Kenneth Rogoff’s case against a “panicked fiscal surge” has led to a number of interesting responses. Unfortunately, a lot of them are gated behind the FT paywall. Rogoff writes:

There is no question that huge uncertainty hangs over the global economy, but is the case against commonsense fiscal conservatism so compelling? I don’t see it. Yes, output growth is likely to remain tepid compared with a normal post-recession recovery. As Carmen Reinhart and I have repeatedly emphasised in our research, anaemic growth with sustained high unemployment is par for the course in post-financial-crisis recoveries. Yes, Europe’s sovereign debt and banking problems are unlikely to disappear soon. But sovereign debt problems are a typical aftershock of any wave of international financial crises. Worrisome as the current conjuncture may seem, the normality of the crisis trajectory to date hardly suggests the need for a panicked fiscal response.
Indeed, it is folly to ignore the long-term risks of already record peace-time debt accumulation. Even where Greek-style debt crises are unlikely, the burden of debt will ultimately weigh on growth due to inevitable fiscal adjustment. The fact that the markets seem nowhere near forcing adjustment on most advanced economies can hardly be construed as proof that rising debts are riskless. Indeed, the evidence generally suggests that the response of interest rates to debt is highly non-linear. Thus, an apparently benign market environment can darken quite suddenly as a country approaches its debt ceiling. Even the US is likely to face a relatively sudden fiscal adjustment at some point if it does not put its fiscal house in order.

Brad DeLong has written a temperate and respectful reply, in which he disagrees with Rogoff’s assessment of how the world’s major central banks will react to a debt explosion. But the reply I found most interesting was from Paul Krugman:

So the original RR book was able to tell us a great deal without any fancy statistical analysis, because it was a study of extreme events.
Unfortunately, the Reinhart-Rogoff paper now being cited all over the place – the one that suggests that there’s a critical level of government debt, at around 90 percent of GDP — doesn’t follow that strategy. All it does is look at a correlation between debt levels and growth. And since debt levels are not sharp extreme events, there’s no good reason to believe that they’re identifying a causal relationship. In fact, the case they highlight – the United States – practically screams spurious correlation: the years of high debt were also the years immediately following WWII, when the big thing happening in the economy was postwar demobilization, which naturally implied slower growth: Rosie the Riveter was going back to being a housewife.
It’s just not up to the standard of the other work. And yet Ken is leaning hard on that paper to justify his pro-austerity position.

As is so often the case, Krugman goes from making a narrow and defensible point — is Rogoff overinterpreting the idiosyncratic experience of the U.S.? — to a sweeping claim — “as I’ve already said, that 90 percent red line is nonsense.” But that doesn’t change the fact that Krugman has made an interesting observation.

Rogoff has a different interpretation of the idiosyncratic event in question, which Krugman doesn’t address in his post:

Similarly, the fact that postwar debts in the US and UK have exceeded 100 per cent of gross domestic product – a level that Ms Reinhart and I find to be above the threshold where growth might be affected – is hardly evidence not to worry about peace-time debt explosions. After a war, the natural phase-down in military expenditures combined with a surge of former soldiers into the workplace, makes it far easier to bring down debt-output ratios than after the kind of peace-time build-up we are now seeing. The risks of rising debt, while apparently far off, cannot be lightly dismissed.

That is, Rogoff seems to believe that postwar demobilization was ultimately beneficial to the debt-output ratio. I could be overinterpreting, but the one version of events sees a surge of former soldiers into the workplace as a potential source of economic expansion while another places heavy emphasis on the de-stimulative effect of a sharp decline in military expenditures.

One way of looking at this: Krugman is at his best when he counsels others against making overbroad claims. He is at his worst when he makes overbroad claims.