Beware most measures of government consumption

Garett Jones reports:

Here’s one big area where I think we should change what we call one type of government spending: Medicare and Medicaid.  Currently, these types of spending are counted as transfer payments (BEA PDF here) and so when we measure GDP they show up in C, consumer purchases.  I think they should show up in G, government purchases.  These medical purchases are so tightly controlled by the government that doctors–oops, “medical service providers”–have become and should be considered government contractors just like defense contractors or construction firms.

Sometimes you hear or read talk of “government consumption plunging,” but sometimes what is happening is that health care expenditures are crowding out other programs, which is not exactly the same thing as fiscal consolidation.


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