The Point of Growth

GDP has grown for 70 years. What do we have to show for it?

Imagine your household earns $150,000 a year. You spend $140,000. You save $10,000. At the end of the decade, you have a modest cushion, a shrinking mortgage, and a retirement account that’s starting to mean something. You’re not rich yet, but you’re building real security. The math is boring. Which is how you know it’s real math.

Now consider your neighbor. Same $150,000 in income. But they also borrow $40,000 a year—home equity lines, credit cards, an underwater auto loan rolled into the next one. They spend $190,000. By every government measure of economic activity, this household is more productive. More transactions. More consumption. More GDP, if households had a GDP.

They’re also broke as shit. And getting broker.

You already know which household is actually prospering. You don’t need a degree in economics to see it. You need a kitchen table to update your balance sheet at.

Nations don’t use balance sheets. They use GDP.

What GDP Was Built For

GDP deserves more credit than its critics give it. When Simon Kuznets developed national income accounting in the 1930s, he was solving an urgent, specific problem: how much economic capacity can the United States mobilize right now? With the Depression grinding on and war looming, that was exactly the right question. FDR needed to know how many tanks, planes, and uniforms the economy could produce. Kuznets delivered a tool to answer it.

He also warned—explicitly, in his 1934 report to Congress—that national income figures should not be treated as a measure of welfare. The tool measured throughput: how much activity is the economy generating this quarter, this year? It was a flow metric, designed to capture immediate capacity. And for its intended purpose, it worked brilliantly. We saved the world.

The problem is what happened next. A wartime throughput gauge became, by institutional inertia and political convenience, the default measure of national prosperity. GDP growth became synonymous with progress. Quarters of positive GDP meant the economy was “strong.” Negative quarters meant crisis. An entire vocabulary of economic health was built on top of a metric that measures activity the way a tachometer measures RPMs—accurately, but with no indication of whether the car is actually going anywhere.

Name another investment that’s compounded for seventy years with as little to show for it. American GDP has grown nearly every year since the 1950s. Real, inflation-adjusted growth. Exposed to the magic of compounding across seven decades. And yet: real wages for the median worker have barely budged since the early 1970s. Homeownership rates for young adults are at historic lows. Household savings rates have collapsed. The national debt has exploded from concerning to existential. Personal debt has followed the same trajectory.

Seventy years of uninterrupted “growth.” And the median household is running harder to stay in the same place.

Why Nobody Fixed It

The obvious question—if GDP is the wrong metric, why hasn’t it been replaced?—has a boring answer, which is usually a sign it’s the right one.

Path dependence. International comparability. Institutional inertia. Treaty obligations pegged to GDP thresholds. The IMF. Careers built on interpreting GDP data. Government agencies structured around reporting it. Entire academic disciplines organized around modeling it.

But ultimately, a metric that rewards government spending will always outcompete a metric that rewards fiscal restraint.

Which is why nobody owns the whole picture. The Bureau of Economic Analysis measures output. The Bureau of Labor Statistics tracks employment and prices. The Federal Reserve monitors financial conditions. Treasury manages debt. Each agency does its job competently within its lane. None is tasked with assembling the pieces into a coherent answer to the question that actually matters: after all this activity, did we end up with more than we started with?¹

The economy, meanwhile, shifted underneath the measurement system without anyone updating the dashboard. In the 1950s, economic output was overwhelmingly physical: steel, automobiles, housing starts, bushels of grain. Measuring throughput in that world captured something real about productive capacity, because physical goods are harder to fake and harder to finance with leverage than financial abstractions.

Over the following decades, the economy transformed in ways that made throughput an increasingly poor proxy for progress. Manufacturing gave way to services. Savings gave way to leverage. Ownership gave way to financialization—a world where the same underlying asset could generate dozens of transactions, each one counted as “output,” without a single new thing being produced. A house built in 1985 gets sold, refinanced, securitized, tranched, insured, derivatized, and traded—every one of those transactions registers as economic activity. Meanwhile, the roof starts to leak.

The nature of “investment” itself has shifted. In 1960, when a corporation spent a billion dollars, it was probably building a factory. The output was visible, durable, and productive for decades. Today, a billion dollars of corporate spending might mean stock buybacks, financial engineering, or acquiring a competitor to eliminate competition rather than create capacity. All recorded identically in the national accounts. All very different in what they leave behind.

The economic measurements didn’t adjust for any of this.

It’s not a conspiracy. It’s not even really incompetence. It’s just the way institutions work. They accrete. They don’t refactor. Nobody wakes up in the morning and decides to perpetuate a flawed metric. They just cite the number everyone else is citing, they fill in the cell in the spreadsheet it’s their job to fill in, because building a better one isn’t anybody’s job.

The Accounting Asymmetry

Of course, accretion doesn’t work in a competitive setting. Which is why the private sector solved this decades ago.

Any publicly traded company is required, by law, to distinguish between revenue and profit. Between operating expenses and capital investment. Between assets and liabilities. Between cash flow from operations and cash flow from financing. A company that reported only its top-line revenue and called it “growth” would be laughed out of every analyst meeting on Wall Street and delisted before lunch.

