- DOGE aims to redefine economic health by focusing on Gross Output over traditional GDP.
- B2B spending, critical to U.S. growth, is overlooked by GDP but captured in Gross Output.
- Simplified regulations and DOGE focus could bolster private-sector growth and economic accuracy.
As discussions about the U.S. federal budget intensify, some business leaders and economists are proposing changes to spending cuts and how economic health is measured. This follows the proposal for a new federal agency, the “Department of Government Efficiency” (DOGE), to streamline regulations and reduce costs for businesses.
In addition to reducing the $6 trillion budget, advocates believe the agency should redefine economic metrics, shifting from Gross Domestic Product (GDP) to a more accurate measure of economic activity.
Rethinking Economic Measurement: From GDP to Gross Output
Traditional economic evaluations use GDP, which measures the total value of final goods and services produced in the U.S. However, critics argue that GDP ignores earlier stages of economic activity, like Business-to-Business (B2B) transactions, which drive business growth.
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Unlike GDP, Gross Output includes B2B transactions, highlighting the importance of intermediate goods and services to the U.S. economy. According to the Bureau of Economic Analysis (BEA), which has tracked Gross Output since 2014, B2B activity exceeds consumer spending.
Source: Caitlin Long
In nominal terms, business spending on B2B transactions and gross private investment reached almost $35 trillion by 2024, more than double consumer spending’s $15 trillion.
The Limitations of GDP
The idea that consumer spending makes up 70% of the U.S. economy comes from the GDP model, which focuses on end-product consumption and government spending. However, supporters of the DOGE concept argue that GDP overlooks the supply chain.
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Business leaders believe that DOGE could reduce regulations that limit private-sector growth, especially in sectors where B2B interactions are important.
By focusing on Gross Output instead of GDP, policymakers could gain a more accurate view of economic activity and health, prioritizing the true drivers of growth.
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