Military spending and the US Southeastern economy

["Julio Huato" <juliohuato@xxxxxxxxxxx>]

The latest issue of EconSouth, a quarterly publication by the Federal
Reserve Bank of Atlanta, has an article that tries to assess the impact of
the recent increase in military spending on the economy of the Southeast
(Alabama, Florida, Georgia, Louisiana, Mississippi, and Tennessee).  These
are some excerpts:

> Pockets of new jobs and higher salaries for the region?s military personnel
> are good news for the Southeast, especially in states that have experienced
> high employment losses during the past few years. However, this timely
> stimulus will not be sufficient by itself to spark an overall economic
> rebound in the region.

> The Southeast, which claimed about 16 percent of the nation?s direct
> expenditures for defense in 2002, has historically relied on military
> spending as an economic spur. In 1996 the Southeast was the third-largest
> regional recipient of defense contracts, behind only the Western and
> Mid-Atlantic states.

> Although Louisiana, Mississippi, Alabama and Tennessee receive considerably
> fewer defense dollars than Florida and Georgia [well, of course, but per
> capita?], military spending is nonetheless an important factor in these
> states? economies.

> Despite projected increases in military production in 2003, commercial
> production will continue to drop. Aviation industry analysts also project a
> decline for exports, which accounted for about $57 billion in 2002.
> Industry officials foresee a 6.8 percent downturn in total sales in 2003 ?
> twice as steep as 2002?s losses of 3.2 percent ? despite welcome infusions
> of military demand.

> Defense spending has sparked rejuvenation, if not recovery, in the ailing
> technology sector, which is showing signs of life for the first time since
> the technology bubble burst in late 2000. The demand for technological
> sophistication in weaponry and battle strategy has given rise to a new
> round of research and development, providing hefty grants for
> university-based research groups and independent firms.

> Defense industry analysts seem to agree that while military spending is
> helping sagging economies throughout the nation, it will not create a
> sustained rebound without considerable improvement in the commercial
> sector. [...] According to U.S. Department of Defense projections, military
> spending in most categories is slated to peak in 2005 and plateau through
> 2007, ensuring a few years of modest but reliable growth in defense
> contracts.

Full article:

http://www.frbatlanta.org/invoke.cfm?objectid=698C8941-ABD2-45AB-B27B352BA9735902&method=display

Julio

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