Budget crunch a threat to defense spending, whoever wins White House

With a financial crisis pinching federal coffers and deep cuts in federal spending looming, multibillion-dollar weapons purchases could take a serious hit.

Neither candidate has outlined Pentagon cuts for fear of losing votes, but industry officials and analysts believe an eight-year boom in defense spending is about to end.

"No matter which party takes control of the White House in January, we will likely see defense spending fall off," said Ronald Epstein, aerospace analyst for Merrill Lynch. "The current historically high budget for defense is not sustainable, especially as the federal budget will be straining from the recent financial bailout."

Defense cuts could take several years to unfold, but the fallout could hit Southern California particularly hard. Defense spending has been a key economic driver, helping to offset job losses from the region's housing downturn.

With defense spending -- excluding supplemental outlays for the wars in Iraq and Afghanistan -- up 60% to more than $500 billion since 2001, hundreds of Southland companies, stretching from Santa Barbara to San Diego, have seen their fortunes rise.

Boeing and Northrop, two of the nation's largest defense contractors, together employ more than 58,000 in the Southland.

In El Segundo, about 6,000 Raytheon Co. engineers design high-tech military electronics while about 4,000 engineers in Palmdale work in secrecy researching new aircraft for Lockheed Martin Corp.'s Skunk Works.

Smaller companies that make robotic spy planes such as AeroVironment Inc. in Simi Valley and General Atomics Aeronautical Systems in Rancho Bernardo have seen their payrolls more than triple.

But a top Pentagon official said Thursday that the U.S. military was anticipating "painful" cuts.

"I think every one of the big programs will get some level of attention," said John J. Young, the undersecretary of Defense for acquisitions.

The presidential candidates are facing an economy that is expected to contract at least through the first half of next year, leaving the new president with little wiggle room to fund all the programs the Pentagon wants.