The Economy is Growing. Right. And I Don’t Have a French Accent.

We should be happy. The Bureau of Labor Statistics announced a 3.5 percent growth in this year 3rd quarter. Yet, most of us aren’t. At least I know I am not. Why? Because I have no faith in the numbers.

First, the Gross Domestic Product (GDP) numbers include government spending. So, when the government pumps thousands of billions of dollars into the economy it will look as if GDP is growing.

What’s more, the way the GDP accounts for government spending is totally biased: It assumes that if the government is spending $200,000 on a contractor to repave a road in the middle of nowhere that it will create $200,000 of genuine economic value.  By contrast, GDP measures are tougher on private-sector spending. As my George Mason university colleague Garett Jones explained to me recently “So if Exxon Mobil pays an engineer $200,000 per year, that only shows up in GDP if the engineer finds an extra $200,000 of oil to sell, or builds a new machine that sells for $200,000, something like that.  So our GDP measures of “government spending” are awful–and when the government is in a race to spend money as quickly as possible, these measures are going to be even worse than usual.”

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Tags: Bureau of Labor Statistics, Economy, executive compensation, GDP, George Mason University
Posted Oct 30th 2009 at 10:43 am in Economics, News | 2293431 Commentshttp://biggovernment.com/vderugy/2009/10/30/the-economy-is-growing-right-and-i-dont-have-a-french-accent/The+Economy+is+Growing.+Right.+And+I+Don%27t+Have+a+French+Accent.2009-10-30+17%3A43%3A59Veronique++de+Rugy