07-03-2025
Without Federal Spending, What's Left of US GDP Growth?
Should a country's gross domestic product include government spending? No, argued Simon Kuznets, the Nobel economics laureate who helped create the measure now known as GDP. When the US Department of Commerce started publishing estimates of national output in the 1940s with government spending included, Kuznets complained that this ensured 'that fiscal spending would increase measured economic growth regardless of whether it actually benefited individuals' economic welfare,' according to economist Richard Kane.
Part-time government worker Elon Musk echoed Kuznets last week, asserting that '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.' Soon after, Commerce Secretary Howard Lutnick — whose department is still responsible for producing US GDP data — declared 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.'
