The Washington Post Outlook section, which just three months ago told us the economy was doing great, features another gem today. James P. Moore Jr. gives us five "myths" about the U.S. economy. Among the myths that Mr. Moore refutes is the claim that the U.S. is about to be eclipsed by China. He tells us that China's GDP is just a bit more than $3 trillion, while U.S. GDP is over $14 trillion. While this is an exchange rate measure, a purchasing power parity (PPP) measure, which applies the same set of prices to the output of both countries, puts China's GDP at $7.1 trillion. Even this measure could be an understatement. The World Bank's old PPP measure would put China's GDP at more than $10 trillion presently. One reason to be suspicious of the new measure is that if apply the IMF's growth figures to the current measure, it implies that China was poorer than almost every country in Sub Saharan Africa in 1980. That one seems unlikely. Mr. Moore also tells us that the U.S. still leads the world in manufacturing in part because of its dominance in pharmaceutical manufacturing. The U.S. is arguably the world leader in pharmaceutical research, but there is not much value added in the process of manufacturing pharmaceuticals. Mr. Moore also told readers that "the United States attracted more than $2 trillion worth of foreign direct investment last year." You could probably only get this fact in the Washington Post, since the Bureau of Economic Analysis puts the amount of foreign direct investment last year at $237.5 billion. So what if they're off by an order of magnitude. Finally, Mr. Moore tells readers that the United States is still the engine of world growth because of its enormous trade deficit. Yes, and Iceland was pulling far more than its weight until recently because of its trade deficit. I'm not sure that this should make anyone feel good.
--Dean Baker