Analysts: Defense spending dip due to budget standoff

A decline in defense spending during the first quarter of the year is directly linked to lawmakers’ inability to pass a 2011 Pentagon spending measure until April, defense analysts said.

Defense spending dropped by 11.7 percent, even without major declines in annual Pentagon spending and while the U.S. military is involved in three wars.

{mosads}“This is mostly because of the continuing resolutions slowing things down,” said Todd Harrison of the Center for Strategic and Budgetary Assessments.

The Commerce Department on Thursday said gross domestic product increased at a 1.8 percent rate in the first three months of 2011. That is down from a 3.1 percent pace in the last quarter of last year. 

The main causes were higher food and gas prices, the department said.

In a Wednesday news conference Federal Reserve Chairman Ben Bernanke added lower defense spending, weaker exports and weather issues as other factors for the slow growth.

Overall, government spending declined by nearly 8 percent. 

The figures cited by Bernanke “show that the Defense Department waited as long as possible” to spend funds “as it managed its cash flow,” Harrison said.

Congress passed a number of continuing resolutions between October 2010 and last month, when it finally approved a full 2011 Pentagon spending measure.

Defense officials warned Congress for months that without a full 2011 appropriations bill of at least $540 billion, they would be forced to take desperate measures. 

Those steps included avoiding awarding contracts for work on major weapons programs.

For instance, Air Force officials were only able to buy half of the 48 MQ-9 Predator unmanned aircraft from General Atomics that were needed for Afghanistan.

“The Pentagon was unable to sign contracts and commit funds due to the congressional stalemate on 2011 spending levels, and that had a depressing effect on economic activity,” said Loren Thompson of the Lexington Institute. “This is one of the many ways in which partisan bickering over federal spending has a negative ripple effect across the entire economy.”

The decline likely is merely a hiccup, Harrison said. 

He expects “higher than normal” defense spending in the second half of the year as Pentagon officials ramp up purchases they were putting off until the budget situation cleared up.