Starting next year, the Bureau of Economic Analysis will publish a new statistic very similar to one advocated by Mark Skousen, Gross Domestic Expenditures. Skousen explains the virtues of his statistic in a recent essay, “Has Government Adopted by New Macro Model?” If you have read his The Structure of Production, you should be familiar with the idea. GDE helps tell a clearer story than GDP data,
I have created Gross Domestic Expenditures (GDE), a measure of total spending at all stages of production in one year. GDE estimates gross spending patterns in intermediate production (goods-in-process or the “make” economy) and final output (the “use” economy). I draw from “gross business receipts” data collected annually from the IRS.
GDE is a real eye-opener. It turns out that the “make” economy (GDE) is more than twice the size of the “use” economy (GDP) and is 3–4 times more volatile over the business cycle. It demonstrates that business investment (the supply side of the economy) is much bigger than consumer spending (the demand side of the economy), thus dispelling the notion that consumer spending is the main driver of economic growth. Consumer spending turns out to represent only about 30% of total economic activity (GDE), not 70% as constantly reported.