November 04, 2011

Defense industry - and its jobs - vulnerable

The defense industry is in the budget-cutting crosshairs.

Congress has already approved defense cuts of $450 billion up to $465 billion over the next decade. An additional $500 billion could follow if the congressional supercommittee created in August were to fail to reach a deal by Nov. 23 on $1.2 trillion in overall spending cuts, over a stretch of 10 years.

Whatever the cuts, the ripple effect through the nation's economy, including Pennsylvania and New Jersey, will be painful.

In the two states, the combined cuts could lead to the elimination of 21,000 direct defense-industry jobs and thousands more in the broader economy, according to a professor at George Mason University in Virginia.

Job-loss estimates were not available for just the Philadelphia region, where 1,583 headquarters companies or local operations of firms based elsewhere were paid $6.4 billion by the Department of Defense in fiscal 2011, according to an Inquirer analysis of federal spending data by the zip code where the work is performed.

While the biggest local recipients were well-known defense contractors - such as Lockheed Martin Corp., Boeing Co., and L-3 Communications Holdings Inc. - the total also includes $1 billion in military sales by the pharmaceutical distributor AmerisourceBergen Corp. in Chesterbrook and $46 million by Campbell Soup Co. in Camden.

Moreover, many smaller companies also do significant business with the armed forces, supplying robots, valves, dishwashing machines, and myriad software and engineering services. Thirty-eight firms received from $10 million to $100 million during the year ended Sept. 30.

What is clear is that defense cuts anywhere will face a fight.

Top leaders from the Army, Navy, Marine Corps, and Air Force warned a House panel Wednesday that deeper cuts would severely weaken the U.S. military, making it difficult to maintain a global presence, especially in the Middle East and the Asia-Pacific.

Operations in the Philadelphia region have roles in some defense programs that analysts consider to be at risk.

"Any military investment that is expensive is potentially in danger of being cut," with expensive being a few billion dollars a year, said Travis Sharp, a fellow at the Center for New American Security in Washington.

Nationally, Lockheed Martin's F-35 Joint Strike Fighter jet, the country's most expensive defense program, has long been on the chopping block for many lawmakers.