Harsanyi points out a fact little understood by conventional economists (but thoroughly understood by the Austrian School): Including government spending in GDP is illusory, smoke-and-mirrors deception at its worst.
For example, economists frequently say that WWII "got us out of the Depression." To support this assertion, they can indeed point to huge expenditures on tanks, bombers, and other weapons. They can also point to low unemployment--a not unpredictable event when you ship millions of young, able-bodied men out of the country to fight in wars.
But all these assertions evade the central question: did all that government military spending actually create PROSPERITY? Quite the opposite. For most Americans, the war years.....
So, U.S. consumer confidence unexpectedly plunged in January to its lowest level in more than a year. The U.S. economy unexpectedly posted a contraction in the fourth quarter of 2012 -- for the first time since the recession -- "defying" expectations that economic growth is in our future.
If the economy were as vibrant as President Barack Obama has told us it is, a belt tightening in a single sector of government surely wouldn't be enough to bring about "negative growth." But one did. Unexpectedly. No worries, though. Pundits on the left tell us that this contraction was good news -- possibly...
In contrast, 1946, ON PAPER, was one of the worst economic years in US history, as the government downsized (yes, they used to actually do that) in converting from a wartime to a peacetime economy. Total GDP plummeted. But in actuality, 1946 was one of the BEST YEARS ever in terms of a real increase in prosperity, as spending was pulled out of defense, and put into the private sector.