Good for the Economy That We're Fighting a War...

Otherwise GDP contraction would have been even greater in the third quarter. Spending on national defense was the biggest positive contributor to the third quarter's economic numbers, which overall showed a decline of 0.3 percent.

Defense spending rose 18.1 percent from the previous quarter, the largest jump since the start of the second Iraq war in 2003, and the second largest since 1984. On the flip-side, residential fixed investment showed the sharpest decline, down 19.1 percent, which was greater than the 13.3 percent decline in the previous quarter, but smaller than a string of 20+ percent declines at the end of last year and into this year.

Coming a close second, and ending a 17-year positive streak, was consumer spending, which fell 3.1 percent in Q3 including a 14.1 percent drop in durable goods spending -- the biggest drop for that stat since 1987. (And I missed this: the drop in nondurables, at 6.4 percent, was the largest since 1950, HT: Jake.)

With the financial crisis and the presidential election, our wars have seemingly taken a back seat, but they're contribution to growth is the economy's lone bright spot.

ADDENDUM:

I should have noted this above, but I was looking at the most disaggregated components (Table 2) when saying "national defense was the biggest positive contributor" to Q3 GDP. At a more aggregated level, net exports and federal spending exhibited bigger contributions to Q3 GDP.

Comments

[thedozer:]

I can't wait to hear smarty and the gang weigh in on this one!

chew on this... growth is not ALWAYS good.

Why can't the US see this economy like leggo's... growing larger and wider is only good when you have adequate footing.

It's time to pour some concrete! And not like we did in the Depression per enacting public projects only in the name of 'growing jobs'

if it's not efficient and sensible, then folks should sit at home and figure out how to add something to this economy rather than participating in its demise

2008 Oct 30 10:58 AM

[alex s:]

defense spending up 18.1% over last quarter? that seems like an effort on the part of the republican government to bolster GDP and keep it at 0 growth or positive......failed attempt. Its not a "good thing" that the government is spending money. that's a short term attempt to mask the negative recessionary number probably fueled by election reasons. who is going to vote for Mccain when the incumbent party sat and watched the country fall into a recession? Consumer spending, way down, investment spending not growing, that's where you need to focus that's where growth will come from. not this BS gov spending on defense number. I bet the government spending number on defense contracts as sharply as it expanded this quarter. Why not? It will be a democratic gov against the war next quarter. Its a no lose situation for the republicans, pump money in defense now, if it works keeps gdp growth positive, a plus for mccain's chances, if not, then bleep it, let the dems deal with it later.

2008 Oct 30 12:57 PM

[Moon Kil Woong:]

Well defense spending was good for Germany, the US in WWI and WWII, however, that's because the US could afford spending to get their economy moving. With the current debt burden I hardly can say it is good that soon all the US $ will be in government bonds and 1/3 of it will be in foreign countries.

2008 Oct 30 11:06 PM

[OldNavySailor:]

War is never a "good": for the economy, for civilization or the future of mankind. War has always been perpetuated by arrogance, greed, oppression, corruption and malice towards mankind. War is destructive to a nation's wealth, its relationship to the rest of the world and to the psyche of its citizens.

The defense of the America people was never threatened by Iraq, yet our government has destroyed their country. I do not invest in companies that participate in the grandiosity of fascism and totalitarianism.

2008 Oct 31 01:57 PM

[henarl:]

Well, defense spending is certainly good for the military- industrial complex and the jobs that it supplies. However, military spending produces very little of use to the civilian population. Wouldn't it be better to convert those industries and their jobs to creating products of use to a peaceful society, such as developing alternative energy, upgrading our infrastructure, etc.?
And, wouldn't it be better to utilize some of the manpower wasted in the military in a more productive way?

2008 Oct 31 05:12 PM