Trump official floats new approach for measuring GDP, as economy shows signs of slowing

The Trump administration is suggesting a change in the way economic growth is measured, just as the economy appears poised to notch its worst performance since the pandemic-era shutdowns.

On Monday, an economic growth model from the Federal Reserve Bank of Atlanta forecast a steep decline for the first three months of this year—a 2.8% contraction in economic growth, after nearly three years of solid growth.

That same Fed model began flashing negative forecasts on Friday for first-quarter gross domestic product, which sums up goods and services produced in the United States.

That prompted Trump adviser Elon Musk to muse on Friday that a “more accurate measure of GDP would exclude government spending,” on X, the platform he owns.

Over the weekend, Commerce Secretary Howard Lutnick echoed Musk’s comments on Fox News “Sunday Morning Futures,” saying he wants to strip out government spending from GDP.

“You know that governments historically have messed with GDP,” he said. “They count government spending as part of GDP. So I’m going to separate those two and make it transparent.”

The GDP report, released quarterly by the Commerce Department’s Bureau of Economic Analysis, already includes detailed breakdowns of how much consumers, businesses, and the government—at the federal, state and local levels—contribute to the economy. It’s unclear exactly how the Trump administration would further separate those components, and whether it plans to go as far as recalculating GDP altogether.

Although economists say removing government spending from GDP is not likely to make a big difference—private-sector measures of GDP generally move in lockstep with the overall measure—they warn it could set a worrisome precedent.

“There’s no need to reinvent the wheel here, we already have the statistics to calculate GDP minus government spending,” said Joe Brusuelas, chief economist at tax and consulting firm RSM US. “But the question is: Why are they putting this out there now? Is it because they’re expecting the economy to slow and don’t want to be blamed for it? That, to me, would be a problem.”

Other signs of weakness have been showing up in the economy lately. Consumer spending, which has propelled much of the economy’s recent growth, fell in January for the first time in nearly two years. Progress on inflation has stalled, hiring is slowing and Americans are feeling significantly worse about the economy than they were a few months ago.

At the same time, Trump and Musk’s DOGE Service have taken swift action to curb government spending by laying off thousands of federal employees, canceling contracts and freezing funding for myriad projects. Government employees make up a small portion of the overall workforce, but there are fears that job losses, which are already bleeding into contracting firms, nonprofits and private business, could eat into broader growth, pulling the economy down further.

Some conservative economists say isolating government spending from economic measures would offer a more accurate picture of the current economy.

“Under Biden, so much of the increase in GDP and employment was the result of government growth, not private sector growth,” said Stephen Moore, a visiting fellow at the Heritage Foundation and an economic adviser to Trump in his first term. “The way I used to put it was: We’re growing the economy in all the wrong places. Right now because of the debt, we want less government spending. So if DOGE is cutting billions out of our GDP, that would be a very positive thing for our economy, not a negative.”

Still, other economists point out a rejiggering of GDP isn’t likely to make much of a difference. Much of the country’s economy—about 69%—is driven by consumer spending on homes, cars, restaurants and other everyday expenses. Government spending, by comparison, accounts for 17% of GDP, with federal spending making up 6.5% of the calculation at the end of 2024.

“Real GDP and private GDP tell almost exactly the same story,” said Jason Furman, an economics professor at Harvard University and former adviser to the Obama White House. “Even in the world of DOGE, government spending is very volatile quarter to quarter. I think they are making the mistake of thinking private GDP will look better than overall GDP, but if you look at GDP in the last couple of years, it looks almost exactly the same with government spending or without it.”

The GDP figure includes government purchases, investments and workers’ salaries, but does count transfer payments, such as Social Security and Medicaid, which are a growing share of federal spending. In all, the U.S. government spent $6.8 trillion last year, data from the Congressional Budget Office shows—although just a fraction of that, $1.9 trillion, was counted in GDP.

The Trump administration’s proposed shake-up comes when economists already have broader concerns about the quality of economic data. Response rates on government surveys have been falling for years, and statistics-gathering government agencies have long struggled with declining budgets and staffing cuts, said Ernie Tedeschi, director of economics at The Budget Lab at Yale University, and chief economist in Biden’s Council of Economic Advisers.

“The real worry is not so much political meddling, but other threats to the continued reliability of data,” including fewer survey responses, he said. “That makes a data little bit noisier and harder to interpret. That makes it much harder to gauge economic risks until they’re right on top of you.”

Although countries’ approaches to economic measurement can vary slightly, most adhere to a recommended framework by the United Nations’ System of National Accounts. The group makes periodic adjustments to account for new methodologies and circumstances, and is set to do so this year. But it would be highly unconventional for the United States to suddenly strike out on its own, said Diane Coyle, a professor at Cambridge University and author of “GDP: A Brief but Affectionate History.”

“When GDP was invented after World War II, there was a lot of debate about what should be included and what shouldn’t, and it was decided to include things that provide value, like public highways and education,” she said. “Excising those from GDP now would be taking out some of the stuff that is good about the economy.”