As of July the wordsmiths at the BEA will wave their magic wands and . . . voila . . . the GDP will increase 3%.
U.S. Government Manipulated Economic Statistics Apr 27, 2013 - 12:22 PM GMT By: Peter_Schiff
" . . .If the government doesn't like what people are saying, they don't bother just to change the conversation, they change the meaning of the words.
The latest example of this was revealed earlier this week when the Bureau of Economic Analysis (BEA) announced new methods of calculating Gross Domestic Product (GDP) that will immediately make the economy "bigger' than it used to be. The changes focus heavily on how money spent on research and development (R&D) and the production of "intangible" assets like movies, music, and television programs will be accounted for. . . . In reality these smoke and mirror alterations are no different from changes made to the inflation and unemployment yardsticks that for years have convinced Americans that the economy is better than it actually is. . . . In the simplest terms, GDP is calculated by combining a nation's private spending, government spending, and investments (while adding trade surplus or subtracting trade deficits). Business spending on R&D, a portion of which comes in the form of salaries, has traditionally been considered an expense that does not explicitly add to GDP. But now, the United States will lead the rest of the world in redefining GDP. Washington has now declared that the $400 billion spent annually by U.S. businesses on R&D will count towards GDP. This equates to about 2.7% of our nearly $16 Trillion GDP. The argument goes that, for example, the GDP generated by iPhones has far exceeded the cost spent by Apple to develop the product. Therefore, Apple's R&D is not an expense but an investment. . . . Economists who have staked their reputations on the efficacy of Keynesian growth strategies have argued that such changes will more accurately reflect the realities of our 21st century information economy. But their analysis ignores the failures so often associated with R&D and artistic productions. For every breakthrough iPhone there are dozens of ill-conceived gizmos that never get off the drawing board. For every Seinfeld, there are countless failures and bombs that leave nothing but losses.
In essence, the new methodology is an exercise in double accounting . . . Another change that will artificially boost GDP concerns how government salaries will be counted. . . . The new system magnifies the GDP impact of government pensions, which are a principal component of public sector compensation. Going forward, the pensions will be calculated not from actual contributions, but from what governments have promised. Under the old system, if a state had a $10,000 pension obligation but only contributed $1,000, only the $1,000 would be added to GDP. Under the new system the entire $10,000 would be counted. So now governments can magically grow the economy simply by making promises they can't keep. . . . "
RIGHT'S RIGHT 
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Mon Apr 29, 2013 2:58 pm
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