Overview

• The Trump administration is considering a new approach to GDP calculation that excludes government spending, citing transparency and accuracy concerns.
• Commerce Secretary Howard Lutnick and Elon Musk have publicly supported the proposal, arguing that current methods inflate economic growth by including inefficient government expenditures.
• Economists caution that removing government spending from GDP would have minimal impact on overall figures and could set a problematic precedent for economic data manipulation.
• The proposal comes as the economy shows signs of slowing, with forecasts predicting a 2.8% contraction in Q1 2025 and consumer spending declining for the first time in nearly two years.
• Critics highlight that GDP already provides detailed breakdowns of government contributions, and excluding such spending could obscure the full scope of U.S. economic activity.