Dean Baker is co-director of the Center for Economic and Policy Research in Washington, DC.
Did Bush manipulate the timing of defense spending to help McCain?
That seems a reasonable question in light of the latest data from the Census Bureau. The October data on durable goods orders showed a drop in orders for defense capital goods of 31 percent from September levels. This plunge followed a 22.2 percent jump in orders in September.
The category of items that fits the bill of defense capital goods includes small arms, communication equipment, aircraft, and parts. These are areas in which there is considerable flexibility over the timing.
Orders that were placed in the months just before the election were likely to spur production, increasing growth and employment for the period just prior to the vote. In fact, shipments of defense capital goods rose 1.2 percent in September and stayed near this level in October (they fell 0.1 percent for the month). Shipments for the two months together were 17.6 percent above their year ago levels.
Defense spending overall (which includes defense capital goods, as well as military salaries and other defense related expenditures) rose at an 18.0 percent annual rate in the third quarter. This is sharpest rise in defense spending in almost a quarter century, excluding the quarter in which the Iraq War was fought.
Defense spending added 0.9 percentage points to the growth rate for the quarter. As a result, the economy only shrank by 0.5 percent in the third quarter, compared with a 1.4 percent rate of decline in the absence of the boost to defense spending.
While defense spending is always erratic, it is difficult to believe that this timing is coincidence. On its face, a quarter in which the military was de-surging in Iraq would not be a time when we should expect to see a big jump in defense spending.
Of course, there is another possible--potentially more benign--interpretation. If the Republicans were concerned that that they would lose the election, then this is their last opportunity to steer contracts to their friends. So, the jump in spending may have just been an innocent effort to give pork to politically connected contractors, rather than an effort to boost the economy to help Senator McCain.
This is a mystery that may never be solved.
--Dean Baker