Question

[JBeukema]

Deficit spending on bombs increases both GDP (by making stuff) and the deficit (by going into the red to do so), right?

So wouldn't any significant degree of federal deficit spending that results in anything being made (eg: bombs for the Long War) (directly by the government or indirectly via contracted manufacturers) render Deficit as a Percentage of GDP a rather unreliable and fickle measure?

 

[Toro]

No

 

[JBeukema]

Can you clarify, Toro?

If they're spending in the red, is that not deficit spending by definition?

If they're buying things that need to be made, doesn't that increase production- and therefore GDP necessarily?

Shouldn't this be able to skew the measurement in either way, depending on whether they buying 'no-bid; deals that pay more than the goods are worth or buying in bulk and paying less than what would otherwise be market value of the goods in question?

 

[loosecannon]

I can answer this question.

GDP simply is what it is. Most people who rely upon GDP data know what it means and understand it's limitations.

If you think about it what you are really asking is whether or not GDP should be used as a barometer of the general economy, esp as a policy tool in the hands of folks who are not so keen to the limitations of the indice.

Again I think this answer is definitely no.