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.Find more Planet Money: Facebook / Instagram / TikTok / Our weekly Newsletter.Listen free at these links: Apple Podcasts, Spotify, the NPR app or anywhere you get podcasts.Help support Planet Money and hear our bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy
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Next month, a crucially important measure of the economy comes out. It's the measure, really. Gross domestic product. It's the total tally of all the goods and services bought and sold in the economy.
In this case, it'll be for the first quarter of 2025. This one big number that tells us how the economy is doing after 2020. Pretty intense couple of months. And the report is right now being put together by the statistics nerds over at the Bureau of Economic Analysis or the BEA.
And its publication is kind of always a big deal. It is closely watched because people can see how hot the economy is running or how cold, like if we're tipping into a recession. But this release, this is going to be even closerly watched.
And that is because earlier this month, Commerce Secretary Howard Ludnick, who oversees the BEA, he went on Fox News and made what was maybe a big pronouncement.
You know, the governments historically have messed with GDP. They count government spending as part of GDP. So I'm going to separate those two and make it transparent.
In other words, Letnick is saying he's going to strip government spending out of GDP. And the stated reason for this proposed change? He doesn't think that a lot of government spending is great for the economy. He doesn't want it incentivized and he doesn't want it included in GDP.
The unstated reason seems to be the Trump administration is firing a whole bunch of government workers, shrinking budgets, canceling contracts. And if, or I guess when, that shows up in GDP, it'll look bad.
But, like, can they do that? Can they change how we measure the economy just like that? Hello and welcome to Planet Money. I'm Mary Childs.
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