Gross Domestic Product: Is It the Measuring Stick of Success?
If you look only at GDP, things might seem pretty good for the U.S. economy. But there are other factors to consider.
by Darrell Keisel
When we look at the economic health of the United States, the main thing many people look at is Gross Domestic Product (GDP). This is the total of all transactions of the goods and services of the United States. It is the broadest available picture of the country's economic growth.
As of Oct. 1, 2005, GDP has been positive for 16 consecutive quarters. That is four years in a row. While the GDP of other nations has struggled at times to remain positive, America's GDP keeps going forward.
The most recent figures show the GDP for July through September 2005 rose 3.8 percent—a good healthy rise. GDP has now expanded at a rate between 3 percent and 4.5 percent for eight consecutives quarters, the longest streak of such consistent growth since World War II.
But before Americans get out the noisemakers and confetti in celebration, we should look at how the United States attained this feat.
GDP growth in spite of economic sluggishness?
Over the last several years of steady GDP growth, the manufacturing sector has been declining. The service sector has grown, but only sluggishly. And unemployment was up during some of these same quarters the GDP surged ahead.
So, how does the United States get the GDP to keep moving forward so well in spite of all this? As a friend of mine, a local bank president, says, "We are a great nation because we spend a lot of money." That's pretty much it in a nutshell.
Referring to growth after Hurricanes Katrina and Rita, The Wall Street Journal said of the GDP expansion of July-September 2005, "Increased consumer and federal government spending contributed heavily to the increase" ("Economy Marks Solid Growth Despite Storms," Oct. 29, 2005).
