Military Spending: Can It Continue to Drive San Diego’s Economy?

By Dr. Lynn Reaser

At least for the near-term, the military will remain a powerful driver of San Diego’s economy.  Because of the nation’s strategic need to focus more on Asia, the Navy will continue to expand its operations here.  By 2013, the Navy will bring in seven additional ships and twenty-five more helicopters.  Including further growth of the Naval Medical Center in San Diego, this will mean the planned addition of more than 2,500 Navy personnel during the next three years. 

The Marine Corps will also add more than 5,000 men and women through 2013 in its “Grow the Force” initiative.  Although this strength level will ultimately be scaled back when the U.S. exits Afghanistan, that could be a number of years away.  The Navy’s additions in personnel levels will be long-term in acknowledgement of the possible threats from China and other nations in Asia.

With respect to various contractors, military construction spending will reach an all-time high in 2011, with significant work continuing near-term.  New orders and repair activity will retain the workforce in shipbuilding during the next two to three years.  Defense cuts could cause a change in the mix, but technology contractors should see further sizeable business.  The new focus on unmanned vehicles will also benefit San Diego firms.

The defense budget will see substantial cuts over the next decade as the U.S. is forced to deal with its deficit and debt problems.  However, San Diego is likely to fare better than most other areas with a significant military presence and could benefit from further consolidation.  Meanwhile, for the immediate future, the prospects are for more growth from the military sector as opposed to cutbacks in the region.


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