The President has issued his veto of the Congressional resolution to block his use of an emergency declaration that will allow him to divert approximately one-third of the Military Construction Appropriation (MCA) for 2019 to build his wall on the southern border, a wall that a majority of Americans and their representatives in Congress do not want to build. The impact that this will have on Virginia is not well-understood, I fear.
Virginia is one of the three top states in the country for receiving Defense spending, according to a report released by the Defense Department Office of Economic Adjustment. Of the $407B in total contract and payroll spending, California received the most at $49B, followed by Virginia at $46.2B and Texas at $37.7B. Virginia’s share of that spending represented 8.9 percent of the state GDP.
At the county level, the three top counties receiving DoD contracts (excluding payrolls and benefits) were Fairfax County, VA, at $13.7B, Tarrant County, Texas, with $13B, and San Diego County, California, with $9.2B. For companies in Fairfax County alone to be earning almost $14B a year in DoD contracts is a significant economic impact to the entire state. It drives high income employment that produces individual income taxes and property taxes as well as consumer spending and it drives corporate income and property taxes that benefit the county schools as well as the state as a whole.
So now Donald Trump is going to divert a large portion of that Defense spending to Texas, Arizona, New Mexico, and California. The construction contracts will be awarded and administered by contracting agencies located there who have little contact with or knowledge of Virginia companies, most likely the Army Corps of Engineer district offices.
We don’t really know the extend of the damage to Virginia companies since, despite Trumps’ claims to the contrary, construction has not yet begun on the southern border wall. But we can safely assume that diverting $6.3B to the southern border will not be a good thing for Virginia business. Jobs in Virginia will be at risk, company profits will shrink, and the impact on Virginia tax revenues will be significant. All this for a wall that homeland security experts tell us will not have any significant effect on illegal immigration, which has been declining steadily since 1992.