The Economy Is Doing Great. Sorry You Can’t Afford Life
The man who helped teach America to measure its economy also warned Congress that the number could not measure our well-being. We have spent ninety-two years ignoring him.
I have broken this topic into a three-part series because I realize asking anyone to read 5,000 consecutive words about GDP is how you lose subscribers and possibly friends. But GDP has a history, and that history turns one dreary economic statistic into a fabulous story about American ingenuity, political opportunism, and our extraordinary talent for turning every success into a brand-new fuckup.
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Gross Domestic Product. GDP. It’s hard to make something that sounds like a digestive condition sexy, but I am going to try.
Let’s start with the boring definition. GDP is the total market value of the final goods and services produced inside a country during a particular period.
For example, if a hospital charges you $3,000 for a colonoscopy that you could have gotten in France for the equivalent of a parking ticket, that $3,000 is GDP. (And yes, that was a personal reference.) If a hurricane destroys your house and you spend $200,000 rebuilding it, that $200,000 is GDP. If a tech billionaire spends six billion dollars on a yacht with two helipads and a submarine, that yacht is GDP, and the GDP per capita of his zip code just got noticeably more impressive.
GDP measures production. It does not measure whether the production was useful, equitably distributed, or within financial reach of anyone you know.
But lately, the gap between what GDP says and what your grocery bill says has become wide enough to drive a 2008-vintage subprime mortgage through it sideways. Economists celebrate continued growth while millions of Americans point to their rent, insurance premiums, and the price of ground beef.
Both can be right.
To see how, we need to return to the 1930s, when Congress asked a very serious man to construct a very serious number and then ignored the instructions printed on the box.
A Russian Tried to Warn Us
The year is 1934. Banks have collapsed. Factories have closed. Men are selling apples in the street, and kids run barefoot on dirty sidewalks. Unfortunately, the federal government has no comprehensive set of national accounts that can show exactly how much the economy is a shitshow.
People had attempted to estimate national income before. But the United States did not possess the vast statistical machinery we now consult every three months to determine whether everyone should feel better.
So the Senate asked the Commerce Department to produce national-income estimates. The job reached Simon Kuznets at the National Bureau of Economic Research.
Kuznets had left the new Soviet Union with his family in 1922, after the Bolsheviks took control of Kharkiv. So he knew firsthand how hairy scary economic collapse could get. Twelve years later, at thirty-two, he was helping the United States calculate the damage from its own fallout. Kuznets had already developed a professional interest in extracting meaning from large quantities of economic data, which was fortunate because Congress had essentially handed him a statistical swamp and asked for the number at the bottom.
So Kuznets and his collaborators assembled records from businesses, tax returns, wages, government reports, and other sources to estimate the nation’s income from 1929 through 1932.
The resulting report, National Income, 1929–1932, was solemnly delivered to the Senate in January 1934. It did not invent modern GDP fully formed. But Kuznets gave the United States its first comprehensive official accounting of national income — one of the crucial ancestors of the GDP number now announced on cable news as if it were the nation’s blood pressure.
Of course, the report documented an economic catastrophe. National income had roughly halved, falling from about $83 billion in 1929 to around $40 billion in 1932. Half the country’s income had vanished in three years.
Here, at last, was a number capable of showing Congress the size of the hole.
Then something strange happened: the report became a bestseller. A Senate statistical document — tables, appendices, methodology — sold out its print run at twenty cents a copy. Americans standing in breadlines paid two dimes apiece to read the official confirmation that they were broke. It remains one of the only times in history the public has fought over a government spreadsheet.
Kuznets also included a warning:
“Economic welfare cannot be adequately measured unless the personal distribution of income is known.”
This sentence should be stapled to every GDP report released by the federal government.
Kuznets was telling Congress — in the very emotive summary of economist speak — that calculating the nation’s total income does not reveal how the nation’s people are living. You must also know who receives that income. Otherwise, a country in which a few oligarchs own nearly everything can produce an impressive aggregate while millions of people scrape the burnt parts off toast for dinner.
He also cautioned that income accounting could not capture “the intensity and unpleasantness of effort” required to earn that income.
In other words, a worker can earn more by working sixteen hours instead of eight. National income rises. The statistic records the additional production and leaves the nervous breakdown and the heart attack in the parking lot.
Then Kuznets added this prophetic little flourish, which I must include because his dry wit amuses me:
“The valuable capacity of the human mind to simplify a complex situation in a compact characterization becomes dangerous when not controlled.”
In other words, here is your useful number, humans. Don’t be an idiot about it.
Guess what? We were idiots about it.
How War Created the Need for Numbers
Then war changed the accounting, as it often does. Governments preparing for war needed to know how much their countries could produce, how much civilians could surrender without starving, and how many tanks could be manufactured before the entire economy began coughing up screws.
