In a turbulent economic climate, U.S. consumer confidence took a significant hit in February, marking former President Donald Trump's first full month back in the White House. According to The Conference Board, the 7-point decline in consumer confidence was the largest drop since August 2021. This development has sparked discussions and debates regarding the root causes of the current economic challenges.
Commerce Secretary Howard Lutnick pointed fingers at former President Joe Biden, holding him responsible for the recent negative economic data and the substantial plunge in stock prices. The Dow Jones Industrial Average saw a dramatic fall, losing more than 1,300 points combined on Monday and Tuesday. Lutnick did not mince words when describing the economic situation left by his predecessor.
"You're looking at Biden data," – Commerce Secretary Howard Lutnick
Despite these troubling indicators, the U.S. economy displayed some resilience over the past year, growing by 2.8%. Furthermore, the inflation rate in December stood at 2.9%, a noteworthy reduction from the 40-year high of 9.1% recorded in June 2022. Yet, these figures have not quelled concerns about the overall economic trajectory.
In a controversial move, Lutnick disbanded two expert committees that collaborated with the government to produce economic statistics. This decision, reported by Reuters on Tuesday, has raised eyebrows and sparked discussions about how economic data is managed and interpreted.
Adding to the discourse, Elon Musk has suggested that the administration consider modifying how gross domestic product (GDP) is calculated. Musk's proposal involves excluding government spending from GDP calculations, a notion that Lutnick also touched upon.
"A more accurate measure of GDP would exclude government spending," – Elon Musk
"Otherwise, you can scale GDP artificially high by spending money on things that don't make people's lives better," – Elon Musk
The Atlanta Fed's GDPNow estimate in mid-February had projected a rise of 2.3% rather than a decline, indicating discrepancies in expectations versus actual performance. Additionally, ADP reported that companies added only 77,000 new workers in February, which was significantly below the revised figure of 186,000 workers in January. This slowdown in job growth further contributes to concerns regarding economic stability.
Lutnick's actions also extended to disbanding the Federal Economic Statistics Advisory Committee, which was responsible for generating crucial data on inflation, employment, and GDP. The Commerce Secretary has defended his decisions by suggesting that past administrations have manipulated GDP figures to present a more favorable economic outlook.
"You know that governments historically have messed with GDP," – Commerce Secretary Howard Lutnick
The debate over GDP calculations has garnered support from individuals like Musk, who believe that separating government spending from consumer spending in GDP calculations could provide a more accurate reflection of economic health. However, this idea remains contentious, as it may complicate or distort traditional measures of the U.S. economy's vitality.
"But you have a new president, you have a new sheriff in charge," – Commerce Secretary Howard Lutnick