Commerce Secretary Howard Lutnick argued that purchasing military equipment should count as GDP, but bureaucratic expenses should not|@howardlutnick|X
Commerce Secretary Howard Lutnick said that he may change the way gross domestic product is calculated and not include government spending while measuring the size of the economy.
He argued that counting government spending inflates GDP, calling it “wasted money,” and added that purchasing military equipment should count as GDP, but bureaucratic expenses should not. His comments align with Elon Musk’s push for federal spending cuts through the Department of Government Efficiency (DOGE).
The GDP includes household consumption, government spending, investment and net exports. According to experts, the move could obscure the data and appear helpful on paper but wouldn’t have any actual impact.
Government spending accounts for 17% of GDP.
Critics warn that this adjustment could make economic growth appear more volatile and harder to compare globally.
The GDP is already forecast for a steep decline
The Federal Reserve Bank of Atlanta predicts a 2.8% contraction in GDP for the first quarter of 2025, the worst since the pandemic-era shutdowns.
Meanwhile, the latest GDP report showed the US economy grew 2.3% in late 2024, with federal spending rising 2.6%.
The proposal comes as inflation stalls, hiring slows, and consumer confidence weakens. Federal job cuts, spending freezes, and contract cancellations could weaken growth further.
Economists argue that existing data already separates government spending, making recalculation unnecessary. Some warn the change could be politically motivated, aiming to downplay a potential slowdown rather than improve economic analysis.