Worrying About the Future of the Defense Budget

We had written earlier about how the assumption is that with the new administration there would be reductions in defense spending. Now there are starting to be a spate of stories of localities looking at the effect of such cuts on their economy. Here is an article at Columbian.com discussing the fact that in the last 8 years defense dollars flowing to the area have increased dramatically due to a subsidiary of Boeing.

Business leaders there feel that if Obama spends money on health care and infrastructure that would make up for declines in other spending. In the Hartford Business Journal Online the feeling is that while there may be a downturn Connecticut is shielded by the fact that the large weapon systems supported in the state have long-term contracts. These include Sikorsky helicopter production and Pratt & Whitney’s jet engines for the F-35. They do acknowledge that such large systems could be cut down the road.

The US Defense Budget has grown very large over the last eight years. Most of that money is spent in the US and supports high paying, quality manufacturing and service jobs. Localities realize this and work to have defense dollars spent there. Reduction in this spending will have ripple effects on the local economy and that is what people are worried about. In the Seventies and Nineties there were severe, local recessions in some cities due to the cuts in spending. Governments are worried about a repeat of this in the next several years.