US economy to add 3% as economic history is 'changed'
The US Bureau of Economic Analysis is changing the method it uses to examine the U.S. economy as the country is addressing the national debt.
The new method will add the equivalent of the economy of a
country the size of Belgium to the U.S. output, the FT reports.
The Bureau will start counting spending on research, development
and copyright as investment, and reflects pension deficits for
the first time. Combined they are expected to add 3 per cent to
the U.S. GDP, according to the newspaper. The change is aimed at
more accurately reflecting the modern economy and will make the
US the first country to adopt the new international standard,
according to the FT.
“We are carrying these major changes all the way back in time
– which for us means to 1929 – so we are essentially rewriting
economic history,” Brent Moulton from the Bureau of Economic
Analysis told the FT.
The changes will affect everything from the measured GDP of
different US states to the inflation measure targeted by the
Federal Reserve, the FT reports. At a time when the
country’s government argues over the debt and spending, the
revisions are likely to lower federal spending as a share of GDP
by half a percentage point. They should also lower federal debt
as a share of GDP by about 2 percentage points from 73 per cent
in 2012, according to the article.
With the U.S. debt-to-GDP ratio nearing 100%, forexlive.com is
critical as changing the GDP side of the equation is easier than
addressing the national debt.