A recurring theme at this blog over the years has been the rank dishonesty of many of our government’s economic statistics.  Rather than being neutral indicators of the state of the country and its economy, the most important government statistics have been crafted and manipulated to maximize their usefulness to advocates for increases in the size of government and in government spending.  Here is a particularly detailed post on this subject from back in December 2016.  

The two main areas of focus here have been the statistics on GDP and on poverty.  Both of those come from the Commerce Department.    

In the case of GDP, the biggest issue is that government spending on goods and services is counted as a 100-cents-on-the-dollar addition to GDP.  That means that the most wasteful spending gives an apparent but false boost to the economy; and even more importantly, that any cut to government spending, no matter how wasteful the spending may have been, gets portrayed as a hit to the economy and a harbinger of recession.

In the case of poverty, the issue is that the official measure of “poverty” counts only cash income, while almost all government “anti-poverty” programs provide in-kind goods and services (think Medicaid, food stamps, public housing, etc.) that don’t get counted.  Well over a trillion dollars of annual “anti-poverty” spending thus somehow never reduces the number of people in “poverty” by even a little; and advocates point to a continued high “poverty” rate to demand yet more spending.

For today, I’ll consider the GDP statistics.  As Trump 2.0 and the Congress move forward with what will hopefully be large cuts to the most wasteful of government spending, some smart people have figured out that any such cuts will in the first instance get recorded as a shrinkage of GDP.  Will this mean we have entered a “recession”?  You can be sure that the legacy press will loudly proclaim that proposition.  Indeed, get ready for that.