Gross domestic product is a controversial metric. Heterodox economists have long criticized politicians’ maniacal obsession with GDP growth, pointing to its relatively recent creation as a measure of national accounts and its limits as a catch-all indicator of a country’s economic health. In 1972, the Club of Rome’s Limits to Growth report argued that exponential growth would exhaust the earth’s natural resources, eventually leading to a “sudden and uncontrollable decline in both population and industrial capacity.” More recently, and less apocalyptically, scholars like Tim Jackson and Ann Pettifor have argued that the climate crisis demands focusing less on growth and more on other metrics of both economic prosperity and planetary well-being, particularly in advanced economies. Plenty of ink has been spilled debating the merits of degrowth, post-growth, and green growth.
The Trump administration seems to want to mess around with GDP for a totally unrelated reason: They’re worried that measuring it accurately might make Trump look bad.
In response to the Atlanta Fed’s forecast that inflation-adjusted GDP is on track to decline this quarter, Elon Musk recently wrote on X that the U.S. should change the way it measures GDP to exclude government spending. He argued that its inclusion means GDP tallies things that “don’t make people’s lives better.” Any potential decline in GDP this quarter, therefore, is simply the result of his own successful efforts to slash government spending.
Appearing on Fox News last Sunday, financier turned Commerce Secretary Howard Lutnick echoed Musk’s recommendation. “You know that governments historically have messed with GDP,” Lutnick mused. “They count government spending as part of GDP. So I’m going to separate those two and make it transparent.”
There are four broad components used to calculate GDP: private consumption; private investment; net exports (exports minus imports); and government spending on goods and services, including at the state and local level. But the Bureau of Economic Analysis—an independent federal body—already collects metrics that don’t include government spending. As Columbia Business School’s Brett House told Barron’s, carving out all the money that federal, state, and local governments spend on new goods and services from GDP would result in an estimate of consumption and production that is “vastly lower than the total output in the economy.”
Musk’s and Lutnick’s anxiety about upcoming GDP figures may be premature. City University of New York economics professor J.W. Mason wrote up a good case for not taking the Atlanta Fed’s GDP forecast at face value. But the details of that forecast also disprove Musk’s own talking point about GDP. The decline the Atlanta Fed predicts is led by lower consumption and import growth, not reduced government spending.
Still, like other debates over the merits of GDP, the one that economists are having over a potential “Trumpcession” don’t have much to do with what Musk and Lutnick are saying. Team Trump’s motivations seem to be simple: GDP numbers could make the White House look bad, and changing the way that GDP is calculated could make it look better.
There’s reason to suspect that Musk and Lutnick are serious about these changes, which would represent an unprecedented attack on the integrity of government statistics. Earlier this week, news broke that the White House has disbanded two expert committees that work with the government to produce economic data.
Such meddling, while disturbing, is also entirely fitting for an administration that has enthusiastically embraced industries premised on inflating their own value. The White House this week is holding a “crypto summit,” and plans to launch a Strategic Bitcoin Reserve that would see the U.S. acquire enormous amounts of bitcoin and other cryptocurrencies over the next five years. The official “memecoins” for Donald and Melania Trump, meanwhile, are down 80 and 90 percent, respectively, from their pre–Inauguration Day highs. These sorts of products have notoriously been a venue for pump-and-dump schemes whereby “market makers” inflate coin values in order to coax in buyers, then sell en masse once prices are adequately high. Those who bought into the hype—who might have believed the coins would be a good investment—are left with virtually worthless tokens that they spent hundreds or thousands of dollars’ worth of real money to purchase.
While crypto scammers are especially flagrant about juicing their own numbers, more ostensibly respectable sectors engage in similar tactics. Silicon Valley companies spent years coasting on fantastical valuations in companies that lost enormous amounts of money, buoyed by investors with excess cash who were willing to believe charismatic start-up founders who promised to disrupt everything from office real estate to blood testing. Like the tech boom after the Great Recession, the shale boom in that era was made possible by low interest rates and flush investors’ willingness to pour fabulous sums into anyone who made a flashy enough pitch.
The oil and gas industry spent the better part of a decade hemorrhaging cash drilling as many holes as possible as quickly as possible in the Permian and other shale deposits. The bubble started to burst in 2014: Fossil fuels got too cheap to justify such massive amounts of spending, there was too much supply and not enough demand, and dozens of companies went bankrupt as Gulf oil producers ramped up production. The industry lobbied to end the long-standing crude oil export ban to allow them to find new buyers abroad, treating foreign markets as an escape valve for domestic overabundance. When Covid-19 hit—and fuel demand crashed—they faced a reckoning that had been in the works for years: They needed to actually make money. Even as the Biden administration begged them to drill more in 2022, companies that had recommitted to getting their balance sheets in order refused to budge from their new doctrine of “capital discipline,” i.e., drilling less to earn bigger profits.
CEOs both in Houston and Silicon Valley are realizing that there are real limits to growth—just not the one the Club of Rome was talking about. Drillers have sobered up from their shale boom binge. They’ve doubled down on the most reliably profitable parts of their oil and gas business, cut out the fat, and looked to secure new sources of demand amid fears about oversupply. Claiming that AI will bring about a new industrial revolution, tech companies are once again promising to transform the world. This time around, though, their pitch is directed as much at the federal government as investors. They may not be making much money on AI, but by telling the White House that building data centers and chips to power it is a critical national security priority—necessary to beat China in the race for the future—they can secure lucrative subsidies, regulatory relief, and defense contracts. Happily for the fossil fuel industry, all those new chip plants and data centers AI developers say they need will need a lot of energy too.
It’s not a coincidence that tech and fossil fuels are now both wholeheartedly backing Trump. Their economic interests are more aligned than ever, and intimately connected to the kinds of support they can continue to shake down from Congress and the White House. Although Trump and his lackeys offer different things to those industries, Republicans’ greatest gift to executives is insulating them from reality by constructing their own: where there’s infinitely growing demand for fossil fuels and they don’t cook the planet; where AI is profitable and transforming society for the better; and where GDP will always grow, so long as Donald Trump is the president.
