Reminder: Where the Defense Dollars Are Spent

Top Ten defense spending locations in Virginia. Source: Office of Economic Adjustment

Just to remind people how heavily dependent Virginia is on defense spending… This graphic comes from the Defense Department’s Office of Economic Adjustment. The numbers include defense spending only, not spending by homeland security or intelligence agencies. (Hat tip: Steve Haner.)

Earlier this week I quoted Newt Gingrich as saying that the Pentagon bureaucracy is massively overstaffed and hinting that a priority of the Trump administration might be to whack that bureaucracy down to size. Along the same lines, the Wall Street Journal reports this morning that Trump is working with advisers to “restructure and pare back” the National Security Administration. The NSA headquarters is in Maryland, so I don’t know if that will have much impact on Virginia. But the larger point is that the president-elect holds few Washington arrangements sacred. If he’s willing to go after the NSA bureaucracy, he could well go after the Pentagon bureaucracy, the CIA bureaucracy and the Homeland Security bureaucracy.

Virginians need to pay close attention to these developments because, regardless of the wisdom of the bureaucracy busting, Virginia (and Maryland) will feel the impact more than the other 48 states.

This does not mean that the Northern Virginia economy is doomed, as one commenter to a previous post implied I meant. But a Trump administration assault on the federal defense/intelligence/homeland security bureaucracy potentially could amount to a Sequestration II for the Washington metropolitan area. Given the fact that NoVa now accounts for about 40% of Virginia’s gross economic output, when NoVa sneezes, Virginia’s General Fund budget catches a cold. And that matters to the Rest of Virginia.

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4 responses to “Reminder: Where the Defense Dollars Are Spent”

  1. Steve Haner Avatar
    Steve Haner

    This website can be a challenge. To download the full report you need to be on a secure connection but the individual page reports on each state are interesting and seem to work on the public site. Note that VA’s DoD spending is 52 percent for services, so you are right that a contraction there would hit the state’s economy. But there is also talk of a major expansion of the Navy, which could boost procurement from many manufacturers and could boost uniformed personnel in the state.

    I knew much of this before seeing this report, but I didn’t know that Virginia was the state most dependent on DoD spending – ranking #1 with 11.2 percent of the state GDP tied to that. What people need to remember is that despite the eagerness to build a more diverse economy, you don’t want to shrink the DoD portion in order to improve that ratio.

  2. Reed Fawell 3rd Avatar
    Reed Fawell 3rd

    Note the difference in defense spending between northern Virginia and Norfolk area. Hopefully, Trump and his team will reverse these allocations so our defense monies go to those people who fight our wars instead of to those people who squander and waste our defense dollars. I sense this reversal is where our new leaders are headed.

  3. LarrytheG Avatar

    What would be more informative would be to know how much of the NoVa economy is DOD versus the rest of the govt which I suspect is substantial.

    NoVa and the Washington Metro area is not where actual mission work is done. Ships are built in Newport News. Training is done at Fort Bragg and Pensacola.. what’s in Wash Metro is headquarters not only for DOD but most of the other Federal Agencies also.

    No matter how many ships the Navy has – they have the same number of HQ staff in Washington. The Pentagon does not expand and shrink according to how big DOD is.. it’s the same number of high level administrators.

    Same for other Fed Agencies. It don’t matter if we have 50 national parks or 350 national parks – there still is only one HQ.

    So I think it’s a misnomer to think Metro Wash economic fortunes are tied to how big or small DOD is.

    Hampton is another story… but I’d be curious to see real data instead of hearing conventional wisdom speculation.

  4. Peter Galuszka Avatar
    Peter Galuszka

    Trump has no military background (other than going to a private military school as a boy). Other than real estate, he has no international experience. He is supposed to be a deal-maker but his various financial misadventures (Atlantic City, Trump University and so on) raise serious doubts about his ability to manage.

    Here is a man who does not want the intelligence community to give him regular briefings. Now, he has all of this big plans (lacking in details) about how to reorganize the defense and intelligence communities. Why should anyone take him seriously? People like John McCain clearly are worried and if anyone knows defense it is McCain.

    How can he transfer resources from NoVa to Tidewater? It takes years to build ships. Sounds like BS. How can he rip up the F-35 fighter program? What does he have in its place?

    I also am very skeptical about his relationship with the Putin regime which has been a major turn away from democratic values that held promise for Russia in the 1980 and 1990s. Invading Ukraine and threatening the Baltics and Poland is menacing. So is placing Iskander medium range nuclear missiles in Kaliningrad.

    I do not see a renaissance. I fear a disastrous war brought on by arrogance and ignorance and miscalculation.

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