Bill Bonner on GDP and government spending

Included in GDP is government spending. But the services offered by the government are not the kind that you are usually looking for. 

Few people wake up in the morning and say, “Today, I’m going shopping for an F-35 Joint Strike Fighter.” Instead, they want the things the government doesn’t make. 

Government spending is almost completely focused on the consumption of wealth, not the creation of it. In other words, it doesn’t add to the supply side of the supply/demand teeter totter. It subtracts from it. 

So, when government spending increases as a percentage of GDP, that too should be cause for higher consumer prices. 

After WWII, total government spending – state, local, and federal – shrank to a bit more than 25% of GDP. Last year, it was over 40%.

~ Bill Bonner, "The Federal Reserve is Wasting Tons of Money," Rogue Economics, March 22, 2021