Obviously, this changed the question. Kuznets had concentrated heavily on income available for civilian welfare. Wartime planners needed a broader measure of total production, including government spending on weapons, military bases, and armies. After all, a bomber may contribute very little to the comfort of an ordinary household, but it contributes enormously to a country’s capacity to bomb someone else’s household.
The Depression report and the war machine were connected by more than paperwork. Robert Nathan, one of the young Commerce staffers on Kuznets’s 1934 team, went on to run the wartime feasibility analysis that used these same accounts to tell the generals which production targets were fantasies.
The spreadsheet built to measure American misery was drafted, six years later, to help win a world war.
Following the 1944 Bretton Woods Conference, national-output statistics became central to the institutions governing the postwar economy. The United Nations formalized international accounting standards beginning in 1953.
GDP eventually became the common shorthand for the size and performance of national economies.
Then we quietly promoted it to a much larger position: How is the country doing?
What GDP Actually Measures Today
GDP measures the value of current production inside a country. That makes it extremely useful for comparing the size of economies, tracking recessions and recoveries, evaluating productive capacity, and watching how different industries change.
It cannot tell you whether the country is someplace you want to live. GDP does not directly measure happiness, health, inequality, leisure, personal security, political freedom, or the amount of money left in your checking account after the insurance companies have finished feeding.
It does not tell you whether the air is breathable, whether the water is drinkable, whether the public schools work, whether the bridges are plotting against you, or whether the medicine keeping you alive requires a second career. (Yes, I am bitter about that.)
It does not subtract every social cost from the production that caused it. A factory creates goods and pollution. The goods count. If pollution makes people sick and they require medical treatment, much of that treatment also counts.
GDP also excludes most unpaid household labor. If you pay someone to care for your child, prepare a meal, clean your house, or bathe an elderly parent, that paid service generally enters GDP. If you perform the same work yourself, it generally disappears from the national accounts.
The work still happened. Civilization continues largely because it happened. But because no market transaction occurred when you rocked that screaming baby to sleep, the statistic assigns no direct value to it.
Feminist economist Marilyn Waring has been pointing this out, with admirable patience, since at least 1988. Every meal cooked, diaper changed, elderly parent monitored, and load of laundry folded keeps the paid economy functioning. Yet much of this labor appears in GDP as zero.
The Country Inside the Aggregate
Now we can return to the apparent contradiction of 2026.
Goldman Sachs forecast that real American GDP would grow 2.5% from the fourth quarter of 2025 to the fourth quarter of 2026, above the consensus forecast of 2.1%. Its full-year forecast was higher. Goldman cited tax cuts, consumer spending, business investment, and easier financial conditions among the likely supports for growth.
The latest official estimate says real GDP grew at an annual rate of 2.1% in the first quarter of 2026, following growth of only 0.5% in the previous quarter.
That is continued growth. Yay! Break out the tariffed beer. Production increased. But it is not exactly the economy galloping naked through a field with a ribbon in its hair.
Meanwhile…on the other side, real average weekly earnings for employees on private nonfarm payrolls rose just 0.3% between June 2025 and June 2026. That works out to roughly four additional dollars of purchasing power per week — about enough for one cup of coffee. Real hourly earnings rose only 0.1%; a slightly longer workweek supplied the rest. So congratulations on the coffee. And remember, you worked longer for it.
Food at home rose 2.7% over the year ending in June. That tidy grocery average conceals what was happening at the meat counter: uncooked ground beef was up 12.4%, while beef and veal overall rose 11.8%. That one especially hurts because Americans really, really like beef. Maybe the podcast bros could tell their audience to start grilling tofu after their denim hot tub dips.
The housing numbers are worse. Like, really worse. In 2024, a record 22.7 million renter households — nearly half of all renters — spent more than 30% of their income on rent and utilities. More than 12 million surrendered over half their income just to remain indoors. Among renters earning under $30,000, the median household had only $210 a month left after housing costs.
That is seven dollars a day for food, transportation, healthcare, clothing, and every other minor extravagance involved in remaining alive. Maybe Stephen Miller could remember that number next time he claims poor people are scamming SNAP benefits.
Then there is healthcare — a problem with an easy solution if you care about a healthy, functioning society. The standard monthly Medicare Part B premium rose from $185 in 2025 to $202.90 in 2026, an increase of 9.7%. Better put that coffee fund into your healthcare bill.
And Trump’s One Big Beautiful Bill Act tilted the arithmetic further: its tax provisions disproportionately benefit higher-income households while its reductions to Medicaid and food assistance thin the resources of households near the bottom. GDP will register the resulting spending either way. It cannot register that one family gained a vacation while another lost a doctor.
So to recap: GDP can rise while real wages fall. It can rise while rent consumes a larger share of income. It can rise while millions of people lose purchasing power, because GDP does not divide national production by need and distribute the result in little envelopes.