We don’t just require companies to report income. We require them to report what they did with it. Did they reinvest in productive capacity? Did they maintain existing assets? Did they return capital to shareholders? Did they borrow to fund operations? These distinctions matter, because revenue without context is meaningless. A company that grows revenue 20% by borrowing 30% more is not growing. It’s dying, with panache.

Governments face no equivalent reporting discipline. GDP counts the spending. It does not count the bill. It records the activity without distinguishing between a dollar spent building a bridge, a dollar spent replacing a bridge that fell down, a dollar spent on interest payments for the debt that financed the original bridge, and a dollar that simply moved from one government account to another. All four are GDP. None are equivalent.

The entity managing the most money on Earth operates with less financial transparency than a regional car dealership. The dealership has to file audited financials. The government files a press release.

First Principles

Strip away the institutional history and the political noise, and the accounting problem is elementary.

Every dollar of economic output does one of three things. It replaces something that wore out—depreciation, maintenance, the cost of keeping the lights on. It builds something new—productive capacity that didn’t exist before. Or it gets consumed—eaten, burned, enjoyed, and gone.

GDP treats all three equally. A dollar is a dollar is a dollar. But a dollar spent patching a pothole is not the same as a dollar spent building a road is not the same as a dollar spent on cigarettes for the work break. One keeps you where you are. One takes you somewhere new. One goes up in smoke.

This is where debt enters the picture, and where the measurement failure becomes actively dangerous.

Debt is a timing mechanism. It lets you pull future consumption into the present or push present investment into the future. Used well, it accelerates the conversion of savings into productive assets—borrow to build a factory, generate returns, pay back the loan. At the end, net savings are higher than before, and you have a new factory to boot.

But used poorly, debt lets consumption impersonate investment. You can borrow a trillion dollars, spend it entirely on digging holes and filling them back in, and GDP will faithfully record a trillion dollars of “growth.”

The activity was real. The output was not.

This is why a society can grow GDP for seventy consecutive years and still end up with crumbling infrastructure, insolvent entitlement programs, and a median household that can’t afford a home, an education, or a retirement. GDP recorded every dollar of spending. It never asked whether the spending left anything behind.

The Question We Never Ask

The data needed to answer the real question already exists. We track gross domestic product. We track capital depreciation. We track net investment. We track government debt issuance. We track household leverage. We track infrastructure quality indices. Every input is measured, somewhere, by someone.

We simply never assemble them.

The question is: After paying for upkeep, after servicing the debt used to finance it, did this year’s economic activity leave us with more productive capacity than last year’s?

That’s it. That’s economic growth. Not “how much did we spend?” Not “how fast did activity grow?” But: did we actually build anything, net of what we consumed and the financing cost?

Call it whatever you want. Net Productive Growth. Adjusted Capital Formation. The National P&L. The label doesn’t matter. What matters is the discipline of asking, at the end of every fiscal year, whether the nation’s balance sheet—its productive assets minus its obligations—got stronger or weaker. The way every lemonade stand with a cigar box full of quarters already does.

The Back of the Envelope

Even a crude attempt at this calculation is revealing.

In 2025, US GDP was approximately $31 trillion. Impressive, until you start subtracting. Capital depreciation—the cost of replacing worn-out equipment, infrastructure, and structures—consumed a little over $5 trillion. Net interest on government debt ate another $1 trillion. Household, corporate, and municipal debt service absorbed about $1.5 trillion. State and local maintenance backlogs—the deferred repairs on roads, bridges, water systems—is over $9 trillion in total, so maybe $700 billion in annualized terms.

That’s $8.2 trillion before anyone builds anything new. Call it $8 trillion, rounding graciously.

Of the remaining $23 trillion, how much represents genuine net investment in productive capacity—new factories, new infrastructure, new technology, new human capital? Gross private domestic investment was roughly $5 trillion, but much of that is replacement investment counted as “gross.” Net private investment—the portion that actually expands capacity—was closer to $2 trillion. Government investment, net of maintenance spending, adds perhaps another $800 billion on a generous reading.

So: approximately $2.8 trillion in net new productive capacity, from $31 trillion in activity. Under ten percent. The economy runs $31 trillion through the meter and less than a dime on the dollar comes out the other side as something new that will still exist next year.

And that’s before asking how much of even that $2.8 trillion was financed by adding to the $40 trillion national debt—whether the “investment” was funded by genuine savings or by pulling forward future claims.

The federal government added approximately $2.3 trillion in new debt in 2025. If even half of that funded consumption rather than investment, the net productive growth number shrinks further—potentially to low single digits as a percentage of GDP, possibly to zero.

Seventy years of “growth.” Nine cents on the dollar actually building something. And most of that was borrowed.

This is a napkin calculation. The real number could be a little better or worse. But the order of magnitude is what matters, and it explains something that GDP alone cannot: why all this activity doesn’t feel like progress. It doesn’t feel like progress because most of it isn’t. It’s maintenance, consumption, debt service, and the statistical echo of money changing hands.

