Bombs Away with Tax Credits

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

The Air Force awarding Northrop Grumman the contract for manufacturing strategic bombers is the best news for California’s aerospace industry since — well, since Northrop Grumman moved its headquarters out of Los Angeles to Reston, Virginia. That action took place about five years ago and highlighted a two-decade long struggle in the defense/aerospace industry relationship with California that resulted from the end of the Cold War in the early 1990s.

Perhaps, the bomber announcement and the expectation that the planes will be built largely in Palmdale in Los Angeles County accounting for hundreds of jobs will be considered the capstone in the turnaround for aerospace in California.

Not that the industry has disappeared. NASA and private companies involved in space exploration have put California on a forward path. According to one study, focusing on the aerospace and defense industry, “In 2012, California accounted for $62 billion in aerospace industry revenues, 9 percent of the global market and 21 percent of the U.S. market.”

But the state, considered the father of the aerospace industry since before World War II, lost it’s footing in the early 90s.

Reporting on the recession battering California then, the New York Times stated in February of 1991:“Military spending accounts for about 8 percent of California’s economy, down from 14 percent 20 years ago. But the effect of the declining aerospace industry has still been remarkable. Virtually every big military contractor has laid off hundreds or thousands of production workers, engineers, scientists and corporate personnel.”

California’s state budget tumbled into a fiscal morass, much of the fall attributed to what might be called a reverse spin on the “peace dividend,” proclaimed at the time by President George H. W. Bush and U.K. Prime Minister Margaret Thatcher to describe the economic benefit from a decrease in defense spending.

Now California should be getting jobs back.

As success has many fathers and mothers we are hearing reminders that the legislature offered $500 million in tax breaks to the firm that would build the fleet in California. This is reminiscent of the recent praise legislators claimed for the film production tax credit that lifted production in the state. Perhaps these events should be considered indicators that lowering the cost of doing business in California will benefit all businesses and job seekers in the Golden State.

Comment on this article


Please note, statements and opinions expressed on the Fox&Hounds Blog are solely those of their respective authors and may not represent the views of Fox&Hounds Daily or its employees thereof. Fox&Hounds Daily is not responsible for the accuracy of any of the information supplied by the site's bloggers.