The Corporate Law Group

GDP Nonsense

The Buzz has a degree in economics but was stunned to find the GDP includes government spending. In the private sector when an employee is paid $100 and produces a $0.07 pencil, we say that the addition to GDP is $0.07. But when a government worker is paid $100, we say that GDP has grown by $100. That makes no sense; especially as a measure of production. Of course, how do we measure government production? We don’t. It doesn’t produce; not even in the same way that other service jobs produce. Everyone from waiters to accountants charge for what they do; the market responds by paying them what they are worth and we call what they are paid by the market, not by their employer, production. Every model should work in the outliers or it is flawed. If Government spending belongs in GDP, let’s just borrow another $14 trillion and spend that this year; we’ll be rolling in 100% GDP growth right up until we file bankruptcy.

Paul Marotta

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