Will defense gains offset budget cuts to science, technology in San Diego?
By CARL PRINE | The San Diego Union-Tribune (Tribune News Service) | Published: March 19, 2017
In a region largely shaped and driven for more than a century by federal spending on the military, President Donald Trump’s first budget proposal last week triggered cheers from defense hawks and cries from researchers, academic leaders and others concerned about funding cuts to San Diego County’s scientific, medical and high-tech industries.
Economists agree that Trump’s 2018 fiscal plan could buoy the region’s defense sector, which has lagged for three years after budget tightening designed to trim the federal deficit. But they’re unsure whether those gains would outpace what could be deep downsizing of federal programs that support non-defense technology, biomedical and environmental exploration in an area that has long tried to diversify its economy — yet still relies predominantly on the armed forces and a constellation of related companies.
“We’re not quite as boom or bust as we were before, but (the military-defense complex) is still a huge part of our economy,” said economist Kelly Cunningham with the National University System Institute for Policy Research.
“The one detail that the president is really planning on is a $54 billion increase in defense spending. That’s pretty key for San Diego. We still have the most military personnel based here in the nation and any increase there is going to help, as far as dollars flowing into San Diego.”
In 2016, the federal government inked $8 billion in contracts with San Diego County businesses — $14.9 billion less than in 2009. That was because of the “sequestration” legislation that Congress had passed in 2011 to cap most federal discretionary spending, especially for the military. The belt-tightening began to bite in 2013, triggering significant cuts to weapons procurement and maintenance projects across the region.
Even with the diminished spending, the county still brought in more than $23 billion in federal funding last year for wages, procurement projects and veterans’ benefits, according to an analysis overseen by Lynn Reaser, the chief economist at Point Loma Nazarene University’s Fermanian Business & Economic Institute.
Federal defense outlays last year directly generated one out of every five local jobs and — as the spending rippled through the region — triggered $21.4 billion in additional economic activity, Reaser’s team found.
Military and otherwise, the federal government is the single largest employer in greater San Diego.
Reaser predicted that the bulk of Trump’s proposed budget, if enacted, would help mend the military’s “readiness” problems created by nearly two decades of wars overseas and the sequestration cuts. That would initially mean more spending on equipment, parts, training, infrastructure improvements and extra troops to ease Navy and Marine Corps deployments overseas.
Trump also wants the U.S. Department of Veterans Affairs to get a $4.4 billion boost, which could trickle down to the roughly 230,000 former service members who live in the county, Cunningham and Reaser said.
Trump’s budget blueprint may be telegraphing future splurging on Navy warships, aircraft and drones, which Reaser said could help local firms and workers in later years, too.
About 10,000 people toil in local shipyards, notably General Dynamics-NASSCO and BAE Systems. Meanwhile, San Diego’s Northrop Grumman and General Atomics are leading makers of unmanned aircraft.
Christopher Thornberg, a founding partner of Los Angeles-based Beacon Economics, affirms the military’s leading role in San Diego County but wants residents to pay more attention to what he sees as Trump’s assault on most non-defense agencies.
“If you’re looking at the defense spending and going ‘rah-rah Trump’ when you’re in San Diego, you’re really missing the point,” he said.
Thornberg pointed to $5.8 billion in proposed cuts to the National Institutes of Health, America’s largest underwriter of biomedical research. The president also envisions hefty reductions for agencies that underwrite climate change science, some types of medical training and international relations — all things with a notable footprint in this region.
In particular, San Diego County’s life-science and medical industries together employ tens of thousands of people. More than 20,000 work on the Torrey Pines Mesa in La Jolla alone. Dominated by UC San Diego, the mesa annually pulls in about $400 million in NIH funding.
At any one time, the university is conducting more than 100 drug trials. It frequently collaborates with nearby private biomedical centers such as the Salk Institute for Biological Studies and The Scripps Research Institute.
The mesa also boasts research units from pharmaceutical giants, including GSK, Pfizer and Johnson & Johnson.
In addition, Thornberg said Trump’s budget proposal shouldn’t be evaluated without scrutinizing his foreign policies.
Trump continues to threaten trade wars, tougher immigration restrictions and increased taxes on commercial shipments from Mexico, actions that Thornberg said could harm the San Diego and Tijuana economies.
Research in 2014 led by UC San Diego said the “CaliBaja region” — Baja California and San Diego and Imperial counties — generated $200 billion in annual economic activity and accounted for more than 70,000 northbound commercial and passenger crossings daily.
Economists have said it takes a sustained, multi-year pattern of major shifts in federal spending to make a lasting impact on a metropolitan region, even in a place like San Diego that’s heavily reliant on one economic sector.
How did San Diego become such a defense hub?
It started in 1885, thanks to then-rival Los Angeles and the Atchison, Topeka and Santa Fe Railroad.
“When they built the transcontinental railroad, it ended up going through L.A.,” said Cunningham at National University. “L.A. and Long Beach developed a shipping industry because that’s where you came to unload or load up the railroads. San Diego missed on all that. They tried, but partly the geography — the mountains — made it difficult. After they missed out, the forefathers of San Diego said, ‘Well, what can we do?’”
Around the same time, a former bellhop moved from Minnesota and eventually came to San Diego. William Kettner took up the insurance and real estate trades, then ran for Congress in 1912. The pro-business Democrat was championed by Republicans who coined the campaign slogan, “Why not Kettner?” It was part of a bipartisan bid to remake a San Diego still agog over the visit of America’s Great White Fleet four years earlier.
“When you look at it historically, that was a strategic decision San Diego’s leaders made to depend on the economy of defense spending,” Cunningham said.
Although he was a freshman lawmaker, Kettner outmaneuvered the San Francisco delegation to win a $249,000 appropriation from Congress to dredge San Diego’s harbor, making it navigable for large ships. (The Great White Fleet’s warships hadn’t been able to enter San Diego Bay because it was too shallow. They moored off Coronado, which wasn’t lost on Kettner, who served as chair of the welcoming committee.)
Kettner also secured funding to finish the Army’s coastal artillery defenses at Fort Rosecrans and the Navy’s Point Loma coaling station — the first American stop for vessels steaming north from the new Panama Canal.
He curried favor with fellow Democrats like President Woodrow Wilson and a rising assistant secretary of the Navy, Franklin D. Roosevelt, who looked favorably on San Diego’s warm-water port.
Back home, business leaders sweetened Kettner’s Capitol Hill deals by donating land and buildings for the Navy to use for training. They also piggybacked on the naval aviation experiments of flight pioneer Glenn Curtiss.
Federal defense spending in San Diego County spiked during World War I and continued as the Navy built a Pacific fleet. It surged again in World War II under Roosevelt, now the nation’s president, and rose yet again when troops went off to fight in Korea, Vietnam, Afghanistan and Iraq, according to Cunningham’s research.
©2017 The San Diego Union-Tribune
Visit The San Diego Union-Tribune at www.sandiegouniontribune.com
Distributed by Tribune Content Agency, LLC.