Defense industry to largely shake off sequester...at first
The long-term nature of defense contracts shields the industry from short-term sequester disruptions in areas of the country that depend on military spending, such as St. Louis.
Yes, the dreaded sequester is finally here, and as you've already heard many times, it's going to hit the Pentagon the hardest, cutting $50 billion or 9 percent of its budget. Putting aside questions of national security, what's that going to do to the economy in places that depend on defense spending?
Defense is big business in St. Louis. Under the sequester many of the 5,000 civilians working at nearby Scott Air Force Base are facing one day of unpaid leave every week.
But is a 20 percent pay cut for a few thousand people really going to hurt consumer spending in a region of 2.8 million?
"I'd say the effect is likely to be fairly minimal," says Glenn MacDonald, a professor of Economics at Washington University.
Defense contractor Boeing is the second-largest employer in the region, with a workforce of 15,000 people. But it's likely to be buffered from the immediate impacts of the sequester.
Roman Schweizer is a Senior Defense Policy Analyst at Guggenheim Securities. He says defense contracts are typically multi-year arrangements.
"So the brunt of that 9 percent cut would be spread over the course of anywhere from one to three to five years."
Which leaves plenty of time for Congress to reverse course, take money out of butter, and put it back in guns.