To avoid recession, does the U.S. need to "redefine" GDP?

On March 2nd local time, U.S. Secretary of Commerce Howard Lutnick suggested on a Fox News program that government spending data should be excluded from the overall calculation of Gross Domestic Product (GDP). Lutnick stated:

“If the government buys a tank, that counts towards GDP, but if the government hires 1,000 people to discuss whether to buy a tank, that does not count towards GDP—this is just a waste of resources and funds—although this spending will be reflected in GDP data, we will exclude it and show the public the true situation of these expenditures.”

In the context of the Trump administration's efforts to cut inefficient government spending, reducing federal staff could lead to income losses and suppress government and consumer spending. In response, Lutnick stated that he does not believe these measures would negatively impact economic growth, and he subsequently proposed that the GDP calculation could be “updated” by excluding government spending.

On the other hand, Musk also posted on social media platform X, stating that a “more accurate” GDP calculation should exclude government spending, “otherwise, the government can artificially inflate GDP by spending money on matters that do not actually improve people's lives.”

Economists Question the Rationale for Excluding Government Spending

In response, many economists and economic researchers expressed that they cannot understand the logic behind excluding government spending, stating that this move is “nonsensical” and could even undermine external trust in U.S. economic data and confidence in U.S. financial markets.

Analysts noted that Lutnick's remarks are particularly puzzling, as current economic data can already distinguish between private and government spending. Neil Dutta, head of economic research at Renaissance Macro Research, stated:

“I don’t quite understand Lutnick’s proposal, as the contribution of government spending to GDP can already be measured separately, and there is no need to modify the GDP calculation method. Moreover, if they cut government spending, all else being equal, that in itself would lead to a slowdown in economic growth, which is precisely what they want to avoid.”

Brett House, an economics professor at Columbia Business School, also stated that distinguishing between public consumption and private consumption to determine which side drives economic growth is valuable research, and many economists do indeed analyze this data regularly, “but that does not mean we can ignore certain economic expenditures and pretend they do not exist”:

“If the published GDP calculation data does not include federal, state, and local government purchases of new goods and services, that would be ‘absurd.’”