Commerce Secretary Howard Lutnick announced on Sunday that government spending may no longer be included in the U.S. Gross Domestic Product (GDP) reports. He made this statement during an interview on Fox News Channel’s “Sunday Morning Futures.” Lutnick explained that removing government spending from GDP calculations would make economic reports more transparent.
This change comes in response to budget cuts proposed by the Department of Government Efficiency (DOGE), led by Elon Musk. Some experts worry that these spending cuts could slow down the economy, especially since government spending has always been considered a key part of GDP. Currently, GDP measures the total value of goods and services produced in the country, including government activities such as infrastructure projects, defense spending, and public services.
Lutnick and Musk argue that government spending does not create real economic value. Musk recently posted on his social media platform, X, stating that “a more accurate measure of GDP would exclude government spending.” He believes that artificially inflating GDP by increasing government expenditures does not truly benefit people’s lives.
Lutnick supported this idea, explaining that purchasing military equipment, such as tanks, is included in GDP. However, paying thousands of people just to discuss buying a tank does not contribute to economic growth. He called such expenses “wasted inefficiency” and suggested they should be removed from GDP calculations.
The U.S. economy grew by 2.3% in the last three months of the previous year, according to a recent GDP report from the Commerce Department’s Bureau of Economic Analysis. The growth was largely driven by consumer spending and increased federal defense spending. Over the entire year, the economy expanded by 2.8%, while government spending grew at a slightly lower rate of 2.6%.
Government spending also accounts for nearly one-fifth of personal income in the U.S. This includes Social Security, Medicare, Medicaid, and benefits for military veterans. However, taxes also take a portion of personal income. In some years, government spending can reduce GDP growth, as seen in 2022 when pandemic-related financial aid expired.
Lutnick emphasized that the Trump administration plans to cut government spending to balance the federal budget. He claimed that reducing the deficit would lead to lower interest rates for consumers and boost economic growth.
“When we balance the budget, interest rates will drop significantly,” Lutnick said. “This will create the strongest economy ever, and betting against it would be a mistake.”
