OPINION

Another First on CNBC, Thanks to Rick Santelli

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Rick Santelli, CNBC’s commentator on interest rates, is the father of the "tea party” after his rant in 2009 against the government bailouts.

Now he is a new supporter of my Gross Output statistic. A few weeks ago, he said on the air that consumer spending drives the economy because “consumption is two-thirds of the economy.”

I immediately contacted Santelli, a long-time friend, to set the record straight. I pointed out that consumer spending is not two-thirds of the economy, but actually only about one-third. It is true that consumption represents around 68% of gross domestic product (GDP), but GDP leaves out a large chunk of economic activity. It ignores business-to-business transactions in the supply chain.

I told him about Gross Output, the new government statistic that I’ve advocated for years. It measures spending at all stages of production. Less than 40% of GO constitutes consumption. Business spending and private fixed investment accounts for more than 50% of GO.

Rick Santelli got it, and arranged to have me on First on CNBC “Squawk on the Street” last Tuesday, Dec. 23, to discuss the significance of GO. I debunked the Keynesian idea that "consumer spending drives the economy," and recommended the supply side view that business investment, productivity and entrepreneurship drive the economy. I also talked about GO and its ability to forecast the future. I said that GO was growing faster than GDP, which was positive for the economy and Wall Street. Watch the three-minute interview here: http://video.cnbc.com/gallery/?video=3000340429.

For more written information on GO, go to http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/.

I’ve also written a textbook, “Economic Logic,” now in its 4th edition, that explains GO in national income accounting: http://www.amazon.com/Economic-Logic-Fourth-Edition-Skousen/dp/1621572226.

Santelli wants me back on Thursday, Jan. 22, when 3rd quarter GO comes out. Stay tuned!

May you all have a wonderful Christmas day, and a happy prosperous New Year!

Good investing, AEIOU,

Mark Skousen

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