Too Sanguine to Be Credible?

Let’s hope Wall Street, Moody’s and anyone else who’s trying to figure out how this state will do in years to come gets to read a relatively sunny new report on the state economy. It’s almost a cure for the recession blues--not to mention a nice booster ad for the state’s credit rating.

The study of prospective federal defense cuts concludes that California’s economy will grow more slowly for about five years but still outperform the rest of the country. Even if the Pentagon budget were cut by one-third, the report says, the state would then bounce back, stronger than ever.

Hard to believe? The report was completed by the Commission on State Finance not long after the Middle East crisis flared and before so many economists began declaring that a national recession is already under way. It also predated the Washington “Gong Show” on the federal budget. But neither tremblor shook the staff’s confidence in its predictions.

In general, the report reaches conclusions similar to earlier reports on the impact of defense cuts, but it is the most thorough study so far, with such rich detail as a catalogue of retraining programs for defense workers and county-by-county, company-by-company totals of defense-related income.

But, as with nearly everything these days, there are streaks of bad news among the good. Major California-based defense programs that face sharp budget cuts next year include the B-2 Stealth bomber and the C-17 military transport. Even without budget cuts, both are in trouble because of delays in production or testing. Major budget cuts could also touch other defense projects in which California has a big stake, such as a rail-based MX missile, “Star Wars” and Tomahawk cruise missiles.

Nothing in the report says that the future looks to be painless. The state, which began losing aerospace jobs three years ago, will lose 101,000 of them before budget-cutting stops. Yet, there is a bit of good news among the bad. Even as it tries to cut the defense budget, Congress signals that it wants a strong research and development effort. California has usually gotten about one-third of the Pentagon’s research work.