Laicie Olson in the Panama City News Herald
Originally published by Randal Yakey in the News Herald in Panama City here on May 1, 2011.
PANAMA CITY — Every spring the beaches are filled with beautiful bodies lounging in the sun and playing in the clubs at night.
Tourism is big business in the Bay County area.
But so is the art of war.
When America goes to war it needs jets, rockets, electronics and high tech gear. And it also needs clothiers, electricians, food service workers and soda pop.
From Lockheed Martin’s aircraft to Coca-Cola delivery, it all costs money. To keep up with defense needs at home or the theaters of war, supply lines need to be running at their peaks.
And from 2000 to 2010, Bay County defense contractors won an estimated $5.3 billion in military contracts, according to a website constructed by a California businessman called Governmentcontractswon.com.
In 2000, the amount of contracts handed out to contractors conducting business in Bay County was $39 million. By the end of the decade, the amount was $745.5 million, with the peak year for Bay County in 2005 when an estimated $921.9 million was poured into the economy, according to the Governmentcontractwon.com.
Last year was a milestone year for Bay County.
While Okaloosa County had 480 contractors to Bay County’s 374, the contracts awarded to Bay County in 2010 surpassed Okaloosa’s $745.5 million to $670 million. Okaloosa has long been a leader in contracts won because of Eglin Air Force base, one of the largest air force bases in the state covering 725 square miles.
High impact
Indiana University’s Bruce McDonald, who did his Ph.D. work at Florida State in Tallahassee, says the economy of the United States is intrinsically linked to the military. The U.S. military employs as many people as Wal-Mart.
“The military is the largest employer in the United States,” McDonald said. “There are 1.6 million active military and an extra 600,000 that are connected in some kind of fashion, not including contractors.”
McDonald said the number of contracts awarded mirrors the growth in the wars in Afghanistan and Iraq. When war is ongoing, the budget to supply and service the military will go up.
“I do think it will level off,” said McDonald.
Contractors are also a big part of research and development in the military.
“Research in telecommunication satellites, cell phones and high tech machinery are all part of it,” McDonald said.
And eventually those innovations come to the consumer market as products for everyday use.
“When there is investment in these kinds off projects there is a return of about 4 to 1 to the private economy,” McDonald said.
McDonald said the military is willing to take risks on trying out new technology, whereas the private sector may not be willing to do so. The military seems more willing to try something new despite the monetary risk.
He also said the amount of contractors and contracts will slow down over the next few years.
Janet Watermeier, executive director of the Bay County Economic Development Alliance, said the economic impact isn’t as significant as the tourist industry, but they are the two segments that have the most significant impact on the community.
“When you are preparing for war you are going to need more stuff,” Watermeier said.
There is a $2.2 billion annual impact on the county’s economy because of the military industry. There are approximately $26 million in capital investments because of the impact of both the Navy and Air Force bases. The bases also employ about 22,500 people, Watermeier said.
“The defense industry is about 30 percent of our economy,” Watermeier said.
Tourism is about 45 percent of the county’s economy.
Even with an estimated $78 billion in military budget cuts over next five years, there shouldn’t be a steep drop in contractor services to military installations in Bay County. That’s because, McDonald said, there is research and development going on at the bases that is considered essential.
Negative Impact
Laicie Olson is the senior policy analyst at the Center for Arms Control and Non-Proliferation in Washington D.C. She said an area such as Bay County will see a boon in jobs while the wars are going on but a downturn may also be possible if there are budget cuts. The budget cuts will affect the contractors first, she said.
“It will affect the national deficit and will affect the entire economy,” Olson said.
With the spill in the Gulf and loss of jobs in the fishing and tourist industry, the Bay County area could take a second hit if the work for defense contractors is cut, Olson said.
President Barack Obama on Thursday officially announced he has nominated CIA Director Leon Panetta to lead the Pentagon after Defense Secretary Robert M. Gates retires June 30. At the same time, Obama announced Gen. David Petraeus would succeed Panetta as head of the CIA.
Olson said with the naming of Panetta, a known budget cutter will be in charge of the Quadrennial Defense Review (QDR).
QDR is a legislatively-mandated review of Department of Defense strategy and priorities. The QDR will set a long-term course for Department of Defense (DoD) as it assesses the threats and challenges the nation faces and re-balances DoD’s strategies, capabilities, and forces to address today’s conflicts and tomorrow’s threats, according to the DoD.
“What may have a bigger affect on the (defense contractor) economy will be the future strategy and the affect of the QDR,” Olson said.
Carl Adams, the owner of PCE Inc., a “support services” engineer and small businessman located in Lynn Have, said he is already feeling the impact of the budget cuts. And with additional budget cuts looming, Adams said he isn’t positive about the future.
“I went from 14 employees down to four,” Adams said. “When I picked up the paper and read about Panetta, I thought, ‘Oh no.’ ”
Adams said he would have rather seen Gen. Petraeus in charge of the Defense Department.
“I think they should have a defense guy in there.”
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