Military spending, at a total of $7 trillion in the past decade, will be one of the key fronts in Washington's continuing budget wars. Following the congressional super committee's failure to reach agreement, the Pentagon is slated to absorb half of the automatic cuts mandated in the bipartisan budget deal of August. The cuts would start in 2013 and be stretched over a decade. Communities dependent on Pentagon payrolls for their livelihoods are worried.
Senator John McCain and other Republicans want to block the automatic cuts. But President Obama, to keep pressure on Congress to reach a better deal, has vowed to veto any legislation that attempts to evade the mandate. In the debate to come we'll hear national security arguments and warnings of "hollowing out" the armed forces. But legislators will be thinking mainly about the potential loss of defense jobs from Virginia to California.
In addition to the 2.5 million in the military and reserves and 740,000 Pentagon civilian employees, an estimated one million workers produce the weapons, equipment and services the military buys. The incomes of nearly 2 million more are affected by Pentagon decisions and by the Energy Department's nuclear weapons programs. Facing an uncertain future, where can defense-dependent communities look for help? In the past, members of Congress were quick to defend against reductions in defense payrolls in their districts. Legislators used the military budget as a jobs program, sometimes authorizing weapons the Pentagon didn't want. At the state level, Texas openly courted a military presence for economic reasons. Governor Rick Perry's Military Preparedness Commission makes it state policy to "preserve, promote and advance the military mission within the State of Texas while protecting vital military installations within its borders, and encourage defense-related businesses to relocate to Texas." The governor's office boasts that Texas was number one in Defense Department expenditures as of 2008, host to the greatest number of active-duty military personnel and second in Pentagon civilian employees --"a driving force in Texas' diverse economy."
The huge national debt and the drive for budget-cutting, however, now make it harder to win plates of Pentagon pork. Defense factory workers, Pentagon civilians and restaurant owners near military bases, among others, have to start thinking of the possibility of life in the civilian economy. Fortunately, the United States has some experience in cushioning the impact of shifts in defense spending.
Those working on or around military installations can look to the Base Realignment and Closure Commission (BRAC), at least to provide less parochial decision-making. BRAC was created in 1998 to curb pressures from legislators seeking to preserve bases in their districts just for the jobs they offer. BRAC establishes a more objective process when the Defense Department tries to reduce or streamline Air Force bases, naval shipyards and forts. The BRAC commissioners review a list of Pentagon recommendations, hold hearings, visit the bases and draw up a final list that Congress may reject in its entirety but not alter. The recommendations become final if Congress doesn't reject the list. Commanders of bases facing closure or downsizing work with nearby municipalities to transfer property to civilian projects. New coalitions form to plan local diversification. Aid to communities prepared to shift gears may come from federal and some state agencies.
BRAC may be the "least dangerous issue" facing the Warner Robins Air Logistics Center, the base's former commander recently told a group of Middle Georgia civic leaders. Recalling a warning by Senator Saxby Chambliss (R-Ga.), retired Air Force general Rick Goddard said: "There's no way we can make the kind of budget cuts that are coming without major changes -- changes in organization and manpower.... (Chambliss) said if we don't get our arms around the $14.5 trillion national debt and the annual $1 trillion deficit, the country is going broke." If the Air Force is going to consolidate, Goddard concluded, it should consolidate at Robins through the BRAC process. Goddard's audience included Herman Cain.
For those in the private defense sector, there is no BRAC. But local responses to defense downsizing at the end of the Cold War may be instructive. St. Louis, Long Island and Philadelphia showed then there's life after defense-dependence. The transition requires vigorous local leadership, help from government, and lots of time and planning.
In St. Louis, McDonnell Douglas dominated manufacturing in the early nineties.
