Boosting the economy, apparently:
Got your attention, didn't it? But defense isn't nearly as large a piece of GDP as, say, personal consumption, so the actual effect on growth wasn't nearly as dramatic as the chart suggests.
Still, according to the Commerce Department, the war-related surge in the Pentagon's budget did contribute almost 1.7 percentage points to economic growth in the second quarter -- about 71% of the total increase. Without it, GDP would have risen an anaemic 0.7%, which wouldn't be a very good talking point for the administration's economic brain trust as it wends its way through the Wisconsin Dells.
The problem, however, is that the growth effect is transitory -- a one off, as the British say. Even if defense spending stays at its current elevated levels, it won't contribute anything to GDP expansion next quarter, or the quarter after, which is really when Shrub will need some of those "results" he was talking about the other day if he wants to show even a smidgeon of employment growth in his first term in office.
To continue pumping up GDP, the war machine will need to be fed steadily more money as time goes by. But the congressional minders of the purse are already getting antsy about the ever-rising pricetag on our occupation of Iraq. So flushing more cash down that particular rat hole could become a real political challenge.
What the administration's economic program really needs, then, is another war -- the more expensive and protracted, the better ...
U.S. Arms Diplomat Denounces North Korean Leader
Today's tough talk "could provide just another justification for North Korea to drag its feet on these supposed talks in September," said Victor D. Cha, a Georgetown University Korea expert, who is visiting here. On the Bush Administration side, Mr. Cha added, today's stark descriptions of North Korea "build the prerequisite components for the argument that the only place you can go is regime change."
Well, maybe not that expensive and protracted. The destruction of most of downtown Seoul -- and possibly Tokyo as well, if North Korea really does have its nuclear shit together -- wouldn't exactly be a tonic for business confidence. Even these guys aren't that stupid and reckless.
But how about a nice foreign policy crisis that stops well short of war, but which requires the Pentagon to spend a lot of emergency money in a hurry on the Korean peninsula? Could that do the economic trick?
I know. I know. I'm still hanging off the conspiratorial edge here -- just a few short hops from the place where the black helicopters rendezvous with the gunmen from the Grassy Knoll, and they all go out to lunch with Elvis.
So let's just write it off as an intereresting case study in synchronicity.
For now.
Update 7/31 9:12 PM ET: The non-economic motives behind Josh Bolton's little diatribe this afternoon are becoming clearer:
U.S. says N. Korea ready for talks
North Korea appears ready to accept President Bush’s proposal for six-party talks to resolve growing concerns about its nuclear weapons, the State Department said Thursday.State Department spokesman Richard Boucher told reporters that an initial round of three-way talks involving the United States, North Korea and China, held in Beijing in April, apparently would be expanded to include South Korea, Japan and Russia.
So it would seem Bolton -- the neocons' man in Foggy Bottom -- was trying to splash a little acid on the proposed talks before the North Koreans could get around to saying yes. Which must have prompted Colin Powell to send his boy Boucher out to grab the spotlight back.
Bureaucratic wars can certainly be brutal, but they don't add much to GDP -- unless they trigger a real one, that is.
I really have a hard time imagining us going to war with Korea, though. Among other things, despite the nebulous possibility that they might have nukes that could reach American cities (which I give more credence than the possibility that Iraq had any significant weapons of any kind that could be launched at any country not adjacent to it or otherwise very close), they also have about 1.1 million soldiers in a standing army. Now, I'm not sure how many of those (if any) are reserves, but even when you count our reserves, we don't even break a million (if I recall correctly). Never mind the fact that we don't even have enough active troops to deploy to Liberia at the moment. Bear in mind that we lost over 30,000 men in Korea (about as many as we have stationed there now), and I think it's pretty clear that smart leaders (though we seem to be running short on those) wouldn't touch it militarily and would actually deal with it on a real diplomatic level (instead of steadfastly ignoring it on what, some have speculated, seems to be moral grounds).
Of course, none of that really makes any difference if a) North Korea gives us the jump and blows away Anchorage without warning (highly unlikely in my mind) or b) Bush & co. stop caring and rush in headlong where we left off 50 years ago.
If the 'war stuff' brings 1.7% growth to the economy then the real growth is 0.7%, right?
And that 1.7% doesn't build a single school, hospital or fire station. No wonder there are no good jobs around except for that opening at the White House for a fact-checker!
If this is supposed to be good economic news...
Well, nevermind... Hey, I supported the 'sanctity of marriage' at yesterday's Spin Conference.
.
Billmon,
Where's the chart from?
Don't forget the possibility that the Commerce Department is simply pulling an Enron and cooking the books. How much pressure do you think they are under to project nicely for the chief?
Paul
Mr. Cud-throw really complaining here about the 'lack of victory' in the 'war on terror'.
I guess Palestine must be invaded next if they don't dismantle their militias in the face of the Israeli settlements. Why the Palestinians are building more homemade bottle-rockets while the Apaches are grounded! Why those poor Israelis with their US made tanks, APCs and bulldozers!
That will boost the stock market 2000 points...
About one half point for every poor American kid maimed in the glorious war on terror so far, I estimate.
Gee, sorry, Mr. Cud-throw, America is running out of kids to sacrifice to Deathmouth right now. And we are just a little depressed about it.
Sorry... You will have to figure out another way to get your blood-money for being a priest of Deathmouth today.
