Can we just change how we measure GDP?

Planet Money

NPR

News, Business

4.6 • 30.5K Ratings

🗓️ 21 March 2025

⏱️ 23 minutes

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Summary

There's one statistic that rules them all when it comes to keeping track of the economy: gross domestic product (GDP). It's the sum of all final transactions, so all the goods or services bought and sold, in an economy. GDP tells us how hot the economy is running, or how cool — like if we might be heading into a recession. And it's an important tool to compare countries, policies, and politicians. It's used by the U.S. government to allocate money and by businesses to make decisions about the future.

For close to a century the building blocks of GDP have been the same. Now Commerce Secretary Howard Lutnick, has proposed a big change: taking government spending out of GDP.

On today's show, can the U.S. change how it measures GDP? We talk with a former head of the BEA — about what he thinks they're likely to do now, and about the pressure he faced while trying to compile GDP for nearly two decades. Turns out, people have always been trying to bend it to make whatever grand project they're working on look better.

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Transcript

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0:00.0	This is Planet Money from NPR.
0:05.7	Next month, a crucially important measure of the economy comes out.
0:09.4	It's the measure, really, gross domestic product.
0:12.8	It's the total tally of all the goods and services bought and sold in the economy.
0:17.6	In this case, it'll be for the first quarter of 2025, this one big number that
0:23.9	tells us how the economy is doing after a pretty intense couple of months. And the report is right
0:31.6	now being put together by the statistics nerds over at the Bureau of Economic Analysis, or the BEA.
0:38.5	And its publication is kind of always a big deal.
0:42.2	It is closely watched because people can see how hot the economy is running or how cold,
0:48.5	like if we're tipping into a recession.
0:51.4	But this release, this is going to be even closerly watched.
0:55.7	And that is because earlier this month, Commerce Secretary Howard Ludnik, who oversees the
1:00.7	BEA, he went on Fox News and made what was maybe a big pronouncement.
1:05.7	You know, the governments historically have messed with GDP. They count government spending as part of GDP. So I'm going to
1:12.5	separate those two and make it transparent. In other words, Letnik is saying he's going to strip
1:18.1	government spending out of GDP. And the stated reason for this proposed change, he doesn't think
1:25.6	that a lot of government spending is great for the economy. He doesn't want it incentivized and he doesn't think that a lot of government spending is great for the economy.
1:29.3	He doesn't want it incentivized and he doesn't want it included in GDP.
1:33.9	The unstated reason seems to be the Trump administration is firing a whole bunch of government
1:38.7	workers, shrinking budgets, canceling contracts.
1:42.1	And if, or I guess when that shows up in GDP, it'll look bad.
1:47.5	But like, can they do that? Can they change how we measure the economy? Just like that?
	...

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