Friday, July 27, 2018

GDP Growth Hits 4.1%, Fastest Since 2014

Bloomberg
U.S. Growth Hits 4.1%,
Fastest Since 2014,
in Win for Trump

Not to rain on anybody's parade but it's important to know the GDP is a BS number.

Here's The Formula For How The GDP Is Calculated.
GDP = private consumption + gross investment + government investment + government spending + (exports – imports)

If you will note how much the government spends is a factor. Government spending was increased by 3.5% in 2018 over what was spent in 2017 . The white house released their spending request for 2019. If approved this will be an even larger percentage increase. Thus any administration (not just this one) can affect the GDP outcome statistics simply by spending more tax dollars then the year before.

What the GDP doesn't factor in is the national debt incurred in order to increase government spending. "The budget shows the 2019 deficit nearly doubling from projections last year, to $984 billion. The red ink would total $7.1 trillion over the next decade, the national debt would rise to nearly $30 trillion,..". Put in simpler terms-- The government is able to trick the GDP numbers w/o factoring in our ever increasing national debt. Which was 105.40 percent of the country's Gross Domestic Product in 2017 . To my way of thinking the GDP is a lousy way to measure our true economic health.

If you will notice another factor is how much "government investment" is spent. An administration can add that little trick anytime it wants to help boost the GDP numbers with taxpayer dollars even if it has to borrow money to do it. "When the economy needs short-term demand stimulus, as it does now, that stimulus can come from spending on infrastructure, i.e. government investment, or it could be from expenditures on something with little long-run benefit such as large fireworks shows held throughout the nation - big extravagant events that spend millions and millions of dollars in the most depressed economic areas..." Oh let's say like $12 billion dollars to subsidize farmers impacted by tariffs.

You may think the GDP it's a good barometer of how well we're each doing. As for me, not so much. I think there is a better way of measuring prosperity...



Kennedy Once Said...

No comments:

Post a Comment

COMMENT POLICY: I request they meet the following guidelines. (1) Remain on topic. (2) Be informative (3) Disputing any of the facts or opinions expressed either by myself or another be done in a respectful manner. Personal attacks will not be accepted for publication.