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5 Cities Vulnerable to the Next Bursting Bubble

Stocks in this article: EBAY GD GOOG ABX NEM

Kileen-Temple-Fort Hood, Texas
Unemployment rate: 7.9%
Largest employer: U.S. Army
Thinking Fort Hood is immune to military budget fluctuations just because the First Cavalry, 3rd Armored and roughly 65,000 soldiers, supporting staff and families call it home is like dismissing an Army without tanks. Considering the depth of cuts Defense Secretary Robert Gates wanted to make even before Osama bin Laden was killed, all options should be considered on the table.

With politicians from both parties discussing drawdowns in Iraq and Afghanistan in the wake of bin Laden's death, communities such as Navy-dependent Jacksonville, Fla., and Air Force base-adjacent San Bernardino, Calif., and Valapraiso, Fla., have reason to believe those conflicts and U.S. commitment in Libya represent a military spending bubble. Gates wants $100 billion to come out of the now $690 billion defense budget within the next five years, but the cuts haven't hit the bases so far.

While he's already "determined that we will not repeat what we did in the 1970s and 1990s, which is across-the-board cuts that end up hollowing out the force," ask the folks in Lima, Ohio, how seriously he's considering cuts. For those who know Lima only from episodes of Fox's Glee, it's also home to the General Dynamics' (GD) Joint Systems Manufacturing Center, which makes the M1A1 Abrams tank and the Marines' Expeditionary Fighting Vehicle. Gates wants to cease production at the plant in 2013-16 to save roughly $1 billion -- marking the first break in U.S. tank production since 1941.

Much of Gates' cuts are targeted toward weapons programs, but he has also called for shrinking the size of the Army and the Marine Corps and hacking the Pentagon budget down to less than 1% growth next year. He has some allies on both sides of the aisle, as Republican House Majority Leader Eric Cantor from Virginia has said the military will not be exempt from budget cuts. With political sentiment shifting away from spending of nearly any sort as the U.S. hit its debt ceiling, military communities such as that surrounding Fort Hood shouldn't be surprised when those cuts hit home.

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