GDP IS A LIE -- USE GPP TO MEASURE ECONOMIC GROWTH

Money Morning -- Martin Hutchinson -- 8/23/2011

http://moneymorning.com/2011/08/23/gdp-lie-time-for-new-measure-of-economic-growth/

GDP increases any time the government spends money. It doesn't matter if that money is actually put to productive use or not - GDP rises nonetheless.

It's obvious why big-government Keynesians would like this calculation: It substantiates their claim that government spending stimulates economic growth.
In the real world, however, this makes no sense. Indeed, none of the examples above actually add to economic welfare.

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. In general, it will underestimate national "welfare" unless government is really bad. But it will give you a much better idea of the output the market economy is producing.

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