Why It Feels Like This

You’ve felt this, even if you’ve never run the numbers.

Every time a headline announces “strong GDP growth” and you look around and think, strong for whom?—this is why. The metric is reporting motion. You’re experiencing a lack of direction.

When your wages rise 3% but your rent rises 5% and your retirement account buys a smaller share of the economy every year despite faithfully contributing—this is why. The flow is positive. The stock is not. You’re on a treadmill that reports your heart rate but not your distance.

When politicians from both parties claim the economy is either booming or on the verge of collapse and neither description matches your lived reality—this is why. They’re reading a tachometer and telling you about speed. One side says the engine is running hot and everything’s great. The other says it’s about to blow. Neither bothers to check whether the car has moved.

Asset prices are at all-time highs, and so is financial anxiety. Both things are true simultaneously, and they’re not contradictory—they’re complementary. Asset prices rise because money is chasing stores of value. Financial anxiety rises because wages can’t keep pace with the assets people need to acquire in order to achieve basic security. The economy is generating enormous activity. The activity isn’t generating prosperity.

This isn’t a populist complaint about elites cooking the books. The books aren’t cooked. They’re just reliably measuring precisely the wrong thing. GDP is an honest answer to a question nobody should be asking outside of a war-planning room.

The dissonance between reported economic performance and felt economic reality isn’t irrational. It isn’t ingratitude. It isn’t economic illiteracy. It’s the mathematically predictable result of chasing revenue at the expense of profitability. A society that measures activity instead of accumulation will always feel like it’s running in place—it is.

What Would Change

If we measured what matters—net productive growth rather than gross economic activity—several things would shift, and none of them are ideological.

Debt-financed consumption would show up as what it is: a drawdown on future capacity, not “stimulus.” A trillion-dollar spending bill that builds high-speed rail would look very different from a trillion-dollar spending bill that funds temporary transfer payments—even though GDP treats them identically today. Government spending that creates lasting infrastructure would be visibly distinguished from spending that simply moves money between accounts and calls it growth.

The perverse incentive to maximize throughput at the expense of durability—building cheap roads that need replacement in ten years instead of good roads that last forty—would become visible and, presumably, embarrassing. Under current measurement, the cheap road is better for GDP: you get to count the construction spending twice in twenty years instead of once in forty. A net productive growth metric would expose this as the accounting absurdity it is.

Most importantly, the political conversation would change. “GDP grew 1% this quarter” would become an input, not a conclusion. The follow-up questions—how much of that was maintenance? how much was borrowed? how much actually expanded our productive base?—would be inescapable once the framework existed to ask them.

We wouldn’t need to agree on what to do about the answers. We’d just need to start asking the questions. A nation that discovers it’s spending $31 trillion a year to generate $2.8 trillion in bottom line progress will have a very different policy debate than one that simply celebrates the headline.

The Point of Growth

The point of growth was never the growth itself.

Nobody wakes up in the morning wanting to maximize GDP. They wake up wanting to build something—a business, a home, a family, a life that’s a little more secure than the one they were born into. They want their kids to start farther ahead than they did. To inherit not just money but infrastructure, institutions, and productive capacity that compound across generations. To stand on the shoulders of giants, and to be those giants for whoever comes next.

That’s what an economy is for. Not activity. Not throughput. Not the frenetic circulation of dollars through a system that tallies transactions without asking what any of it built. An economy exists to convert human effort into durable prosperity—the kind that survives the people who created it.

When all of the numbers go up and to the right, but it now takes two full-time incomes to secure the lifestyle that our grandparents earned with one, the problem isn’t the lifestyle. It’s the numbers. You improve what you measure, and we’re not measuring prosperity.

Kids used to put themselves through college with summer jobs. Now they’re paying off student loans in their golden years. We once led the world in production, it’s how we won the Great War. Now we’re importing Temu plastic from our adversaries. A generation ago, a thirty-year-old could buy a house. Today they’re buying Labubus on installment plans.

This isn’t nostalgia for a time gone by. It’s an audit. For all of our effort, for all of the progress, for all the trillions flowing through the meter, are we better off?

A nation that can’t answer that question about itself isn’t being governed. It’s being managed—quarter to quarter, headline to headline, with no one keeping score on the only results that matter across generations.

We measure GDP, but we don’t keep it. It slips through our fingers, year after year. Real prosperity is built from what remains after our labor. And it’s the whole point.

1. There’s an old joke: two economists were walking in the woods when they noticed a pile of bear shit. One dared the other, I’ll pay you $1,000 if you eat that. The other economist said, “I’ll show you,” and gobbled it down. A little farther along, they found another pile. The second economist said, “Now I’ll pay you $1,000 to eat it!” So the second economist did and got paid for his trouble. A bit further on, one of the economists said, “You know, we both just ate shit and have the exact same amount of money we started with,” to which the other economist replied, “true, but we grew the economy!”