U.S. Economy Saved (Temporarily) by Defense Spending

As you probably know by now, GDP declined at an annual rate of 0.3 percent in the 3rd quarter (July-September). Menzie Chinn has a good post at Econbrowser breaking down the components of the GDP numbers. One number jumped out at me: defense spending contributed 0.9 percentage points of GDP growth. Put another way, if defense spending had remained flat in Q3, GDP would have declined at an annual rate of 1.2 percent.

Now, there may be very valid reasons for an uptick in defense spending. For one thing, our military’s equipment is being depleted by the wars (and in some respects the equipment was insufficient to begin with). But I’m not sure we can count on it in future quarters – or that we want to count on it.

One thought on “U.S. Economy Saved (Temporarily) by Defense Spending

  1. Dean Baker pointed out that “Over the last 40 years, this increase is exceeded only by a 36.3 percent jump in the 2nd quarter of 2003 (the Iraq War) and an 18.2 percent rise in the fourth quarter of 1984, at the height of Reagan’s military buildup. At a time when we are supposed to be de-surging in Iraq, it is difficult to identify any events in the world that would warrant such a large jump in military spending.”

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