Military news mixed for economy

Military installations and defense contractors are taking the brunt of the automatic budgets cuts mandated by sequestration. Why should we care?

Washington has major bases and military suppliers such as Boeing. They contribute more than $13 billion to our economy, about 4 percent of total gross domestic product. A July 2012 study by George Mason University projected sequestration could cost our state 41,000 military-related jobs.

According to Defense News, sequestration will cut $15.8 billion from the Pentagon’s 2013 budget and another $37 billion in cuts to defense contractors, like Boeing.

While Boeing’s major focus in Washington state is commercial aircraft production, the company is one of the world’s largest manufacturers of military aircraft with $33 billion in sales and 59,000 employees worldwide. That section of Boeing’s business is under pressure. The Navy has already announced an $18 million cut to its $1.3 billion program to buy 18 V-22 Osprey tilt-rotor aircraft from Boeing and Bell Helicopter.

Even though this particular program is not located in our state, cuts to Boeing’s military contracts will compel the company to redouble its efforts to economize — including scrutinizing the operating and regulatory costs that color decisions on where to operate or expand both its commercial and military lines.

Fortunately, one of Boeing’s major military contracts in Washington escaped the sequestration budget ax so far. The company’s $35 billion contract to produce 179 KC-46A aerial refueling tankers in Everett over the next 14 years has not been affected.

Unfortunately, Spokane’s Fairchild Air Force Base lost its bid to host the first 36 K-46A refueling tankers, a decision Gov. Jay Inslee called “extremely unfortunate.”

Reducing our military presence in the Mideast will directly impact jobs in Puget Sound. Joint Base Lewis-McChord will lose about 4,500 active-duty soldiers over the next few years. On the plus side, Lewis-McChord will continue its role as the Army’s West Coast force projection base.

Reductions in Washington’s military presence create a ripple effect throughout our economy.

One positive note, Pentagon officials have indicated that as the U.S. withdraws from Iraq and Afghanistan, it may shift more of its resources to the West Coast.

The state is also shifting its bureaucratic focus. Acting on a Gov. Christine Gregoire administration study recommendation, Inslee’s new budget creates the position of director of military affairs, a $300,000 allocation designed to help the governor’s office on military issues. Unfortunately, coordination alone is not enough.

Keeping military bases and contractors really is no different than keeping other employers. It largely depends on costs to operate, the desire to keep them here, and setting regulations that are reasonable and achievable.

Don C. Brunell is the president of the Association of Washington Business. For more, log onto www.awb.org.

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