I am oversimplifying this problem somewhat, but even GDP per capita cannot solve this. Dividing the aggregate by the population produces an average, not a distribution. If 10 people are sitting in a bar and Elon Musk walks in, the bar’s average wealth increases dramatically. But the rest of the poor slobs still can’t afford another drink.
CPI Is Not Your Mother
The Consumer Price Index (CPI) measures changes in the prices paid by urban consumers for a weighted basket of goods and services. Rent receives much more weight than smartphones because households spend considerably more on housing.
But your household is not the average basket.
A young renter, a retired homeowner, a family with three children, and a person with an autoimmune disease purchase very different versions of survival. If most of your income goes toward rent, food, insurance, and medicine, your personal inflation experience can be substantially worse than the headline rate.
CPI measures prices. It does not measure how freely you can participate in ordinary life after paying them.
I bolded freely for a reason. Consumer purchasing freedom is what remains after the economy has collected admission. If the admission is too high, everyone is less free.
GDP never claimed to calculate freedom.
A Brief Visit to 1893, Because We Have Done This Before
Seven years before the Panic of 1893, Andrew Carnegie published Triumphant Democracy, a long, self-satisfied, supercilious celebration of American industrial progress.
Carnegie cited coal, steel, railroads, factories, agriculture, shipping, exports, and nearly every other aggregate capable of making a wealthy industrialist feel that history had personally written him a thank-you note.
America was producing astonishing quantities of things. Carnegie interpreted this productive power as evidence that American democracy had produced unparalleled prosperity.
Then came 1893.
Banks failed. Railroads collapsed. Businesses closed. By 1894, some estimates of unemployment approached 19%. Jacob Coxey led an army of unemployed men toward Washington to demand a federal public-works program.
That summer, the Pullman Strike erupted after the Pullman Company cut workers’ wages without making comparable reductions in the rents charged in its company town. President Grover Cleveland sent federal troops into Chicago. The conflict turned deadly.
The nation’s industrial capacity remained immense. Its railroads still stretched across the continent. Its steel mills had not forgotten how to make steel.
America possessed extraordinary productive wealth and an extraordinary number of people who could not afford to live.
That is the mistake we keep making. The Gilded Age celebrated steel tonnage. The 1920s celebrated factories, automobiles, and stock prices. The pre-2008 economy celebrated homeownership while millions of those homes were resting on mortgages that worked beautifully, provided nobody ever had to repay them.
Now, we celebrate GDP and AI capital expenditures.
Each statistic describes something real. Trouble begins when we ask it to describe everything.
The Affordability Agenda
The political class has developed a term for the space between prosperous aggregates and unaffordable lives: the affordability agenda.
This makes affordability sound like one policy department among many, somewhere between transportation and municipal shrubs.
But affordability is the ability to participate in normal life. It is the ability to obtain shelter, food, transportation, medical care, education, and some modest quantity of pleasure without performing a monthly financial reenactment of the Donner Party.
The sudden popularity of the phrase is also a confession. If GDP growth reliably captured household economic freedom, politicians would not need an entirely separate vocabulary to describe the fact that people cannot afford to well…live.
More Growth of What, and for Whom?
Kuznets continued throughout his career to distinguish the quantity of growth from its quality, costs, distribution, and purpose.
That is the question missing from most celebrations of GDP. More growth of what?
If GDP rises because the country produces more housing, better infrastructure, effective medicine, and useful technology available to ordinary people, that growth can expand human freedom.
If it rises because medical bills, insurance premiums, disaster reconstruction, weapons production, luxury consumption, and speculative data centers become more expensive, the aggregate still grows.
Then comes the second question: Growth for whom?
GDP tells us that production increased. It cannot tell us who received the income, who performed the unpaid work, who absorbed the costs, who gained leisure, who lost health coverage, or who stood in the supermarket performing long division over a package of ground beef. A country can produce more while millions of its people can afford less.
Simon Kuznets warned Congress about this in the first official national-income report.
He did not tell us to discard the number. He told us to curb our dangerous tendency to mistake a single characterization for an entire country.
We kept the number.
Then we threw away the warning.
Coming in Part Two: In November 1982, a Reagan-appointed stockbroker named John Shad quietly gave corporate America a new way to spend its profits. Forty-four years later, CEOs make 281 times what their workers do — and we can finally answer the question GDP cannot: If the economy kept producing more, where the hell did all the money go?
Carlyn Beccia is an award-winning author and illustrator of 13 books. The Grim Historian is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.
Excellent, excellent, excellent. This is exactly what we need to educate each other about who is doing what to whom, and why (props to John Stoehr and The Editorial Board). I will be quoting and sharing this widely. Thank you!
Another point, the new politicians, AOC, Talarico, Mamdani, understand this. They were not trained on the oligarchs model of interpretation. I believe that our new American generation can finally begin another economic revolution.