Although we touched on this article in class, I would still like to share my opinion. In short, Kudlow and Fatas are talking about two different things. Kudlow is being specific, he is focusing on private spending and feels like this is the most important area in the economy. Private spending increased by 3.4% and Kudlow is calling this a success even though GDP growth was -0.1%.On the other hand, Fatas looks at the big picture, the entire GDP as a whole, and views that negative growth as a failure. He does not care about specific gains and losses within that -0.1%, he only sees a negative number and views that as a failure.I have to agree with Kudlow's way of thinking. We must focus on specific areas of the economy first, and the economy as a whole will become stronger later. A loss now could result in an even larger gain later.Fatas makes Kudlow look very stupid in this article, be he fails to recognize that Kudlow might have some logic to his argument.
I agree with Johnny that Fatas frames Kudlow in a very negative way and this isn't fair at all. Fatas writes of Kudlow's piece as too ideological, when it is clear that Fatas has his own ideology in mind as well. When you boil this all down it is just a liberal and conservative disagreeing about how to fix our economy. We could debate this issue for the rest of the semester and still make no progress. I'm sure there are tons of different ways to begin to remedy the issues of the economy but petty shots on the internet definitely won't help. Government spending cuts have been shown to spur growth in the private sector, but a social safety net is also an important mainstay of our country. I guess we can leave these issues to be debated in Washington.
I would like to follow up today’s class discussion by bringing up the point that even if Kudlow’s article did not contain the major flaws in economic theory we exposed, a single quarter’s data is not substantial enough to support such a large claim concerning fiscal policy. I understand that this 4th quarter data is some of the most recent and therefore is very important to consider when addressing current fiscal policy. Despite this importance, past economic data of similar results should be cited to support Kudlow’s claim. Additional data would limit the concern that these changes are the result of another unconsidered variable and are actually unrelated. This further degrades the creditably of Kudlow’s argument by showing that even if he were correct, he hasn’t provided substantial evidence to back it up.
I agree with Robert that a single quarter's data can hardly be used to explain a much larger trend. In class we pretty well straightened out the "Conservative vs. Liberal" idea and debunked some of the article's biggest flaws.What stuck out to me was our focus on government spending, particularly military spending. As someone going in the Army, I'd like to point out that a 20% cut in military spending doesn't necessarily mean "20% less tanks" as someone in class put it. While quite a bit of military spending does go towards weapons and new technology, cuts to the budget can also affect the soldiers, their families, and the numerous programs supporting them on bases around the world. A large cut in military spending doesn't just mean fewer weapons for an admittedly extremely well-equipped force, it can hurt healthcare, daycare, education, recreation, housing, and any other number of programs the military community relies on to maintain the semblance of normal civilian life.
Looking back at this article, after discussing it in class a while ago, I can better understand the concepts of GDP and what each percentage actually means. We’ve been talking a lot about the effects of the multiplier on the GDP and the economy and I must agree with Johnny’s original comment regarding the article that although Fatas makes good points and sees the big picture, he overlooks that fact that any growth should be considered good growth especially when our economy is in its current state. If private spending is increasing, other spending could shortly follow. Kudlow has the right idea in saying that it was a good quarter.
This article brings up two different ways of interpreting the GDP of the 4th quarter. Kudlow sees it as positive because of the 3.4% growth in private consumption and investment, while Fatas sees the .1% contraction as negative. I think the main problem with both these views is that they have a very short run view of economy. A quarter does not allow for the multiplier affect to take place. We will have to wait and see if the this growth in the private sector will continue or if the decrease in government spending will lead to further contraction of the economy. Either way, I think it is definitely a positive sign about the 3.4% increase in private consumption. This means that people's expectations of the economy are improving. Hopefully, this follows the paradox of thrift and that positive expectations will lead to more growth and that cycle will continue upwards.