For one of his classes Herndon was asked to replicate the results of a study. He chose the seminal 2010 study that analyzed the relationship between post-World War II public debt and gross domestic product (GDP) growth in advanced economies. The study, widely cited as the basis for austerity policies in Europe and the U.S., argued that economic growth consistently tumbled once government debt exceeded 90 percent of a country’s GDP.
As he began working on the project, Herndon was unable to successfully replicate the results of the original study by renowned Harvard economists Carmen Reinhart and Kenneth Rogoff. Herndon contacted the economists, who sent him their original data. As Herndon reviewed the spreadsheet, he quickly found that a series of data errors and insupportable statistical techniques had altered the relationship between public-debt levels and GDP growth. In fact, Herndon demonstrated, in advanced economies average GDP growth does not dramatically change when ratios of public debt to GDP rise above 90 percent.
Herndon went on to collaborate with two UMass Amherst professors of economics, Michael Ash and Robert Pollin, on a report titled “Does High Public Debt Consistently Stifle Economic Growth? A Critique of Reinhart and Rogoff.” Published April 15, it immediately gained international attention and sparked pointed criticism of politicians and policymakers who had made the Reinhart and Rogoff study the basis of their debt-cutting fiscal plans.
Within two weeks Herndon was profiled by the New York Times, Wall Street Journal, and Washington Post, got coverage from numerous European and Canadian media outlets, and was interviewed or featured on the Bloomberg Network’s Street Smart, MSNBC’s Last Word With Lawrence O’Donnell, and Comedy Central’s Colbert Report. Stephen Colbert asked Herndon what many people might wonder, given the array of powerful people his findings have discomfited: “Do you have someone starting your car for you right now?”