Defense Efficiency Initiatives Could Have Huge Effect on Local Economy

By Jonathan Wilson

The nation's Defense Secretary, Robert Gates, wants his department to be more efficient and has ordered a 10 percent reduction each year for the next three years in funding for defense contractors.

It's a decision that could have huge ramifications for the Northern Virginia economy.

Jerry Gordon is the president of the Fairfax County Economic Development Authority. He says he's concerned about Secretary Gates' announcement, but he says scaling back on defense contracting is a hit Fairfax County can take.

"It won't devastate the economy; this isn't Pittsburgh in the 70's where they lost steel, and it isn't Boeing in the 70's when they left Seattle," he says. "The reason for that is that we have diversified the economy."

Stephen Fuller, director of the Center for Regional Analysis at George Mason University, isn't quite as confident that Fairfax or the rest of Northern Virginia has diversified enough.

He says Virginia received $35 billion in federal procurement dollars in 2008. That means a 10 percent cut in federal procurement, much of which comes from the Department of Defense, would amount to $3.5 billion. That's about how much Virginia's expected to grow in this first year of the recovery so to give this some order of magnitude, this would, in effect, erase the recovery next year.

Fuller says he's not sure Secretary Gates' idea of increasing shipbuilding efforts in Virginia would actually offset the impact of cuts in funding for contractors, but he says it's also unclear whether Gates can actually follow through with the cuts, since so much contracting work is essential.