Government retools GDP calculation
Monday, July 29, 2013 1:56 PM
Should the cost of making a hit television series be considered spending or an investment? A new way of figuring the nation's gross domestic product calls it an investment.
In its most significant reclassification of what constitutes economic output since 1999, the federal government will now include spending on research and development and some forms of entertainment when it calculates the nation's GDP, Bloomberg reported.
The update, effective July 31, will boost the world's largest economy by around $400 billion, equivalent to adding another Virginia or New Jersey. However, it probably won't alter the recent trend in growth.
"If you measure something in pounds or in kilos, you haven't changed the weight," said Neal Soss, chief economist at Credit Suisse AG in New York. "It's the same economy, we're just applying a different accounting convention to measure it."
Spending on films and long-running television shows such as the situation comedy "Seinfeld" will be classified as investment, rather than an expense. That would have added about $70 billion to GDP as of 2007, according to estimates from the Commerce Department's Bureau of Economic Analysis.
The biggest impact will be from including research and development costs, which would have boosted the economy by about $314 billion in 2007, according to BEA estimates. In the 1999 reclassification, the government first counted spending on computer software as an investment. Also added to GDP estimates will be transfer fees related to home sales and a new treatment of pensions.
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