Military spending keeps region afloat in tough times

NORFOLK

As the pace of economic growth slows in Hampton Roads, the region's health is increasingly dependent on defense spending, an Old Dominion University economist said Tuesday.

"Military and government spending don't make us recession-proof, but they certainly give us a cushion" during a downturn, said Jim Koch, Old Dominion's president emeritus and an economics professor.

That cushion will enable Hampton Roads to recover more quickly from a recession than the nation as a whole, Koch said. But spending cuts or the loss of an aircraft carrier group to another homeport would threaten the region's economic health, he said.

"Seventy percent or so of all our growth during this decade is due to defense spending," Koch told about 740 people at a breakfast gathering sponsored by Lead Hampton Roads, a leadership program of the Hampton Roads Chamber of Commerce. This spending, he said, has been "a huge, valuable anchor for us."

But Hampton Roads isn't likely to see the sort of double-digit annual increases in spending that it witnessed earlier in the decade, he said during the gathering at the Norfolk Waterside Marriott hotel.

Koch recounted several findings that he and other ODU economists reported in the university's 2008 State of the Region report. The latest report predicted that defense spending in Hampton Roads will be up 5 percent in the next year despite the departure from Norfolk in April of the carrier George Washington for its new homeport in Japan, and despite military base-closing and realignment activities in the region. That increase would be in line with the annual increases of 4.5 to 4.9 percent that the region has experienced since 2006, according to the report.

However, the Hampton Roads economy would suffer if a carrier strike group departed, which is a possibility, Koch told the gathering. A single carrier group, he said, pumps between $750 million and $800 million a year into the region's economy.

Losing one, Koch said, has a bigger annual impact on the region's economy than the loss of Ford's Norfolk truck-assembly plant, which closed last year.

Defense spending in Hampton Roads this year will total $18.3 billion, according to the State of the Region report.

In response to a question about defense spending, Koch alluded to reports that Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, called last week for slashing the nation's defense spending by 25 percent.

No matter the results of Tuesday's presidential election, "I would be very surprised if defense spending continues to rise at the rate it does now," Koch said.

But if Hampton Roads had to weather significant cutbacks in spending, there would be "lots of stores shuttered up and lots of homes abandoned," he said. "Times would be very, very tough."

Tom Shean, (757) 446-2379, tom.shean@pilotonline.com