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Saturday, November 01, 2008

Military Keynesianism?

Menzie Chinn is wondering why government spending on the military went up so much recently (even though overall GDP growth was a negative .3% government spending contributed positively to output growth by 1.15%, and defense spending's share of that growth was .86%):

More on Defense Spending, Econbrowser: In my last post on the 08Q3 GDP release, I noted the remarkable contribution of defense spending. Here is a little more detail on the growth rates of defense spending on goods and services on a NIPA basis.

Mc1

Figure 1: Defense spending (blue), defense consumption spending (red) and defense investment spending (green), in billions of Ch.00$, SAAR. NBER defined recession dates shaded gray. Source: BEA, GDP advance release of 30 October 2008, and NBER.

Mc2

Figure 2: Four quarter growth rates in defense spending (blue), defense consumption spending (red) and defense investment spending (green), in billions of Ch.00$, SAAR, calculated as four quarter log differences. NBER defined recession dates shaded gray. Source: BEA, GDP advance release of 30 October 2008, and NBER.

This last graph indicates that as of 2008Q3, total defense spending is rising (in real terms, on an annualized basis) by 7.5%; defense consumption spending is rising by 6.3% (this category includes wages for military and civilian personnel, intermediate goods including ammunition, fuel, supplies, etc.); and defense investment (including structures, aircraft, vehicles, ships, other equipment and software) by 15.5%. The 2008Q3 observation is 1.67 standard deviations above the mean y/y growth rate over the 1990-08 period.

Military Keynesianism? I'll let others speculate; I just think it's interesting.

    Posted by on Saturday, November 1, 2008 at 12:06 PM in Economics, Fiscal Policy, Politics | Permalink  TrackBack (0)  Comments (46)

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