U.S. To Exclude Government Spending From GDP, Says Commerce Chief

Commerce Secretary Howard Lutnick announced on Sunday that government spending may soon be excluded from gross domestic product (GDP) reports, a move that could alter a key measure of the U.S. economy, Josh Boak reported for the Associated Press (AP).

GDP reports already provide transparency by detailing government spending trends, making Lutnick’s proposal highly controversial. I Photo: The White House

Speaking on Fox News Channel’s Sunday Morning Futures, Lutnick defended the proposal in response to concerns that spending cuts proposed by Elon Musk’s Department of Government Efficiency (DOGE) could trigger an economic downturn.

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

While government spending has traditionally been included in GDP calculations, as it directly affects taxes, deficits, and overall economic growth, removing it could distort a fundamental measure of the nation’s economic health.

GDP reports already provide transparency by detailing government spending trends, making Lutnick’s proposal highly controversial.

Musk’s downsizing of federal agencies could lead to the layoffs of tens of thousands of federal workers, potentially reducing consumer spending and slowing economic growth. Lutnick’s remarks echoed Musk’s argument, made Friday on X, that government spending does not create real economic value.

However, critics warn that Trump administration officials appear to be overlooking the economic benefits of certain types of government spending, which can shape the economy’s long-term trajectory.