Kudlow’s Kontinuing Konfusion Over Nominal v. Real

Noumenon ask over at Mark Thoma’s blog:

Excuse me, I can see from Google that you have criticized Lawrence Kudlow in the past. Can you explain how he can claim that “over the past 11 quarters … America has increased the size of its entire economy by 20 percent?” Because that seems to imply a 6% growth rate and it’s only been like 3.5%.

Real GDP as of 2006QI was only 11.5% higher than it was as of 2005QII so Noumenon is correct. Here is what Lawrence Kudlow wrote:

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.

Nominal GDP increased by 25% over this period but I guess Kudlow continues not to understand the difference between nominal v. real increases. As far as the Chinese economy, the CIA World Factbook reports its GDP (purchasing power parity) was $8.859 trillion in 2005.

Kudlow has been long guilty of trying to tell his readers that Bush’s fiscal fiasco actually promotes investment and long-term growth even though the facts say otherwise. As Brad DeLong often wonders – is it stupidity or mendacity? It appears to be both.

Update: Even Glenn Reynolds got the point eventually – with a little help:

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.”

Is Kudlow less intelligent than Glenn Reynolds or is Amerman correct that Kudlow misrepresented this issue. Being called out by the rightwingers should be a single to the National Review that it is time to fire Lawrence Kudlow.