Commerce Secretary Proposes Separating Government Spending from GDP Reports

WEST PALM BEACH, Fla. (AP) — Commerce Secretary Howard Lutnick announced Sunday that the Trump administration may separate government spending from gross domestic product (GDP) reports, a move that could redefine a key measure of the U.S. economy’s health.

During an appearance on Fox News Channel’s “Sunday Morning Futures,” Lutnick responded to concerns about potential economic repercussions from spending cuts proposed by the Department of Government Efficiency. He stated, “You know that 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.”

This proposal could complicate the calculation of GDP, which traditionally includes government spending as it reflects how tax and spending decisions affect overall economic growth. Current GDP reports provide detailed accounts of government spending, maintaining transparency for economists and analysts.

Concerns arise as Musk’s efficiencies may lead to the termination of tens of thousands of federal employees, whose diminished incomes could adversely impact consumer spending and broader economic activity.

Lutnick’s remarks resonate with comments made by Elon Musk on social media platform X, where he stated, “A more accurate measure of GDP would exclude government spending. Otherwise, you can scale GDP artificially high by spending money on things that don’t make people’s lives better.”

Critics argue that the current administration may overlook the economic benefits of certain government expenditures that can positively influence economic trajectories. Lutnick illustrated his point, saying, “If the government buys a tank, that’s GDP. But paying 1,000 people to think about buying a tank is not GDP. That is wasted inefficiency, wasted money.”

The Commerce Department’s Bureau of Economic Analysis recently published a GDP report indicating that the economy grew at an annual rate of 2.3% during the last quarter of the previous year. This growth was chiefly propelled by increased consumer spending and adjustments to federal spending related to defense.

In 2024, the federal component of the GDP increased by 2.6%, trailing behind the overall economic growth rate of 2.8%. Notably, nearly one-fifth of people’s personal income, which totaled over $24.6 trillion last year, is derived from government spending, including Social Security, veteran benefits, and Medicare.

Lutnick emphasized that balancing the federal budget through spending cuts would stimulate growth and reduce consumer interest rates. “When we balance the budget of the United States of America, interest rates are going to come smashing down,” he asserted. “This is going to be the best economy anybody’s ever seen. And to bet against it is foolish.”

AP correspondent Julie Walker contributed to this report.