Rear Admiral Gene LaRocque (USN, Ret.)
Director, Center for Defense Information
INTERVIEWER & NARRATOR:
Sanford Gottlieb, Senior Producer,
MARKETING & OPERATIONS:
Mark Sugg
PRODUCERS:
Matthew Hansen
Nick Moore
Daniel Sagalyn
PRINCIPAL ANALYST & SCRIPTWRITER:
Sanford Gottlieb
PROGRAM PRODUCER:
Nick Moore
ASSOCIATE PRODUCER/MARKETING:
Lori McRea
ORIGINATION:
Washington, D.C.
PROGRAM NO.:
525
INITIAL BROADCAST:
8 March 1992
CONDITION OF USE: Credit "AMERICA'S DEFENSE MONITOR"
(Center for Defense Information).
(C) Copyright 1992, Center for Defense Information. All Rights Reserved.
Videotapes also available.
CLYDE BEARD
Carpenter
HENRY DAVIS
Sheet Metal Worker
Senator JIM EXON, (D-NE)
Senate Armed Services Committee
JEFF FAUX
President, Economic Policy Institute
Rep. SAM GEJDENSON, (D-CT)
House of Representatives
ROBERT HEILBRONER
Economist, Author
JIM HOFFMAN
Army Career and Alumni Program
GEORGE KOURPIAS
President, International Association of Machinists
CLYDE PRESTOWITZ
President, Economic Strategy Institute
Governor ROY ROMER
Governor of Colorado (D)
ADELE WABASH
Unemployed Worker
Now there's growing talk by the chairman of the powerful House Armed Services Committee, and others, of the possibility of major military reductions and of the long awaited peace dividend.
Yet, in the midst of recession, some Americans are nervous about the economic impacts of a more peaceful world.
["AMERICA'S DEFENSE MONITOR" program introduction.]
Admiral GENE LaROCQUE: Welcome once again to "AMERICA'S DEFENSE MONITOR."
We Americans really do love peace. We believe in peace. We have even adopted the old shibboleth that the Romans used, "If you want peace, prepare for war." Well, we've been preparing and fighting in wars for the past 40 years, so much so that we have begun to question our peaceful intent. So much so that, today, we're asking the basic question: Can we afford peace? Our program is about that today.
HENRY DAVIS: Before everybody was worried about Russia this and the communists this and that. And nowadays, the communist world is kind of crumbling, they're almost gone. And a lot of the resources that they spent towards that fact should be turned towards -- in the country here.
Rep. SAM GEJDENSON (D-CT): It's a challenge, without any question, but it has an opportunity within it. It depends on the policies we engage in as a nation.
INTERVIEWER: If military spending really comes down, is this a problem for the country or is this an opportunity?
JEFF FAUX: Oh, it's an opportunity and it's more than an opportunity, it's a godsend. This may be America's last chance to regain its economic competitiveness in this decade, maybe in the next two decades.
NARRATOR: America has shifted military gears before. The government cut military spending steeply after World War II, again after the Korean and Vietnam wars. During World War II, when unemployment disappeared and many women entered the work-force, Americans saved money. Their pent-up demand for homes, cars and appliances fueled a postwar boom.
The boom -- and the G.I. Bill of Rights that enabled veterans to go to college -- helped the country reabsorb
10 1/2 million veterans within two years. Veterans who didn't continue their education were able to find well-paying jobs.
After Korea and Vietnam, short term economic problems were overcome without any lasting effects, although the end of the Vietnam War coincided with the start of the worldwide oil crisis.
So, America has done it before, and could do it again. In some ways, the situation is a lot easier to deal with than it was at the end of World War II. Military spending, as high as it is now, represents a much smaller share of a much bigger economy than it did back then.
Today's active duty armed forces are only one-sixth the size they were at the peak of World War II. And the 2.9 million Americans who now work in military industry and the one million Defense Department civilians constitute only 3 percent of the employed workforce.
In addition, the changes in military spending that President Bush has in mind are very tiny. In his 1992 State of the Union Address, he said he wants to cut military spending by $50 billion over five years. That represents only 3 percent of the nearly $1.5 trillion the administration wants to spend on armed forces and weapons during that same period.
Nevertheless, jobs will be affected. One estimate comes from the Office of Technology Assessment, OTA, which prepares detailed reports for Congress. The OTA estimates that 530,000 defense workers, 396,000 active duty military and 104,000 Pentagon civilians could lose their jobs by 1995. If military spending goes down, the challenge for the country will be how to keep employment up.
The size of the challenge seems quite manageable, but there are also important problems that make transition to a civilian economy more complicated than it was in 1945.
First, of course, is the recession, with its high level of joblessness, in an economy that has lost its competitive edge and whose manufacturing base has been eroding.
President George Kourpias of the International Association of Machinists has been watching the erosion.
GEORGE KOURPIAS: I see people worried. People are getting angry at what is happening to them.
ADELE WABASH: They cut money back. All that did was put people back farther. It put more danger, more crime on the street. It put people -- Like I was just saying, it puts more people out here for crime. You have no other way to go. People been trying to survive out here doing honest work, but then they get to a point -- You can't get the job and they cut all the funds you have. You're out of your housing, your family hungry. What can you do?
