UMD Professor Says U.S. Should Recalibrate Economic Measure

By BEN MEYERSON, Capital News Service

WASHINGTON (March 13, 2008) - The United States' key economic benchmark isn't getting enough of the picture and could be shortchanging American productivity, a University of Maryland professor told lawmakers Wednesday.

The gross domestic product, often used as an indicator of the nation's economic health, doesn't pass muster because it only measures transactions that directly move money through the market, economics professor Katharine Abraham said to Sen. Byron Dorgan, D-N.D., the lone representative present from the Subcommittee on Commerce, Science and Transportation.

"There's a lot of productive activity that goes on that doesn't get picked up by through-market transactions," said Abraham, who served as commissioner of the U.S. Bureau of Labor Statistics for eight years under President Clinton and the current President Bush. "What you can look at in the GDP is investments in plants and equipment and physical stuff."

The U.S. shouldn't change the GDP calculation, she said. Instead, the agency that figures the GDP—the Bureau of Economic Analysis—should supplement it with other measurements of what Americans are doing with their time.

The government should add ways to measure things such as volunteer work for nonprofits, making meals at home instead of paying to eat out, and should measure money spent on education as an investment rather than pure consumption, as Abraham said it currently is.

"In today's economy, a lot of the investment that we make isn't in physical things, it's in less tangible things, and a big part is investment in human capital," such as education, she said.

Abraham testified on a five-member panel that for the most part, agreed with her. All agreed the GDP was not intended to be a catch-all measuring stick for the well-being of the entire nation, and that it should somehow be supplemented.

"Our witnesses today will lay the groundwork for Congress to have a dialogue," Dorgan said at the opening of the hearing.

The panel seemed grateful for the opportunity to have a say in how the nation measures its productivity.

"When you talk about the economy, this isn't the picture on the wall, the movie—this is root of the issue, this is the lens," said Jonathan Rowe, director of the Tomales Bay Institute in Minnesota.

Dorgan said he wasn't sure how the committee would use the information provided Wednesday, but he said he would think about the panel's recommendations.

The GDP is used across the globe as the key measurement of a nation's economy. It generally combines consumption, investment, government spending, and the ratio of imports to exports. The United States' GDP for 2007 was $13.8 trillion.

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