The government produces many of America’s most important economic indicators. And that data influences the media’s coverage of the economy, which likely colors voters’ views of the president.
These facts have long led partisans to fear presidential manipulation of economic data. Specifically, during Democratic presidencies, conservatives have often sought to dismiss positive economic trends by alleging data manipulation. Last August, Donald Trump accused the Biden administration of “manipulating jobs statistics” to make unemployment look artificially low before Election Day.
Such allegations have always been baseless. Presidents might have an incentive to tamper with economic data reported by the executive branch. But they have always been constrained from doing so by respect for the independence of data-gathering agencies like the Bureau of Labor Statistics and Bureau of Economic Analysis, fear of scandal, and a desire to provide the private sector with clear and accurate information about economic conditions.
But Trump appears uniquely unencumbered by such constraints. His administration is openly contemptuous of agency independence, arguing that the president should boast unitary authority over all of the executive branch’s activities. It also evinces no concern for giving off the appearance of corruption (before taking office, the president established a memecoin that enables any interest group to directly burnish his net wealth). Trump’s constantly shifting tariff threats indicate an indifference to providing business owners with clarity about the economy’s future trajectory, while his entire history as a public figure suggests an indifference to the truth.
All this gives us some cause for fearing that Trump might tamper with government economic data, should it become politically inconvenient. And over the weekend, Commerce Secretary Howard Lutnick suggested that he intends to do just that, by altering how the government calculates gross domestic product (GDP) — the total value of goods and services produced in the economy.
“You know that governments historically have messed with GDP,” Lutnick said during a Fox News interview Sunday. “They count government spending as part of GDP. So I’m going to separate those two and make it transparent.”
Lutnick’s remarks came days after Elon Musk argued that “A more accurate measure of GDP would exclude government spending” since “Otherwise, you can scale GDP artificially high by spending money on things that don’t make people’s lives better.”
In other words, Musk believes that the US government has been producing useless goods and services just to inflate GDP numbers.
This argument is substantively unsound. And it also appears politically motivated: Musk’s comments came in response to a new projection from the Atlanta Federal Reserve, which showed GDP on pace to decline during the first quarter of this year. Musk’s implication was that this projected decline is entirely attributable to his elimination of wasteful government activities that had been distorting growth statistics.
Stripping government spending from official GDP data would not be the most corrosive form of data manipulation. Such tampering would at least be transparent; the administration would not be producing fabricated economic statistics, but merely seeking to redefine an existing measure. But the administration’s desire to alter the content of GDP — seemingly, due to political concerns — makes the threat of more covert and destructive data manipulation more plausible.
The problem with Elon Musk’s case against GDP
The Trump administration’s complaint with conventional GDP estimates has a certain logic to it: Governments often aspire to produce high GDP growth and public investment can mechanically increase such growth, even if the goods and services produced have little value to consumers or businesses.
This dynamic is a genuine problem in China, where the ruling Communist Party sets explicit goals for GDP growth, and often meets them by building economically useless infrastructure like “ghost cities” comprised of mansions and apartment towers that no one has ever occupied and bridges that are rarely used.
Nevertheless, there are several problems with Musk and Lutnick’s argument.
First, while it’s true that the government sometimes makes bad investments, which raise GDP without providing much economic value, this is also true of the private sector. Production of the Juicero contributed to GDP, but was of virtually no use to consumers. And this happens on a much larger scale each time investors’ enthusiasm for a given asset — such as internet companies or homes — causes the private sector to produce a larger supply of that asset than consumers can support, which leads to an eventual crash (like the “dot com” one in 2000 or the housing one in 2008 ).
Ultimately, GDP is not meant to measure wise or socially valuable economic activity, in part because such a metric would be inherently subjective. Perhaps it is obvious to Elon Musk that the government’s investments in highway repairs or public education have produced less economic value than his own investment in the Hyperloop. But I think most people would not find this self-evident.
It is useful to have an impartial tally of all goods and services produced in the US economy. This would be true even if GDP did not correlate with other indicators of prosperity, but it does.
Second, the US government already produces an estimate of what GDP would be without public production, a measure called real value in private industries. Businesses and consumers already have access to this information, there is no need to alter GDP calculations to provide it to them.
Third, it simply is not the case that the US government has been using public spending to artificially inflate GDP. As former White House economist Mike Konczal notes, a measure of GDP that excluded public spending would show stronger growth during Joe Biden’s presidency than the actual GDP data does.
Over a longer time horizon, meanwhile, changes in the real value produced by private industries have correlated almost perfectly with changes in GDP. Were the US government propping up growth with massive investment in useless infrastructure, we would see a large gap between these two figures.
Why the Trump administration’s silly critique of GDP is ominous
The context of Musk and Lutnick’s remarks makes them especially troubling.
On Friday, the Atlanta Fed’s projection for first-quarter GDP growth turned negative, after a Commerce Department report showed that personal spending fell by 0.2 percent in January. As of this writing, the Atlanta Fed is currently forecasting that GDP will decline at a 2.8 percent annualized rate during the first four months of this year.
Musk suggested that this apparent economic downturn was entirely attributable to his elimination of wasteful government programs. Lutnick’s proposal for removing publicly produced goods and services from GDP therefore appears politically motivated.
As it happens, Musk is actually completely wrong about why America’s economic outlook is souring. If one stripped public sector production out of the Atlanta Fed’s forecast, then GDP would be on pace for a 3.8 percent contraction this quarter, according to Harvard University economist Jason Furman. What’s actually driving the Fed model’s pessimism is slowing consumption and private investment, the latter being partly a function of Trump’s tariff policies.
Nevertheless, Musk thought he was proposing a change in the measurement of GDP that would make the Trump administration look better. And America’s Commerce Secretary suggested days later that he would pursue that very change.
This is an ominous development. Right now, the Trump administration does not have especially strong incentives to manipulate economic data. The midterm elections are more than a year and a half away. And although GDP forecasts have declined, we are not actually in a recession as of yet. In fact, some forecasters still project healthy growth for this quarter. If this White House is willing to mess around with GDP now, it’s conceivable they would be interested in suppressing adverse inflation or employment readings more insidiously in the future.
Pulling off such manipulation would not be easy. Any attempt to covertly alter how the government’s statistical agencies report data would almost certainly trigger mass resignations and leaks to the press. And further attempts to redefine economic data points in politically convenient ways can only achieve so much; the private sector produces a lot of economic data, and if the government’s numbers paint a dramatically different picture from other sources, business and the mainstream media will likely dismiss the former.
Nevertheless, further attacks on the integrity of government data would be costly, undermining the capacity of the government, businesses, and households to make informed economic decisions.
Rather than scheming to change unflattering economic indicators, White House officials should try to better understand them. Proposing changes to how GDP is calculated — which would actually make your own economic management look worse — is not the best way to reassure a skeptical public that you know what you’re doing.
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