Accounting: US growth will (finally) pick up!

At the end of the post we read:

A little more than half of the total decline in government spending since the middle of 2010 is due to military cutbacks, some of which obviously has to do with the withdrawals of US forces from Iraq and Afghanistan. Since the start of 2012, more than all of the decline in government spending can be attributed to reduced defence expenditures. For better or worse, this austerity also seems to have come to an end.

So while real nondefence spending is still about 5 per cent below its peak, real defence spending is about 12.6 per cent below its peak. Some of that is welcome, since it can be explained by the end of wars and recovery from the trough of the recession, but some of it represents a self-inflicted wound. The good news is that an increase in the military budget might actually be something the politicians can agree on.

I would say: to get the economy really “booming” let´s start a new war!

Interesting to note in the “flagship chart” above that from 2010 to mid-2011 “austerity was on the rise, declining since then and now it´s finito. However, both during the periods of rising and declining “austerity” real output growth chugged along at a very stable 2.2% growth rate!

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I have a hard time figuring out why now, with “austerity” having ‘retired’, that would change!

About the Author

Marcus Nunes
João Marcus Marinho Nunes is a partner of Phynance Estratégias Quantitativas e Investimentos and a professor of Economics at Fundação Getúlio Vargas in São Paulo, Brazil. He also blogs here: http://thefaintofheart.wordpress.com/

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