Federal Consumption Components of GDP

Graph below of part of the "G" component of U.S. Gross Domestic Product.

This is the contribution from U.S. Federal Government consumption expenditures and gross investment.

This is broken down into 'Defense' and 'Non-defense' components.

The total is running at about $1.2T.  The 'Non-Defense' component is running at about a $400B annual rate while the 'Defense' component is at about $800B.

Since the 'Non-defense' component is only $400B, we can examine the U.S. Treasury statement to identify the expenditures that this 'Non-defense' component does NOT include.

We know generally that the G component of GDP does not include "Transfer Payments" so that rules out Social Security and Interest on US Treasury Securities, and based on the statement , we can also rule out two other categories of 'automatic appropriation', Medicare and Medicaid.

Here is a link to the FY2012 year end Treasury Statement.

For year end FY 2012, these two line items are $246B for Medicaid and $542B for Medicare; totaling well in excess of the $400B of Non-defense consumption and investment expenditures so logically they cannot be part of this $400B Non-defense component.

So for U.S. GDP, the direct contribution to this form of measurement of economic activity from the Federal Government does NOT include at least that from:   Social Security $658B, Interest on US Treasury Securities $215B, Medicare $542B and Medicaid $246B for a total of $1.661T Federal Expenditures that simply are not included in the widely followed GDP measure and/or monitored by economists.

Indeed if we look at the total Federal spending computed by subtracting total Federal securities redemptions from total withdrawals from the TGA for year end 2012 we can see they withdrew a total of $11T while $6.8T of that was to simply redeem US Treasury securities so that leaves $4.2T of net total Treasury account withdrawals for the year, while the Federal contribution to G is reported at $1.2T.  So the remaining $3T of withdrawals is directly ignored by this popular GDP economic measure.

I guess economists wait until these $Trillions of Federal expenditures eventually show up in Consumption expenditures or something and add it up at the cash registers well after the fact ex post and come up with GDP a few months later.

Is this a good idea or helpful?

We just had a "GDP disappointment" this past week for 1Q (hey, better late than never...) and everybody acted as if surprised, could this have been predicted (or god forbid prevented...) with better real-time economic surveillance?

Good thing airlines don't operate this way as far as how much fuel they put in before a flight:  "Hey Joe, do we have enough fuel"?... "I don't know, I'll tell you after we get there or not"....

Pretty sad situation.

Our current crop of economic policymakers both in the government and the academe that advises them are simply not qualified for their positions. We need to get people in there who have the cognitive abilities to be able to understand what is really going on.