Consumer Spending is *Not* 70% of GDP

[jtuck004]

What consumer spending actually benefits THIS country?

If the system is structured so a person could wind up going cold, hungry and homeless by trying "buy American", maybe
we need some spending on manufacturing, jobs, and training that teach people how to protect themselves in a global economy?

by: Michael Mandel on August 14
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As a textbook author, there are few things that frost me more than hearing “consumer spending is 70% of gross domestic product,” because it perpetuates two very large and very misleading untruths.
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At a time when we are wrangling over health care reform, it’s misleading to say that “consumer spending is 70% of GDP”, when what we really mean is that “consumer spending plus government health care spending is 70% of GDP.”

Second, an awful lot of those back-to-school dollars are going to imported clothing and school supplies (how many of those laptops and iPods do you think are made in the U.S.?). A dollar of consumer spending does not translate into a dollar of domestic production.

In fact, the whole way that the BEA presents the GDP statistics points the public debate in the wrong direction. GDP stands for “gross domestic product”—that is, domestic production. But the breakdown of GDP is into expenditures categories—personal consumption expenditures, government consumption expenditures, etc. Just take a look at Table 1 of the latest GDP release.
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Slightly more,here.

[billlll]

1. how GDP relate to total incomes?

Tks

[DoctorK]

2. what do you think GDP is?

it is a measure of spending, and it is a really flawed metric for attempting to 'measure' an economy.

"A dollar of consumer spending does not translate into a dollar of domestic production."

Who said it does? Consumer spending gets significant coverage because someone has the job of acquiring, transporting, and selling that merchandise. Those business functions translate into jobs. Most 18 year olds I know what would rather work in a store than on a clothing line sewing machine. How 'bout you?

"What consumer spending actually benefits THIS country?"

If you buy a coat for $20 you now have protection from the cold. That's a benefit to you, even if the coat is made in Vietnam instead of South Carolina.
Ultimately, consumer spending benefits the consumer, or otherwise they would have saved the money. That's the basis of voluntary exchange.

Many of the problems we're experiencing are result of a rebalancing in the economy after hacks like Greenspan and Krugman encouraged consumers to borrow to fund consumption (MEW contributed hundreds of billions annually to consumer spending until the bubble popped).