An estimated 1 in 4 jobs in San Diego County are tied to the military sector, and $32 billion in defense-related activities is linked to that area alone, more than the entire economic output of Panama.
So what happens if tens of billions of dollars in defense spending is suddenly yanked? Defense contractors and other employers are worrying aloud about the answer as Congress and President Barack Obama quarrel over tax increases and budget cuts and the country edges closer to the so-called fiscal cliff.
The bureaucratic term for this doomsday scenario is sequestration, and while many have expected a smaller military, more profound downsizing has a lot of people nervous in California and elsewhere.
“The damage is already starting to happen,” said Chad Moutray, chief economist for the National Association of Manufacturers. “Many of our members are already seeing a slowdown in their sales, hiring and investment.”
Deep spending reductions were proposed last year as a way to force lawmakers and the president to address the federal government’s outsized budget deficit. If Congress and the White House take no action by Jan. 2, $500 billion in Defense Department cuts will automatically kick in over the next 10 years, with $55 billion of it expected in the first year.
The deadline that now looms has become part of a larger debate about defense spending. Obama already was eyeing $487 billion in cuts over the coming decade, and even some Republicans who have traditionally shielded the military’s bloat now say the Pentagon is due for a diet.
How the economy will react isn’t clear.