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Trump administration to exclude govt spending from GDP? Commerce secretary replies
The Commerce Department in its most recent GDP report, showed that the economy grew at an annual rate of 2.3% in the final three months of 2024
US commerce secretary Howard Lutnick has said that the administration spending “could be separated” from gross domestic product reports in response to the questions whether the spending cuts pushed by Elon Musk-led Department of Government Efficiency (DOGE) could possibly cause an “economic downturn”.
“You know, that governments historically have messed with GDP. They count government spending as part of GDP. So I’m going to separate those two and make it transparent," Lutnick told Fox News.
According to an AP report, such a move could “potentially complicate or distort a fundamental measure” of the American economy's health.
The government spending is traditionally included in the GDP because changes in taxes, spending, deficits and regulations by the administration can impact the path of overall growth.
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The AP report added that GDP reports already include extensive details on government spending, offering a level of transparency for economists.
Musk's efforts to downsize the federal agencies could result in the layoffs of tens of thousands of workers, whose lost income could potentially reduce their spending. This could affect businesses and economy at large.
On Friday, Musk had said,"A more accurate measure of GDP would exclude government spending. Otherwise, you can scale GDP artificially high by spending money on things that don’t make people’s lives better.”
Lutnick had said,"If the government buys a tank, that’s GDP. But paying 1,000 people to think about buying a tank is not GDP. That is wasted inefficiency, wasted money. And cutting that, while it shows in GDP, we’re going to get rid of that.”
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US economy grew at an annual rate of 2.3% in last three months of 2024
Last Thursday, the Commerce Department's Bureau of Economic Analysis published its most recent GDP report, showing that the economy grew at an annual rate of 2.3% in the final three months of last year.
The report makes it possible to measure the forces driving the economy, showing that the gains at the end of last year were largely driven by greater consumer spending and an upward revision to federal government spending related to defense.
Still, the report added that the federal government's component of the GDP report for all of 2024 increased at 2.6%, slightly lower than overall economic growth last year of 2.8%.
In the GDP report, government spending accounts for almost one-fifth of people's personal income, which totaled more than $24.6 trillion last year.
This includes Social Security payments, benefits for military veterans, Medicare and Medicaid and other programs. But the report also measures the amount of people's personal incomes that are paid in taxes to the government.
