Commerce Secretary Howard Lutnick Proposes Removing Government Spending from GDP Calculation:

Commerce Secretary Howard Lutnick explained that the Gouvernement spending could potentially be excluded from gross domestic product reports calculations. Mr. Lutnick's comments were in response to questions on March 8 about cuts spending around Government Efficiency Elon Musk department and its potential consequences on the economy.

“Governments always meddle with the GDP,” Mus said on Fox News Channel’s Sunday Morning Futures. “They Always included the spending done by government count as part of GDP. I will put those two together and make sure it is distinct.”

This would likely make measuring the health of the economy in the US overly simplistic, or even misleading. Government spending is adjusted to include deficits, tax revenue, spending, and regulation changes that modify the path of projected growth. Also, GPD reports have grown like a behemoth in power and scope in the United States and now have detailed accounts on government spending leaving the explanation for, and inclusion of, economists wanting more tangibility.

If the effort succeed, the cuts in federal agencies by Musk will lead to tens of thousands of federal employees losing their income, which can eventually reduce spending and hurt the overall economy.

Musky’s campaign has argued that and spending does not add value to the economy, and Musk’s proponents, and some economists, have looked for conditions where where the economy can be funded without the existence of the money provided by the taxpayer.

“Government spending should be excluded from GDP calculation,” Musk stated on his social media platform. "This is because money spent on things that do not improve the quality of life for a large proportion of the populace enables GDP to be artificially inflated.”

The Trump administration is seemingly downplaying the economic value added by Social Security payments, infrastructure spending, government scientific research, and other expenditure that advanced the economy’s productive capacity.

“Let me ask you,” Lutnick said on Sunday. “Does that kernel of government expenditure, if they buy a tank, qualifies as GDP? Yes. If they spend money paying 1,000 people to think about how to go about buying a tank, that's not GDP. That is wasted inefficiency, and wasted money. And with that, we need the cuts. While it shows in GDP, we're going to get rid of that. It is wasteful. The bureau of economic analysis of the commerce department published their latest gdp report last thursday, announcing that growth was at an annual rate of approximately 2.3% for the last quarter of the preceding fiscal year.”

The report indicates the important factors behind the economy’s performance. It shows that the improvement recorded at the end of last year was due to increased consumption and also due to an upward adjustment of federal government spending on defense. The component of GDP of the federal government for the whole year of 2024, however, still grew at an annualized rate of 2.6%. This, in point of fact, is below the growth rate of the economy last year which was 2.8%.”

In the government's personal income and expenditure accounts, the majority of expenditure on GDP is social benefits, with spending estimated to be around 20 percent. A year ago, the total Personal Income of the people exceeded $24.6 trillion. These payments include social security, assistance programs for veterans, Medicare, and Medicaid, among other things, but the data does not give details of personal income tax payments to the extent that they would be counted as income to government.

“When we balance the budget of the United States of America, interest rates are going to come smashing down,” Lutnick said. “This is going to be the best economy anybody's ever seen. And to bet against it is foolish.”