Commerce Secretary Howard Lutnick said on Sunday that government spending might be removed from gross domestic product (GDP) reports. He made the comment while responding to questions about whether spending cuts pushed by Elon Musk’s Department of Government Efficiency might lead to a weaker economy.
“You know that governments historically have messed with GDP,” Lutnick said on Fox News Channel’s “Sunday Morning Futures.” “They count government spending as part of GDP. So I’m going to separate those two and make it transparent.”
This change could affect how people measure the strength of the U.S. economy. Government spending is usually included in GDP because taxes, spending, deficits, and rules made by the government can affect how the economy grows. GDP reports already show detailed information about government spending, which gives economists tools to analyze the numbers.
Musk’s plan to reduce the size of federal agencies might lead to tens of thousands of government workers losing their jobs. If that happens, those workers would have less money to spend, which could hurt businesses and the broader economy.
AP reporter Julie Walker said the Trump administration may remove government spending from GDP, which could make it harder to see how the cuts by the Department of Government Efficiency (DOGE) affect the economy.
Lutnick’s remarks were similar to what Musk said on Friday on X, where he argued that government spending doesn’t add value to the economy.
“A more accurate measure of GDP would exclude government spending,” Musk wrote on his platform. “Otherwise, you can scale GDP artificially high by spending money on things that don’t make people’s lives better.”
President Donald TrumpSo far, Trump administration officials seem to ignore the benefits that certain types of government spending can bring to economic development.
“If the government buys a tank, that’s GDP,” Lutnick said Sunday. “But paying 1,000 people to think about buying a tank is not GDP. That is wasted inefficiency, wasted money. And cutting that, while it shows in GDP, we’re going to get rid of that.”
The Bureau of Economic Analysis at the Commerce Department released its latest GDP report on Thursday. It showed the economy grew at a 2.3% annual rate during the last three months of the previous year.
The report helps people understand what is driving the economy. It showed that the growth near the end of the year came mostly from increased consumer spending and a higher estimate for federal government defense spending. Government spending in the GDP report rose by 2.6% for all of 2024, which is a bit less than the total economic growth of 2.8%.
Government spending makes up nearly one-fifth of Americans’ personal income, which added up to more than $24.6 trillion last year. This amount includes payments like Social Security, military veteran benefits, Medicare and Medicaid, and other public programs. The report also shows how much of people’s income goes to taxes.
Sometimes government spending doesn’t boost GDP and can even lower it. That’s what happened in 2022 when pandemic aid came to an end.
Lutnick said the Trump administration plans to balance the federal budget through spending cuts, which he claimed would boost growth and lower interest rates for consumers.
“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.”
