Gross Domestic Product (GDP) is a worthless number. The previous truth isn’t a defense of Donald Trump after the 0.3% Q1 GDP decline. Instead, it’s a defense of reason that requires the reasonable to routinely point out the ridiculousness of the most cited number in the fraud that is “macroeconomics.”
To see why GDP is so useless, it’s important to first recognize that consumption is what follows production. Always. Translated, we export so that we can import.
GDP fell into negative territory on Wednesday largely because of an import surge. Yes, imports count against GDP. Except that imports are a certain effect of exports.
Some will no doubt point out that imports surged as a function of businesses getting ahead of the mindless tariffs foisted on us by President Trump. It’s perhaps true. But whatever the driver, surging imports that are by their very name a sign of surging exporting substantially brought GDP down.
Which brings us to government spending. Governments aren’t some other. Just as individuals can’t consume without producing first, neither can governments. Governments can only spend insofar as productive individuals shift the fruits of their production to them. They do in the form of taxation.
Keep the above truth well in mind with government spending top of mind. Governments that produce nothing attain their spending power from taxable access to the wealth of those who do, yet the useless number that is GDP is actually enhanced by government spending. In other words, the most cited number in “macroeconomics” increases the more that governments spend wealth extracted from the productive. If we ignore that the central planning of resources produced in the private sector is by its very description a wet blanket laid on economic growth, we can’t ignore that counting government spending as economic growth is double counting; as in the growth already occurred, hence the government spending.
Bringing this back to Trump, one could make the argument that his mindless tariffs brought GDP down, but for reasons unrelated (at least for now) to slowing growth. As for DOGE, it seems the brief suffocation of government spending similarly brought down GDP. What’s important, and it’s not a defense of Trump, is that what pulled GDP into negative territory was, if anything, pro-growth. Please read on.
Please do with a plan to stop and think about the presumed implications of Trump’s tariffs. While for the longest time the best and most prosperous of U.S. companies achieved prosperity by shipping low-margin, economy-sapping manufacturing overseas so that the high-margin work could be done here, it’s evident that to placate Trump the best and most prosperous U.S. businesses will spend precious wealth to bring back at least some of the low-margin work to the United States. The latter is bad for the economy, but for a GDP calculation that doesn’t distinguish between digging holes and refilling them versus designing iPhones, watch GDP increase as U.S. corporations bring back at least some of the past under duress.
Which is why economically ignorant Democrats eager to pounce on the GDP number should hold their tongues. At the same time Republicans should at least try to not sound more economically ignorant than they already sound. Tariffs are anti-import, they’re pro low value production, and since they sap economic growth, they likely foretell more government spending to mitigate the damage done by the tariffs. All three are good for GDP.
Yes, GDP will go up to reflect a weakening economy. Worthless number, meet mindless economic policy.
