Nah, it's dumb. He's saying a dumb thing because he doesn't understand the use and importance of it (and also its limitations). We (economist) count everything because excluding an economic agent that has a massive effect on the economy, is such a intellectually foreign concept that we don't even consider it. There's no rational honest argument that would make sense.
BTW, government expenditure only appears in the GDP calculations by expenditure. It doesn't appear in the income nor in the production. The later one the one you are actually thinking of.
>BTW, government expenditure only appears in the GDP calculations by expenditure. It doesn't appear in the income nor in the production. The later one the one you are actually thinking of.
I am not sure against what you argue exactly. My point is that if we use GDP as a metric of economy strength, then it's easy for the government to cheat it by fueling it's spending by printed money (ah, sorry, the reputable economist use the "quantitative easing" euphemism instead) or by unfair debt issuing practices (like forcing banks, pension funds, or even people directly to buy government bonds), then it results in a short term "sugar rush" GDP growth, while consequences are kicked down the road. In the US case we also have an additional masking factor in the form of having control over the world's reserve currency, which significantly dampens the usual inflation reaction.
So if we want a better metric, we should somehow discount this factor. Obviously, simply removing the government spending is too simplistic (or you can call it less charitably as "dumb").
Ok, here's another neat trick about the GDP. We do not measure growth of the GDP in nominal values, but real values, aka, we adjust for inflation (yes, this is the _only_ case where you can actually "adjust for inflation" and will be valid). We use something called deflator which allows us to ignore the variances of value in the currency due changes in monetary policy.
So, the government can "print money" (that's not how it works), which would cause inflation (aka, the currency loses value), so the effect on the real GDP is muted. There's another thing that happens when the government goes into a spending spree which is "crowding out", basically the government buys what households and business would have bought and therefore they don't buy anymore, so the effect of the GDP is muted. There are many other things that happen also due such actions that would actually make the GDP to contract!
Anyways, reckless fiscal policy alone doesn't "manipulate the GPD values". Economies do not work in a vacuum. There's tons of interactions that are not explained because it's too complex to do so without the previous knowledge, to do so in a short amount of hours would be very dangerous because you would think you understand things that you really don't understand. Take a course of macroeconomics, of about 100 hours, and it would only be the start. Then industrial economics, economic policy, taxation, international economics, monetary policy, monetary economics, you get it?
Using a very debatable inflation metric (e.g. should deflationary technological advancements in electronics manufacturing boost the "real GDP" metric?), which is quite muted (even with the post-COVID spike!) on top of that because of the "exorbitant privilege".
>that's not how it works
Suuuure. The recent examples of collusion between banks, the government, and the central bank to quickly increase amount of base money is not outright "money printing", just benign "quantitative easing", nothing to see here.
>crowding out
This works only when government engages in "fair" and competitive debt issuance. But we see a different picture, government bonds are counted as bank reserves and even worse banks do not even have to apply the mark-to-market accounting rules for them in some cases. And everyone knows that the Fed immediately will ride to the rescue on the first sign of trouble in the bond market as was done during not-QE.
>reckless fiscal policy alone doesn't "manipulate the GPD values"
Alone? No. But it certainly boosts GDP (both real and nominal) in the near term and makes the economy look better than it really is. It's the same story as in China where they had massive "infrastructure investments" to artificially stimulate the economy and make GDP numbers look good. We can see in the real time how it unravels.
No, there's no debate in using a deflator. The deflator only takes into account monetary effects on the currency. Why there isn't one? Because nobody knows that thing exists! GDP deflators are calculated and used around the world by non-partisan. And even when partisanship is involved, the people discussing it [0] have the knowledge to be able to discuss it.
> The recent examples of collusion between banks, the government, and the central bank to quickly increase amount of base money is not outright "money printing", just benign "quantitative easing", nothing to see here.
Ok dude, you have an obvious ax to grind. I guess expecting actual constructive economic debate was my misinterpretation.
BTW, government expenditure only appears in the GDP calculations by expenditure. It doesn't appear in the income nor in the production. The later one the one you are actually thinking of.