You and Me and the GDP

Earlier this week we learned that the GDP, or Gross Domestic Product for the US grew at 0.1% in the first quarter (Jan – Mar).  By comparison, it grew 2.6% in the last three months of last year.

However, I have reached a sad point as an American – I no longer believe most of what the government says.  I have always been skeptical of the occasional item.  But now I find that I doubt the validity of the majority of information coming out of Washington.

Which made me think about 0.1%.  That number is suspiciously close to a negative number.  What if it was actually 0.06% and it rounded up to 0.1?  But what if it was worse.  What if it actually came out below zero and it was manipulated to 0.1?  We know now that they did it with the unemployment numbers before the 2012 election.  We know they have been hiding actual Obamacare numbers.  So why not adjust the GDP, released right before so many important Senate primaries?

Just this morning I was sent two stories that backed this up.

The effect of Inflation

There is a specific formula for calculating the GDP that gets reported in the press, and part of that calculation is an adjustment for inflation.  This is based on something called the GDP Price Deflator.  For the end of last year they used a value of 1.6%.  Inflation has actually increased in the last months due to higher costs for food, energy, housing and Obamacare.  But for this release they used a value of 1.3%.  Using the inflation numbers from last year in the calculation would result in GDP growth of -0.2%.

A change in Calculation

In July of last year the federal government started changing the way they calculated the GDP.  I was not aware of this until someone sent me a link to this article from 2013.  The article points out that, unlike other countries in the world, The United States has made adjustments to the Investments part of the GDP formula.  It appears that we are now counting R&D spending as an investment, changing the way we add in pension spending (adjusting for ‘future’ spending, not just actual) and adding the costs of closing Real Estate deals (including legal fees) into the mix.  According to the author, these changes alone inflate the GDP by around 3%.

So – in all likelihood, GDP for the first quarter of 2014 was negative.  Will it ever be reported that way?  Does anyone even care?  I have been talking to more and more people who just accept that what the government reports is not true.  But what does this mean for the future of our country?