To overcome declines in military aircraft orders, city and county officials teamed up with the regional chamber of commerce to help workers and small businesses. The St. Louis Economic Council, a public-private agency, spearheaded the effort, expanding the coalition to include labor, defense firms, an activist group advocating conversion of defense industry, and nearby Illinois and Missouri counties. The coalition:
- Set up reemployment and retraining centers;
- Secured grants from the Office of Economic Adjustment (OEA), a Pentagon planning shop;
- Surveyed local defense firms, discovering that a tenth of laid-off workers wanted to start their own companies;
- Began building a world trade center and a technology center with matching funds from the Commerce Department's Economic Development Administration (EDA).
- Many of the defense subcontractors and suppliers started the difficult transition into commercial markets. Today, St. Louis's municipal bonds have been upgraded to AAA because of its diversified economy. Community leaders say broad citizen involvement and federal help were critically important in reducing the dependence on Pentagon dollars.
Long Island faced a similar problem in 1991. Grumman dominated the regional manufacturing sector. Grumman's lobbyists met weekly with Long Island's bipartisan congressional delegation to discuss such legislative strategies as how to save the F-14 fighter plane program. The New York State economic development agency meanwhile promoted diversification. With an advisory group of industry associations, county officials and Nassau Community College, the agency created a pilot project focused on nine small defense firms. Planning funds came from OEA. The project concluded that the managements had to learn sales and marketing in order to enter commercial markets -- skills in short supply in defense industry. With EDA funding, the lessons learned were applied to expand technical aid to over 100 other companies. When in 1994 one of New York State's economic development specialists visited Long Island defense firms, it was obvious to this observer that he enjoyed a close rapport with the managers he had counseled. There were conditions for this assistance. Management had to agree in advance that the workforce would be involved in the process. If the plant was unionized, the union had to affirm in writing that it was not opposed to the outside consultation.
Today, Grumman's former complex at Beth Page houses offices for Goya Foods and the Sleepy's mattress company, a Homeland Security Center of Excellence, and a movie studio. Long Island has outgrown its defense-dependence.
Former airplane hangars seem ready-made for the movie industry. There's one at the Philadelphia Navy Yard that has been turned into a sound stage used by Paramount and a leading film-maker. The Yard has also provided background for CBS-TV's series Cold Case. No longer an active-duty navy yard, in the past 10 years the Philadelphia Navy Yard has become a multi-use waterfront development with 115 companies and a workforce that will soon reach 10,000. Urban Outfitters, Tasty Baking, pharmaceutical firms, researchers and architects have offices on the 1,200-acre property that was once home to mothballed ships. A former Marine barracks has been converted to a center for commercializing technology. United Technologies, Penn State and the Department of Energy are creating an Energy Innovation Hub. The project will test new energy-saving technologies in buildings. A master plan calls for making the Yard Philadelphia's greenest district.
The Philadelphia Industrial Defense Corp., a nonprofit, manages the Yard for the City of Philadelphia and has attracted $125 million in investments from OEA, EDA, and state and local governments. Another $650 million came from private funds. The Navy did most of the environmental cleanup.
Currently, some key professionals in defense-dependent areas have turned their attention to diversifying local economies. A new strategy is emerging in the Norfolk-Newport News-Hampton Roads complex in Virginia, where naval shipbuilding and repair provide thousands of jobs. The local public-private alliance that promotes federal investments there places Old Dominion University at the core of the strategy. The school had established a major computer modeling and simulation center where the departed Joint Forces Command was its main customer. Medical modeling and simulation now may replace war games. Clean energy and expanded trade could take up some of the slack in the local economy if naval shipbuilding is cut back. Even in base-heavy San Antonio, which benefited from over $3 billion in military construction funds, the city is pondering how it might save money by merging municipal and military services. Could the city pick up trash at the three major bases, while the Army does its shooting practice at the police range? San Antonio is seeking an OEA grant to find answers.
Prolonged recession and the fear of more job losses will complicate the transition to fewer defense-dependent communities. But military budget cuts will be gradual, and a shift to civilian development comes slowly. All the more reason to start planning now.