Saturday, May 9, 2009

The Defense Welfare State

Like in that Starship Troopers movie, service guarantees the Defense Welfare State.

The concept of the welfare state is foreign in the use, and the term is a pejorative. Since Daytonlogy has a social-democratic metapolitcs, the welfare state is, at this blog, a positive. A way of providing social insurance against the vagaries of the economy.
In our area defense spending provides both social insurance to military, civilians, and veterans, (via Wright-Patterson AFB and the Veterans Administration complex on Gettysburg Avenue), but is signifigant enough to provide a "floor" to the local economy, mitigating disruptions caused by the business cycle and the decline in manufacturing.

The Consolidated Federal Funds Report shows defense related spending for 2007 (and past years to 1993) as around 26% of spending. But it fails to account for civilian retirement, veterans benefits, and and other smaller programs. Adding these, called here "Defense +", one comes up with 33% of all Federal spending in the metropolitan area.

Drilling down into that 33%, one can see procurements account for a full 40% of defense spending. This includes procuring services from the R&D and IT contractors out on I-675 in Greene County as well as the more mundane things like construction contracts and supplies. Another 33% is for military and civilian payroll.

In raw numbers, for 2007, there was $3B in defense spending in the metro area.

The following is not adjusted for inflation, but one can see some patterns, with more growth during the Bush years due, perhaps, to the post 9-11 war on terror (peaking at $3.2B), and stagnation and decline in spending during the Clinton era.

Opening up the "other category" are two programs that dont fit well in the other broad groups. Impact Aid is aid to local school districts because they have to teach the additional students from military families (the impact of having a military installation in or near a school district).

AVFEA is apparently an education program for military members.

Defense procurement probably has a great indirect, difficult-to-measure impact on the area, as the economic impact is the purchase of goods and services, showing up in the economy as wages and salaries for the staff of defense contractors of various sorts, as well as purchase of supplies and equipment by these contractors. Again one can see the plateau in the Clinton era, and a jump in the Bush years.
There are two programs that appear in the funds report for research, here aggregated into a R&D grants category. Presumably these are going to contractors or universities. One can note a big jump in this category after Mike Turner entered Congress. Perhaps one is seeing some earmark activity here? In any case it's a noticeable jump.

A closer look at the payroll line. During the 1990s the Defense Electronic Supply Center (DESC)(AKA Gentile Air Force Station) was closed via BRAC. This, along with Clinton-era cuts, contributed to a noticeable dip in payroll, enough to offset the masking effects of cost-of-living (COLA) adjustments for the remainder of the workforce.

Then a consistent ramp-up during the Bush era, probably showing the effects of inflation and COLAs as the Federal workforce in the metro area was not increasing during this time.

Fortunately the cuts in the 1990s happened during "good times" of relatively high employment in the metro area.

Since funds report provides this annual payroll number, we can compare it with other economic sectors in the Dayton region, using the County Business Patterns data for the Dayton MSA. The most recent year for County Business Patterns is 2006, so lets use that year.

The civilian + military payroll shown here in blue, next to other categories (including non-defense payroll).

Manufacturing is contributes the most payroll, followed by health care and social services. Then comes the Professional, Scientific, and Technical (or PS&T) category. The defense payroll is the fourth. And, adding the non-defense Federal category, the total Federal payroll almost equals the PS&T category. An impressive demonstration of the Federal role in the economy, just by payroll.

And something to keep in mind if the Manufacturing sector was in rapid decline starting in 2007, as Federal payroll would be a category insulated from the vagaries of the economy. Also note that Federal spending--defense + nondefense-- is, along with Manufacturing, the one sector that is probably brining in the most money from outside the region (in the Feds case via taxes).

An example of this is the PS&T sector. Adding defense on top of it and one equals Manufacturing as the largest aggregate payroll sector in the region (and may well be surpassing it by now).

A key point here is the $1.4B in procurements and $10M in R&D grants could be driving some portion of the Professional, Scientific, & Technical category via the miltary contracting for engineering, consulting, scientific and IT services. It would be a challenge to measure this with any degree of accuracy based on public sources.

Next, a look some possible geographical impacts and veterans benefits spending.


Mike Bock said...

Jefferey, I'm just now catching up with your posts. Your charts and graphs are impressive. I would like to know the process you used in creating them so I might do something similar.

What is interesting is how little we know of the community in which we live. This ignorance has a lot of dimensions. It would be interesting to question a high school grad about the geography and history of the Miami Valley. Most kids are living on the moon, in Myspace, in The Simpsons much more than in Dayton, Ohio.

But, I'm regularly shocked at how little I know of the community in which I live, either. In 2006 when I volunteered to serve as a Central Committee member for the Montgomery County Democratic Party, I had a general impression of how I supposed the Montgomery County Democratic Party operated. I was subsequently shocked to learn how little I knew. We have a whole system that seems designed to keep us in the dark, perpetually naive.

What stands out to me in your graphs is the apparent impact Mike Turner has made on getting money to our region. I've often wondered why the Democratic Party has shown such disinterest in making the 3rd Congressional District competitive. This graph suggests a possible explanation.

Jefferey said...

I think most people, not just kids, dont really live in the Dayton area in their heads. That includes to me, too.

The Turner connection is interesting.

Though I show him on one of those graphs on R&D grants, corellation doesn't equal caustation...but it's a pretty good hint. I am somewhat interested in Turners' & Hobson's track-record in earmarking.

I am just wowed with the potential economic impact on the local economy. Just the payroll numbers are impressive, and then add the worforce coming in with BRAC.