Donald W. Reynolds National Center For Business Journalism

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How will state, local economies adjust to Pentagon budget

February 25, 2014

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The Department of Defense aims to scrap A-10 to keep F-35 alive in new budget.

The announcement Monday that Defense Secretary Chuck Hagel has laid out a five-year plan to drastically shrink miliitary spending likely has a lot of businesses, workers and consumers alarmed.

While Hagel’s outline is merely, as one news outlet put it, the opening salvo in a budget battle with Congress, the plan to shrink the U.S. Army to pre-WWII levels and make other cuts to bases and weapons programs is a good launchpad for a look at your region’s dependence on military and defense spending.

According to this NBCNews.com article, the biggests “losers” should the Pentagon budget be enacted would be the communities and companies that rely on military bases.  Not only will some (unknown) bases close, but personnel at those that stay open might have reduced spending power following curbed pay raiser, lower subsidies to military commissaries, lower housing allowances and other forms of spending that can ripple through an area’s economy.

And check out this Bloomberg Government report from late 2011, “Impact of Defense Spending: A state-by-state analysis.”  It’s packed with information you can use for this story and as reference for future reporting; each state is represented in map form with major spending areas highlight, lists of top contractors and a variety of factoids that will help you illustrate your area’s reliance on Pentagon spending.

If your area is one that already has lost a military base or a big defense contract, now might be time to re-asssess the aftereffects.  And it’s not necessarily all bad news; this abstract of a RAND Corp. report, “Military base closures: The impact on California communities,” took a look at the closure of three bases in that state and concluded that effects, while hard to predict, are not necessarily dire.  On the other hand, the economy has changed quite a bit in the 20 years since those bases were shuttered; in the present climate of few manufacturing jobs, already-high unemployment and other challenges, how might outcomes be different?  Check with urban planners, economists, real estate experts.  This Friends Committee on National Legislation report, “Life after Pentagon Dependence,” raises some interesting issues too, and might help you prep questions for interviews in your region.  And here are some Pew reports, generated during the sequester, about DOD spending as percentage of state GDP and other metrics.

It’s interesting considering that we usually hear how poorly military families fare — here’s a just-out report that says food stamp use by military households is at peak levels — to read that overall military compensation compares favorably with civilian pay and benefits.  See this article at Military.com, which is based on a routine Department of Defense compensation report; it says “As private sector salaries flattened over the last decade, military pay climbed steadily, enough so that by 2009 pay and allowances for enlisted members exceeded the pay of 90 percent of private sector workers of similar age and education level.”   That tells me that a region facing base closures or other cuts stands to lose some good-paying jobs and the spending power that goes with them; here’s a link to the DOD reports.

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