[Peace-discuss] "Cost of war" and the economy

[C. G. Estabrook]

	April 30, 2008
	Inventories and War Spending Keep Economy Growing in First Quarter
	By Dean Baker

GDP eked out a 0.6 percent gain for the second consecutive quarter as a jump in 
inventories and defense spending kept GDP in positive territory...

A 6.0 percent jump in defense spending drove a 4.6 percent rise in federal 
spending. Defense spending is erratic and the increase will likely be at least 
partly reversed in future quarters...

It seems likely that growth will turn negative in the second quarter and at 
least remain weak for the rest of the year. The inventory build-up of the 
current quarter is likely to be reversed and consumption growth is likely to 
slow further under the pressure of job loss, declining real wages and plunging 
home values. With investment and state and local spending also acting as a drag, 
GDP is likely to fall in the next two quarters.

Dean Baker is Co-Director of the Center for Economic and Policy Research in 
Washington, D.C.