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Did Bush Goose Defense Spending for Political Reasons?
I am very reluctant to believe that a U.S. president would time defense spending for political purposes, but it is hard to explain the 18.1 percent jump in the third quarter in any other way. 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.
The increase in defense spending added 0.86 percentage points to GDP growth for the quarter. In other words, GDP would have fallen at a 1.2 percent annual rate in the absence of the leap in defense spending.
One of the reasons that I didn't think that President Bush (or any other president) would manipulate defense spending for political purposes is that I assumed that such an unusual jump would draw attention from the media. I was wrong. This peculiar leap in defense spending was almost completely ignored in the coverage of the GDP report.
--Dean Baker
COMMENTS (8)
I went 28+ years without ever hearing anyone use the word "goose" as a verb, and now I've read it on the web 2 days in a row.
Anyhow, very interesting, Dean. I read yesterday that GDP growth fell "less than expected," and this makes that less auspicious.
Posted by: Matt | October 31, 2008 9:19 AM
If what you said is true, that means the Administration is so capable and clairvoyant about the potential significant drop in GDP would have happened. The spending didn't simply just happened overnight--it's not like a company or a consumer who goes out and spends.
The DOD has be involved and don't they have the normal procurement and acquisition process involving approval, funds disbursed, etc?
Bottom line, timing or gooshing such huge purchase in gov't has to be planned well in advance to fall into a single quarter, right?
I think you raised some very good points though. I guess anything is possible but is it reasonable?
Posted by: James | October 31, 2008 11:03 AM
it could have been thought of as a stimulus (not exclusive of politics). martin feldstein just advocated defense spending as a stimulus. i like it because i enjoy the picture of replacing useful infrastructure with tanks. imagine the gratitude of new yorkers -- a pile of F-22s in central park, what else does it say, except, "good times ahead!"
Posted by: hapa | October 31, 2008 11:15 AM
Bush has politicized the rest of the government, why not the economic data?
Some political hacks mistakenly believe that people read or hear that the economy is bad and then they vote the bums out. Wrong. People feel the economy at a personal level- no raises, hiring freezes, layoffs, no jobs, relatives out of work, etc.
Posted by: bakho | October 31, 2008 11:50 AM
Bush is trying to "delay" the recession to put it on Obama's watch and not take the blame, just like with everything else. Absolute worst president in history.
Posted by: me | October 31, 2008 12:21 PM
if the money would have gone to public projects one could have called it money well spend, the military however can be termed a waste of money in every way. Money spend to destroy other stuff... hmmm.
Posted by: tjerk | October 31, 2008 12:39 PM
I assumed that such an unusual jump would draw attention from the media.
I like your stuff, Dean, but this line was naive given the history of the last 8 years.
Posted by: QrazyQat | October 31, 2008 2:54 PM
Of course George Bush would do anything, but what is the political gain to be had for boosting defense spending? More stability in Iraq, so McCain looks better?
Posted by: Douglas O'Keefe | October 31, 2008 8:41 PM