Wednesday, November 13, 2013

Gross private product

The bureaucrat devising regulations that damage business? His salary increases GDP. The $300 million Alaskan “bridge to nowhere” of a few years back? That was $300 million added to GDP. The jet-fighter project that costs billions, and is plagued by huge overruns that lead to its cancellation? Those billions add to GDP.
Even public-spending “stimulus” programs, however foolish, are always effective according to the GDP definition, because their cost is simply added to output.
It’s obvious why big-government Keynesians would like this calculation: It substantiates their claim that government spending stimulates economic growth.

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So how can you get an accurate measure of economic growth?
Arithmetically, there’s a simple solution: You take Line 1, “Gross Domestic Product,” in the Bureau of Economic Analysis‘ GDP Table and subtract from it Line 21, “Government Consumption Expenditures and Gross Investment.”
That gives you a net number, which we can call “gross private product,” or GPP. It’s a measure of all the output produced by the private sector.

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