Perhaps a trip to Iraq as a mercenary would suit a fine mercenary personality such as Mr. Cud-throw. Or maybe, the little bald-headed guy that sits with him could be used as 'flypaper'.
I might be separated from the admission price to T3 for a chance to the first episode of Cud-throw goes to war! Think of what that would do for the economy.
Assclowns are everywhere!
.
We're all (war) Keynesians now!
I expect there will be another big surge soon, as the Pentagon and the defense contractors rush to get as many big program starts in place as they can, before the general-election inflection point in late '04. Much easier to kill a program before the assembly line is open.
As I recall, Bell-Boeing are actually running the production line on the V-22 Osprey before the final flight testing and re-engineering are even complete! The finished flight articles are being expensively hangared, and will have engineering fixes slipstreamed in at a future date -- at impressive cost, I'm sure. Hey, build as many as possible while the political wind is favorable...
What in their record would lead you to believe that these people are not that stupid? I think they're exactly that stupid. Well, not stupid - I guess I mean venal. But if they really wanted another war, why wouldn't they jump in and rebuild Liberia? That would be good for billions more a month and not as dangerous. Oh, right - that's in Africa, where they have no interest in building democratic paradises. So I guess Iran should watch out.
Again, biden getting great press taking on Wolfie, Gore rumors Bush falling in the polls.
Biden is running.
So is Clarke.
Note that I didn't say that The Sinister Cheney/Rumsfeld/Wolfowitz Keiretsu wasn't that stupid. I'm just saying I have a hard time believing that we would actually go to war with Korea... among other things, according to our fine intelligence folk, the DPRK has missiles (nuclear or otherwise) that have enough range to hit America (though given the whole Iraq/WMD debacle, I'd take that claim with a grain of salt, or an entire slat lick if possible). That's not the sort of thing that the intelligence community would let them make angry (not that they've shown much ability to stop our folks up top in the past).
Billmon,
Watch the bond market collapse that is currently in progress. As one hedge fund manager said, this is 'spooky', not normal, and almost as if confidence in US government finances is gone.
That GDP growth is borrowed.
Where's the chart from?
I put it together based on today's GDP release from the Commerce Department.
Why is this conspiratorial? The war in Vietnam was great for the defense contractors, they made tons of money. Why is it ridiculous to think that Bush would send US troops to be cannon fodder just to make his business pals some bucks? That's exactly what LBJ and Nixon did in Vietnam. And Papa Bush made lots of deals with Iraq to make some cash.
Watch that consumer segment too! Increased consumer spending is unsustainable if not backed by increased disposable income.
We can also look for a bump in consumer spending in this, the third quarter, from the child tax credit checks. Another one-off, but it'll look good for a while.
Don't be so sure that people are gonna spend that rebate-- mine is already earmarked for debt relief.
War, What is it Good For? Boosting the economy, apparently:
Yeah, like cannibalism would fix the obesity problem.
The difference here is who's spending the money. Trickle-downers would have us believe that huge defense contract spending in the US will mean an increase in disposable incomes, but there's nothing in this situation to indicate that as yet.
I'm curious, though: what happens when huge numbers of soldiers come back to the US and start spending their past year's worth of paychecks? Like in a port town when sailors get shore leave, won't there be a big boom cycle?
L
"Don't be so sure that people are gonna spend that rebate-- mine is already earmarked for debt relief."
Jeff, that's so Ricardian of you . . .
RonK,
I wonder about the increased consumer spending, too, in light of the fact predictions say most people won't be getting much of a raise this year. For my family this isn't so bad. We pay off our debt from past mistakes at the end of the year, and we do pretty well.
But thinking back to when I was making $16K as a reporter and hoping for OT (which is going away), I can't imagine it's going to be a great new year for your average worker, and they may be holding back on spending this December after they see what their increases will be.
Luis, I do not think that there will be a large or even a particularly discernable bump in the GDP for the soldiers who are coming back from Iraq when they spend a year's worth of paychecks for a couple of reasons. First, the majority of the US military is married, and this is especially true for the middle to senior NCOs and the officer corps (ie the people who make middle class money in the military). So this means that the vast majority of the pay that has been earned by the soldiers in the Centcom AOR has already been spent on the kid's braces, the mortage for the house and the minivan payments. Secondly, there are what, approximately 150K uniformed personal deployed overseas, and that number is assumed to be constant for the next year, so as one soldier comes back, one soldier goes over, so it will be a national wash. There will be localized effects but on a national scale, I would imagine that there will be nothing too noticable.
Fester
Fester: Sounds like you're right. I'm from a small country, and a port city of 300,000. It's easy to overestimate such things. I remember a French naval visit; nine hundred 22-year-old French sailors swamping the city for a weekend felt like a foreign invasion.
But, on a national scale, it probably ain't no thing.
L
Halliburton, the second biggest oilfield service company in the world, on Thursday said work in Iraq had boosted revenue as it swung from a loss to record second-quarter net income of $26m , or 6 cents a share, compared with the year-earlier period.
The Houston-based company credited the quarter's 11 per cent rise in revenue, to $3.6bn largely to increased activity in its Engineering and Construction Group (ECG) projects, including government services work in the Middle East.
Billmon read this bit of claptrap! "Taking Back the Market — By Force" by Larry Kudlow. It kind of puts whole the neo-con/war/economy thing in perspective!!!