Thinking About Tanks
How the federal government makes the economy go
Speaking yesterday on Fox News, U.S. Secretary of Commerce Howard Lutnick indicated that official data for U.S. GDP would now separate out government spending from the rest of the nation’s overall economic tally.
“You know that governments historically have messed with GDP. They count government spending as part of GDP. So I’m going to separate those two and make it transparent.”
Lutnick seems not to be aware that the Bureau of Economic Analysis — which sits in the agency that he leads — already separates out federal spending in its quarterly GDP reports. You can see that in lines 51-57 of Table 3 in BEA’s report on U.S. 4th quarter GDP in 2024, released last week, and shown below highlighted in yellow. Federal spending (annualized) was about $1.9 trillion of the nation’s $29.7 trillion economy.
The motivation for Lutnick’s comments on GDP may be the increasingly pessimistic expectations for U.S. GDP in Q1 of 2025. Just today, the Atlanta Fed projected that in the first quarter of 2025, the U.S. economy will contract by 2.8% — a steep drop from its projections of ~4% growth just one month ago.
Lutnick may be motivated to present GDP without federal spending because the Trump Administration’s effort to cut government spending will, by definition, reduce U.S. GDP. Remember that GDP is simply a summary of economic activity, not the worth of its components. There are longstanding debates over how to interpret and value government spending, but its inclusion in the top line GDP measure is standard practice — Users of GDP numbers are of course free to redefine the metric however they like.1
Lutnick justified his proposal to exclude government spending from GDP using an analogy of the inefficiency of paying people to think about tanks:
“If the government buys a tank, that’s GDP. But paying 1,000 people to think about buying a tank is not GDP. That is wasted inefficiency, wasted money. And cutting that, while it shows in GDP, we’re going to get rid of that.”
I’d like to make the case for thinking about buying a tank.
The U.S. has only one tank production plant, and that is the Joint Systems Manufacturing Center, in Lima, Ohio. The facility, owned by the U.S. government and run by General Dynamics, employs more than 850 people. Business is booming:
“Our future here is very good,” Senior General Dynamics Land Systems Representative Gary Hadding said. “The investment the United States government is putting into JSMC is remarkably huge right now. We have a lot of future investments going to take place plus our contracts are coming in well.”
The JSMC is scheduled for a significant increase in government investment in the publicly-owned, privately-managed factory, with its budget increasing to $287.1 million in 2028 and $300 million in 2029 for plant upgrades, including more automated and robotic processes.
How does the U.S. decide that it is in the nation’s interest to invest in tank production? What capabilities should these tanks have? Where might they be used? To whom might the U.S. give or sell them to? What new technologies are needed in the next generation of tanks? From where do we source the materials necessary to build them? How do they fit into the context of U.S. defense strategy and military capabilities? What sorts of advanced training will be needed to operate them? What does the tank supply chain look like for future production and maintenance?
Answers to questions like these come from people who think about buying tanks.
Who are these people? Some are at the Strategic Studies Institute of the U.S. Army War College:
The Strategic Studies Institute (SSI) is the U.S. Army’s institute for geostrategic and national security research and analysis. SSI conducts global geostrategic research and analysis that creates and advances knowledge to influence solutions for national security problems facing the Army and the nation. SSI serves as a valuable source of ideas, criticism, innovative approaches, and independent analyses as well as a venue to expose external audiences to the U.S. Army’s contributions to the Nation.
Others work for the Defense Advanced Research Projects Agency (DARPA):
Since 1958, DARPA has held to an enduring mission: To create technological surprise for U.S. national security.
Working with innovators inside and outside government, we have delivered on that mission many times over – transforming the seemingly impossible into world-changing defense and national security capabilities. Often, DARPA innovations also become fixtures of modern civilian life.
Still others work for the Defense Intelligence Agency:
DIA is a Department of Defense combat support agency. We produce, analyze and disseminate military intelligence information to combat and noncombat military missions. We serve as the Nation’s primary manager and producer of foreign military intelligence, and are a central intelligence producer and manager for the secretary of defense, the Joint Chiefs of Staff and combatant commands.
There are also many others elsewhere in the Department of Defense, the president’s national security team, and staff of relevant congressional committees whose jobs entail thinking about buying tanks.
It is thinking that empowered the United States to create a level of national security unmatched in world history, which in turn facilitates the incredible U.S. economy — and not just through security but also through the many technological innovations that have spilled over from the military to the broader economy.
Much more broadly than just defense, federal government employees whose job it is to think about things help make the economy go.
In 2023 the federal government employed more than 32,000 physical scientists, according to a new data dashboard published by the American Institute of Physics — of these, about 3,100 work for the U.S. Army, where I’d guess some spend their time thinking about buying tanks.
Consider that in 2023, the Department of Commerce employed almost 2,500 meteorologists at an average salary of $113,000, totaling $283 million — let’s just make it $350 million to account for benefits. Aside: whatever DOGE is doing, someone should tell them about what Willie Sutton said about the banks he robbed.2
Most of these meteorologists work for the National Weather Service inside Commerce. Federal government weather forecasting is a backbone of the U.S. economy and central to public safety. One study estimates that the benefits of of improved NWS forecasts since 2007 are worth $5 billion for each U.S. hurricane. Data collected and shared by the NWS also underlie a $10 billion+ private sector forecasting services market. Advances in weather forecasting are one of the triumphs of science and technology over the past century.
Even if half of NWS meteorologists were playing video games all day (they are not), the work of the NWS would still be an incredible value to the nation.
In 2021, Craig McLean, acting chief scientist of NOAA, testified before Congress that “NOAA is a $12 billion agency trapped in a $5-and-a-half billion budget.” He was correct, and that is still true. If anything, NOAA’s funding should be increased along with commensurate expectations to improve its forecasting and services in line with the needs of the economy. Congress would then need to hold the agency accountable.
It turns out that thinking about buying tanks, the weather, and many more things are actually pretty important to the U.S. economy. Changing how the government represents GDP to the public is not going to fool anyone if U.S. military capabilities suffer or if weather forecasts become less reliable.
Writing in 1937 — ironically enough, about government spending and inflation — John Maynard Keynes called for government to institutionalize thinking about policy:
It is essential to set up at the centre an organisation which has the duty to think about these things, to collect information and to advise as to policy. Such a suggestion is, I know, unpopular. There is nothing a Government hates more than to be well-informed: for it makes the process of arriving at decisions much more complicated and difficult.
Still current in 2025.
We live in a era where politics runs roughshod over policy, and the policy analyses that inform policy and politics. Even so, thinking about things matters — I suspect we will learn that soon enough.
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I highly recommend Diane Coyles’s book, GDP: A Brief but Affectionate History, which I used in my classes many times.
Is there waste, fraud, and abuse in government spending? Surely. Locate it and cut it. When doing so, make sure to grab hold of the baby before tossing out the bath water.
No one can dispute that the federal government provides numerous products and services to the American people. Using a blunt instrument to determine what is essential and what isn’t is bad policy. However it is clear that there is lots of opportunities to reduce costs. Modernization of technology based processes for example. Tackling fraud and putting in systems to prevent it. Moving some services to the states I think is a worthy goal. Reading between the lines of your essay it is clear you disagree with the approach. Do you disagree that urgent attention to our debt levels is essential?
Believing that the function an agency is supposed to provide is valuable is a far cry from that agency actually providing the service. Evaluating the accuracy and efficiency of an agency is made difficult by all the people that turn the agency into a jobs programs.