of other catalysts the source for high debt? Inquiring minds want to know.

A research paper by Carmen Reinhart (an economics professor at the University of Maryland) from earlier this year argued that high debt leads to low growth or worse. This study triggered a debate, which I discussed in May. Reinhart and Ken Rogoff of Harvard have responded to the brouhaha with a new update, but one critic is, well, still a critic.
Another skeptic of the notion that high debt impairs growth wrote:

…what I don’t like about the analysis is that it only looks at the risk of adding to the deficit, it doesn’t compare the risk posed by higher debt to the risk of doing nothing (or worse, contracting the deficit before the economy has recovered sufficiently).

Meanwhile, the Economic Policy Institute recently published a more detailed critique of the earlier Reinhart and Rogoff paper.
But no matter which side you’re on, ignoring a huge mound of red ink on a nation’s balance sheet requires a special kind of self delusion. “So while the general criticism, that there is no ‘magic’ level of debt-to-GDP, is a fair one,” reminded The Economist’s Buttonwood blog, “the Reinhart/Rogoff paper can’t be dismissed so easily.” Why? Buttonwood explained:

The best way of solving a high debt problem is economic growth. Clearly, however, countries have struggled to grow with a high debt level. So it seems best not to take the risk. As for the deficit/stock argument, governments with a high debt-to-GDP ratio will inevitably be paying a lot in interest payments; either these drive up the deficit or they would crowd out more useful forms of public spending such as roads or education.