Was The Election Bought With Taxpayer Dollars?
When I originally reported on the Q3 GDP report last year I made the following observation:
There was an anomaly though in the government spending component of the 3Q GDP. Of the .67% contribution to the 2.67% annualized economic growth rate - the entirety came from a massive surge in defense related spending. There are two issues with this: 1) in the previous three quarters defense spending was a drag on economic growth yet in the month just prior to the election defense spending has a massive $20.9 billion increase; and 2) manufacturers in the various regions should have seen increases in new orders and backlogs which hasn't been the case.
Originally, as I am not a "conspiracy theorist," I dismissed this anomalous surge in defense spending to the a rush to implement spending prior to the sequestration that was part of the 2011 Budget Control Act. However, if that was the case, defense spending should have continued to surge through the end of 2012 to buy as much "stuff" as possible before the budget control spending cuts kicked in. The chart below shows the quarterly change in defense spending as a percentage of GDP. The black line is the quarterly change in real GDP.
In Q4 defense spending plummeted by a whopping 42.4 billion dollars. This juxtaposes the assumption that if there was a need to beat an end of year sequestration threat - spending should have been on the rise.
If we look at the trend of GDP beginning in Q4 of 2011 it is decidedly negative with the bump occurring just prior to the election. That boost to economic growth was primarily driven by the surge in defense spending in that quarter.
This does make one wonder whether, or not, there was a motivation to increase defense spending in Q3 of 2012 for purposes other than strengthening the national defense? I leave that up to you to decide.