Utah should begin planning now to take up the economic slack expected from defense spending cuts and reductions in other federal programs, the Utah Foundation warns.
The foundation is a private, non-profit public service agency established to study government in Utah and the relation of taxes and public spending on the Utah economy.The end of the Cold War could be a heavy blow to the state's economy, the foundation said in its latest report.
"Utah's economy is impacted by federal defense expenditures to a much greater degree than that of most other states," it says.
With a heavy concentration of Department of Defense procurement contracts, and industry that tends to specialize in the manufacture of advanced weapons systems, the state is vulnerable to reductions in the defense establishment. "Both of these areas are likely targets of future defense cuts," the report predicts.
In addition to a defense wind-down, the foundation fears that federal spending for other programs may be slashed as Congress struggles to balance the national budget.
"Economists, planners and those involved in Utah's economic development program should recognize these international developments and take action to minimize their impact on Utah and its citizens," the report says. Federal spending in Utah amounted to nearly $6.2 billion in fiscal 1989. That was $441 million, or 7.7 percent, more than in the previous fiscal year.
In 1989, military wages in Utah totaled $234 million; civilian defense wages, $636 million, and defense contracts, $979 million. These figures add up to nearly $2 billion.
Military funding amounted to 32.2 percent of all federal spending in the state, the report says.
"Approximately 9.5 percent of all personal income in Utah was derived from defense expenditures within the state. For the nation as a whole, defense expenditures were equal to 5.2 percent of total personal income."
With the breakup of the Eastern Bloc in Europe and changes elsewhere, expectations are that the cold war is winding down and the United States soon may be able to make substantial cuts in military expenditures, the report says.
"If international military tensions continue to diminish, there will be increased pressure to reduce defense spending. Historically, large reductions in the Department of Defense budget were made following World War II, the Korean War and the Vietnam War."
According to the foundation, one group of military experts proposes a 50 percent cut in defense spending by the year 2000. A private task force sponsored by the Committee for National Security and the Defense Budget Project said that if the international changes continue, a 50 percent cut in the next 10 years is reasonable and will soon seem modest.
"Economists point out that the long-term gains from a `peace dividend' will be reflected nationwide, but the short-term pain will be reflected in a few places."
One of those few sore spots might be Utah, the foundation fears.