What is this thing called Gross Domestic Product (GDP)? It is everything produced by all the people and all the companies in the US and in the world. Key upon the word “produced” in the preceding sentence. Until now, the word “produced” referred to the total market value of all final goods and services produced in a country in a given year. But the definition of “produced” will change in July of this year.
Being generous and not including negative GDP growth that occurred during the first three quarters of Dear Leader Barack Hussein Obama’s first reign (er, term), the GDP growth rate has been 2.12 percent, not something to crow about. The GDP growth rate for the fourth quarter of 2012, after Obama was re-elected, was a whopping 0.4 percent.
However, in July 2013, there will be a world-wide redefinition of the GDP, of what is produced. Government statistics will take into account components such as film royalties and spending on research and development. Billions of dollars of intangible assets will enter the GDP of the US economy. The redefinition is expected to add about three percent to the GDP growth rate. Brent Moulton, manager of national accounts at the Bureau of Economic Analysis, said:
“We’re capitalising research and development and also this category referred to as entertainment, literary and artistic originals, which would be things like motion picture originals, long-lasting television programmes, books and sound recordings. At present, R&D counts as a cost of doing business, so the final output of Apple iPads is included in GDP but the research done to create them is not. R&D will now count as an investment, adding a bit more than 2 per cent to the measured size of the economy.”
Redefinition is fine. Just remember that apples should not be compared to oranges. But that minor technicality won’t phase Obama. I’m betting that Obama and his economic team will take credit for the GDP growth increase. He and they will conveniently forget to mention the definition change, will instead trumpet their policies as the reason for the growth. And we can expect the MSM to go right along with him. There is, after all, precedent. Look at what the MSM did with unemployment numbers – particularly just before the 2012 election.
But (and there is always a “but” when Obama is involved), the GDP growth rate will be in excess of five percent, well above what economists say is the “ideal” growth rate of about 2 to 3 percent per year. Too much GDP growth causes inflation. Expect economists to change the definition of “ideal” in order to support Obama.
So, come July, when the GDP growth rate jumps due to some accounting miracle, just remember that the economy is not really heating up. Rather remember what is actually going on, that Obama’s economic policies have not changed.
H/T to Tom, who called the GDP situation to my attention.
But that’s just my opinion
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