Foggy Figuring

23 April 2013 By Martin Hutchinson

The key measure is already too influenced by arbitrary “hedonic adjustments” and cost-based accounting for government services. A new set of revisions will increase the dependency on estimates and fine demarcations. GDP will become less transparent and easier to distort.

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The Bureau of Economic Analysis’ comprehensive review of the GDP accounts, the first since 2009, will make five major changes, which together are expected to add about 3 percent to reported GDP:

It will recognize expenditures by government, businesses and nonprofits on research and development as fixed investment. (This is expected alone to add 2 percent to GDP);

It will recognize expenditures by businesses and non-profits on films, long-lived TV programs, books and other artistic originals as fixed investment;

It will expand the ownership transfer costs of housing and depreciate them more rapidly;

It will measure transactions of defined benefit pension plans on an accrual basis by recognizing the costs of unfunded liabilities (imposing an interest charge on them rather than measuring their quarter-to-quarter fluctuations directly);

It will use accrual accounting consistently for wages and salaries.

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