Trump admin wants to change the GDP formula - GDP for Dummies

 

Trump admin wants to change the GDP formula

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Econ 101 professors might soon be handing students Sharpies to cross out the textbook truism that gross domestic product includes government spending, household consumption, net exports, and investment. Commerce Secretary Howard Lutnick said this week that the statistical agencies he oversees might stop including government dollars spent in the measure of the economy’s size. Lutnick said the change would make reporting “transparent,” echoing Elon Musk’s earlier point that the government can juice on-paper economic performance through spending that doesn’t improve people’s lives. But economists say “useful spending” is subjective, and: Government spending, which makes up 17% of the US GDP, has implications for economic growth. The change could be largely cosmetic, as granular GDP statistics released by the government already allow economy watchers to subtract Uncle Sam’s bills. Some economists warn that the move threatens the independence of federal statistical agencies and could undermine trust in government data, especially if it’s perceived as an attempt to mask the impacts of Musk’s federal cost-cutting effort. Either way, the GDP isn’t looking so hot…with the Federal Reserve Bank of Atlanta projecting this week that the economy will shrink by 2.8% in Q1. Harvard economist and former Obama advisor Jason Furman noted that GDP drop would be even bigger without government spending.