Irvine No Winner in Theoretical Cut of Defense Budget

Times Staff Writer

What happens when you take, say, $30 billion from the nation’s annual defense budget and transfer it to national urban programs?

If you’re a resident of Chicago, according to a study released Thursday by the United States Conference of Mayors, it means “a strong net economic gain in jobs, income, investment and overall economic activity.”

But here’s what the report predicts about Irvine, in the heart of militarily dependent Orange County:

“The city of Irvine shows a very slight average net loss in employment of 72 jobs per year, and a slight loss in personal income and overall economic activity.”


Not that President Reagan, or anybody in the race to succeed him, is even considering such a scenario. At least not publicly.

Agran Asked for Study

But the Conference of Mayors, after unanimously approving the suggestion by Irvine Mayor Larry Agran at the annual meeting last year, asked Employment Research Associates, a consulting firm in Lansing, Mich., to look into the question. The report was released Thursday in Chicago. Agran, en route home from Chicago, was not available for comment.

In addition to Chicago and Irvine, the study also assessed the impact of such a theoretical transfer of funds on the cities of Trenton, N.J., and Austin, Tex. The report said the cities were chosen because they were “geographically representative and because they reflect the needs of cities of different sizes with diverse industrial and economic bases.”


In its summary, the study noted that between 1981 and 1988, critical urban aid programs were cut by a cumulative total of almost $60 billion.

“By contrast,” the study said, “during those years, the annual increases in military spending reached a cumulative total of $328 billion.”

The study assumes the shifting of $30 billion per year over five years (1986-1990) from the defense budget to urban grant-in-aid programs over the same period. That amount, it said, represents 11.6% of the $238 billion military budget of 1986-1990.

Positive Net Effect

“Even with this cut,” the report says, “the annual military budget would average $41 billion higher in real terms than it was in 1981.”

“The study found that nationally, a five-year shift of $150 billion from the military budget to urban programs yields a positive net economic effect,” the report says. “The gross national product rises by an annual average of $3.5 billion. Personal disposable income increases $2.2 billion annually.” But while the report notes other national pluses to such a transfer, including more jobs, more investment, better social services and health care, it said that the immediate economic effect on Irvine, and Orange County, would be negative.

“Orange County, an economy with both substantial military contracts and large military bases, shows an annual average net loss in Gross Regional Product of $272 million,” it says.

“The net loss is attributable to a decline in GRP of $387 million from reductions in military contracts and personnel, which is only partly offset by a $115-million increase in GRP from additional grants-in-aid. Most of these losses occur principally because of cutbacks in military contracts in defense electronics and aerospace, which in turn lead to reductions in subcontracts in other industries and services.”


But the study added that economic conversion planning could minimize the impact of such a cutback in military spending.

“Moreover, Orange County and Irvine benefit from the tangible improvements in the quality of life through increased public goods and services in urban mass transportation, public health care, low-income housing, employment and training infrastructural improvements and social services,” it says.