Did you know that just over the past 11 quarters, dating back to the June 2003 Bush tax cuts, America has increased the size of its entire economy by 20 percent? In less than three years, the U.S. economic pie has expanded by $2.2 trillion, an output add-on that is roughly the same size as the total Chinese economy, and much larger than the total economic size of nations like India, Mexico, Ireland, and Belgium.
It’s news to me.
UPDATE: Reader Daniel Amerman says that Kudlow didn’t include inflation, and that if you include inflation, the U.S. economic expansion was “only” 11.4 %. As Amerman says, “11.4% over 11 quarters is quite respectable in real terms, there is no need for misrepresentation and hyperbole.” Click “read more” for his entire email.
ANOTHER UPDATE: A response from Prof. Aron Spencer — click “read more” and scroll down.
And be sure you read this.
MORE: Captain Ed has much more, and says Kudlow overplayed a winning hand. “The numbers, adjusted for inflation, are already compelling.”
Dear Mr. Reynolds,
Kudlow pulled a bit of a fast one on you and his other readers — he included inflation in his economic growth rate, something reputable economists try to avoid doing when talking about economic growth statistics. If you go to the government website below, and click on the GDP table in the upper left, you will find that the 20% is in nominal dollars before adjusting for inflation (13,042/10,427), and the real rate is (11,403/10,230 in 2000 dollars), which is 11.4%.
http://www.bea.gov/bea/dn1.htm
11.4% over 11 quarters is quite respectable in real terms, there is no need for misrepresentation and hyperbole.
Now, if you go to this government website, (CIA World Factbook), which measures economies in real purchasing power parity that is not subject to the systematic currency manipulation the Chinese government engages in, the size of the Chinese economy is $8.9 trillion in 2005 dollars, which would be about $8 trillion in the 2000 dollars above. So, in real dollars, the US grew by about 15% ((11,403-10,230)/8,000) of the real size of the 2005 Chinese economy in those 11 quarters. That’s a fine number, nothing to be ashamed about — but nothing remotely like the 100% which Kudlow is claiming.
http://www.odci.gov/cia/publications/factbook/geos/ch.html#Econ
Unfortunately, sir, Mr. Kudlow has played you, and his other readers. From reading your site, I think you are well aware of the worldwide effects of China’s spectacular growth rate, and how it is transforming much of the global economy. Mr. Kudlow’s assertions would be amazing if they were true — but unfortunately, they are not, and I am confident you prefer a more factually-based approach to what appears on your site.
Hmm. I’ve always found Kudlow to be reliable. Comments, anyone?
—
Prof. Aron Spencer of the NJIT Management school emails:
Amerman is nominally right about the inflation part, but as to the bit about adjusting for the non-floating yuan: while it is basically true that the Chinese economy is larger than it is reported due to the undervaluation of the yuan, if Amerman thinks that he can determine that the “proper” market value of the yuan is ~%400-%500 of what it is currently set at, I wonder why he doesn’t go make himself billions by betting on currencies that do float…
No one really knows what the yuan would stabilize at if it were allowed to float, but that “knowledge” is what Amerman is basing his assertion on. If the yuan were to double in value (assuming it were allowed to float), then U.S. growth would have been around %50 percent of China’s total (implied) GDP.
Daniel, if you make those billions, don’t forget the tipjar over to the right. You’ll want to use PayPal, as the Amazon button is limited to fifty bucks . . . .