US Commerce Secretary Lutnick Pushes To Exclude Government Expenditure From GDP Calculation: 'Don't Think The Stock Market...Would Like That,' Says Expert

Howard Lutnick, the U.S. Commerce Secretary, has expressed his intent to exclude government spending from the gross domestic product (GDP) calculations.

What Happened: Lutnick argued that government spending has historically distorted GDP figures. He stated, “They count government spending as part of GDP. So I’m going to separate those two and make it transparent.” Lutnick made this announcement during his appearance on Fox News Channel’s “Sunday Morning Futures” program. He did not specify a timeline for this change though.

When asked about the potential effects of the Trump administration’s policies—such as tariffs and efforts to shrink the government through spending cuts and mass layoffs—Lutnick dismissed concerns about a recession. He responded, “No, no, no.”

Lutnick justified his proposal by stating, “If the government buys a tank, that’s GDP, but paying 1,000 people to think about buying a tank is not GDP,” referring to the latter as “wasted money”.

Interestingly, the commerce secretary’s comments aligned with Tesla CEO Elon Musk‘s post on X on Friday, asserting that excluding government spending would give a more accurate measure of the GDP. "Otherwise, you can scale GDP artificially high by spending money on things that don't make people's lives better,” wrote Musk.

SEE ALSO: Trump’s $5 Trillion To $11 Trillion Tax Plan: A Boost For Growth Or A Path To Unprecedented Debt?

Why It Matters: Lutnick’s comments come on the heels of fourth quarter data highlighting the slowdown in the growth of the U.S. economy, with real GDP increasing at an annual rate of 2.3%, down from 3.1% in the third quarter. The slight upward revision was due mainly to higher-than-expected increases in government spending and exports.

Meanwhile, economists disagree with Lutnick’s stance stating that altering the current national accounts structure could make GDP highly volatile and complicate the assessment of the economy’s health. They also opined that this change would make it difficult to compare the performance of the U.S. economy against other countries.

Sung Won Sohn, Finance and Economics professor at Loyola Marymount University told Reuters, “I don’t think the stock market, the financial markets would like that.”

• READ MORE: Warren Buffett Calls Tariffs ‘An Act Of War,’ Warns They Function As A Tax On Goods Amid Market Turmoil

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Image Via Shutterstock