GDP, what does it measure?
GDP is so much adored by economists, that it became the anchor for every measurement on national accounting. To my view it is a very partial tool to understand economic performance and wealth of a country. The very best example, where the GDP failed is the Greek economy. Before the Greek economic crisis at 2010, it showed GDP per capita comparable to that of Germany. Also the level of debt as percentage of GDP did not exceed 100% as compared to 170% today, after significant write offs of debts. How so? Because of heavy borrowing, that financed big share of the Greek economy in the past.
Other source of miscalculation GDP causes is it’s being tool for measurement of the current flow of economic activity, and not expressing anything about accumulated national wealth. Take for example countries like, Russia and China compared to US. US economy runs for years a huge current account deficit, and Russia or China, have years of surpluses. Yet which countrie’s economy is better off? Of course US’s. Why? Because it accumulated during its last relatively uninterrupted 150 peaceful years (since the civil war) capital in many forms.
The official GDP is only part of this story. The other part is the very existence of well functioning economic institutions like: financial systems, political system supportive to business, well functioning management systems, highly developed stock exchange market, local capital owners who use the capital for economically positive purposes, entrepreneurship in all business sizes and every imagined field of activity, accumulated know how in its universities and other institutions, like for example Google, etc. Add to it the absolute and relative size of US economy, its military power supportive to its currency, and you will understand, that the traditional economic tools, like GDP, or deficits and debts as proportion of GDP are not good enough to measure the strength of the US economy.