Gross Domestic Product is exactly what the words imply, gross not net. It’s the estimated sum total of sales and income. It doesn’t have a thing to do with expenses. As such, it’s totally out of whack in the real world you and I live in.

Let’s say that you own a small bakery in your home town. You make great products that everybody in your city loves and buys at one time or another when they feel like a treat. Let’s also say that your gross sales are expected to total $300,000 this year. Sounds great doesn’t it? The GDP will, of course, count this as part of their total, taking the figure from your estimated tax returns.

But, let’s also say that expenses have been abnormally high this year. Besides payroll, rent or property taxes, the cost of sugar, flour and all of the other supplies you must buy, your costs for energy have tripled. It’s now costing you a small fortune to keep the lights on and run those ovens all night almost every night just to get your product out. You can’t raise prices anymore and you’ve already sold the stocks you bought when times were better. Now, you figure expenses at about $400,000 for the year.

You are in deep doo-doo, right? You’re operating at a loss. Losing money hand over fist and thinking some pretty far out alternatives like cooking with firewood and somehow adding cappuccino latte to your product at a high mark up.

Do you think the GDP will take this $400,000 expense factor into account? Absolutely not. In fact, they’re going to count it as more income from everybody you’re paying. All of your employees, utilities and suppliers will be counted into the GDP on the positive side.

In fact, as far as the GDP is concerned, you could say that your little bakery accounts for $700,000 of the Gross Domestic Product. Isn’t that wonderful? Isn’t it a great measure of the state of the economy? They’re showing this tax estimate, while you’re going $100,000 in the hole.

Of course, if you close shop and move to Mexico to set up a pastalaria, you won’t show up in the GDP unless you continue to bank in America. In that case, you’ll show up in the Gross National Product (GNP) as an American doing business outside the country.

Theoretically, it’s possible for the nation to show a Gross Domestic Product of $8 trillion while, at the same time, having expenses of $10 trillion that may or may not even be noticed.

Be very careful when you see the GDP used for anything other than tax estimates. That’s all it’s good for, even though the Congressional Budget Office spends almost all of its energy trying to relate the GDP to everything. Only your federal government has time to waste on fruitless ventures.

For instance, here’s a chart from the CBO relating Gross Domestic Product to Social Security’s predicted spending over the next 30 years.

But I did have an ulterior purpose in showing you this recent chart. Where are the “baby-boomers?” Shouldn’t there be a dramatic jump in there for the 76 million baby boomers looming on the horizon and about to wreck havoc on the Social Security system? Where are they? Do you think the Congressional Budget Office simply forgot to include them? My God, could it all be another fabrication or outright lie?