NARRATOR: In addition, consumers have a lot of debt and are worried about the future. Since the mid-seventies, consumers have been saving less. Growth and family income slowed markedly during the 80s. Consumers can't go on a buying spree to restart the economy.
Then the enormous budget deficit has made many Americans, and good number of politicians, wary of new federal spending. The debt will reach a record $4 trillion in 1992. It was almost $29,000 per worker in 1991. This year the government will pay $200 billion just for the interest on the national debt.
And, inadequate support in recent years for transportation, clean water, clean air, new energy sources, education and training has hurt the country's economic health.
CLYDE PRESTOWITZ: Some thinking should be given to an infrastructure strategy that would enable us to take advantage of winding down the defense expenditures and to begin to reinvest in ourselves and in the basic underpinning of our economy.
NARRATOR: Finally, although military spending is a relatively small part of the national economy, it looms large in a few industries, states and communities. Ripple effects from layoffs in these economic pockets can have a national impact politically and economically.
Rep. GEJDENSON: I've been a strong advocate for the things that are made in my state. If we're going to buy things for this country's defense, I'm going to fight to make sure they're built, first, in eastern Connecticut and, second, in Connecticut.
NARRATOR: With these problems, can America afford peace? Maybe the question should be: Can America afford to keep military spending at cold war levels when there are no enemies in sight?
The $50 billion President Bush says he wants to take from the military budget does not represent a cut in spending so much as a cut in the increases for the Pentagon planned before the collapse of the Soviet Union. The administration still expects to increase military spending between now and 1997 to $291 billion a year.
Take a look at this Defense Department press release from January 1992, which includes the costs of the Department of Energy's nuclear weapons production. The press release does not factor in the effects of future inflation. Military spending increases $7 billion over the five-year period.
Some military specialists and members of Congress have proposed genuine military spending cuts far greater than
$50 billion over five years.
Colorado Governor Romer unexpectedly raised the issue of the peace dividend with President Bush at a meeting of the National Governors Association.
Governor ROY ROMER (D): "Well, I think the approach that many Democratic governors are
taking is the following: That we ought to take the peace dividend, whatever size it is, 50-to-100
billion over five years, and have it directed toward economic stimulation of the country."
President GEORGE BUSH: "Well, let me get to the defense budget. Have the Democratic governors taken a position that it ought to be a $100 billion defense cut? I've said to the nation I think it ought be 50, and the Joint Chiefs of Staff think it ought to be 50. And I have a responsibility for the national security and the foreign policy and, in my view, 50 billion, based on recommendations from the Joint Chiefs and from the secretary of defense, is right."
NARRATOR: The administration is using the fear of job loss to keep military spending high, as shown in President Bush's answer to Governor Romer.
President BUSH: "Do you want it to be 100 billion? And, if so, what bases do you want to close? What areas do you want to shut down? What weapons systems do you want to knock off right now?
NARRATOR: The president's response resonates with many members of Congress, who are trying hard to hold on to the military bases and defense contracts that provide jobs for their constituents.
Chairman Les Aspin of the House Armed Services Committee says the split in Congress these days is not between Republicans and Democrats. It is, he explains, between those who want to keep military contracts and bases in their districts and those who want to take the money and spend it on something else.
If less money is spent on the military, what will happen to the economy and jobs? That depends, in part, on what's done with the savings. Right now there's a three-way struggle in and out of Congress on what to do with any future peace dividend. Reduce taxes? Reduce the deficit? Or, use the savings to train people and rebuild the country? Of course, if any future peace dividend is large enough, more than one goal could be pursued.
Assuming military spending cuts of several hundred billion dollars during the 1990s, the Office of Technology Assessment concludes, "If those resources are spent to improve human resources and our capital stock, then the long term outcome is going to be a growing and more resilient and more vital gross national product."
A number of economists agree. Robert Heilbroner, professor emeritus at the New School for Social Research, is well known for his many clear and perceptive books explaining economics.
ROBERT HEILBRONER: Well, it seems to me that the first thing that has to be done, while we're trying to figure out how to modernize the country in some large structural way, is to repair what we know is missing; that is, human capital and physical capital. You cannot have a modern economy when you can't drive trucks along the road at a decent speed, when you don't have a high speed transportation system, and all the rest. You certainly can't have a productive economy when the basic working force is uneducated.
NARRATOR: Economist Jeff Faux is the forward-thinking president of the Economic Policy Institute.
Mr. FAUX: We still know we need to spend more in human resources and on infrastructure and those kinds of things. So, we ought to spend that now. It would provide a stimulus to the economy in two ways. One, it would create incomes, and jobs, and spending and that would help especially those areas that are being impacted already by defense cutbacks. Secondly, because it adds to our skill level, our efficiency of transportation, and things of that sort, it makes the economy more efficient as a competitor in this new global economy that we're in.
NARRATOR: Clyde Prestowitz was a top Commerce Department official in the Reagan administration. Now the influential president of the Economic Strategy Institute, he's eager to see "smart highways" and "mag-lev" -- high speed magnetic levitation -- trains begin to move people and goods and create new manufacturing jobs.
Mr. PRESTOWITZ: Well, "smart highways" have sensors and semi-conductor microprocessors embedded in them, so that you're driving down the road and the road will tell you -- you'll have a receiver in your car or there may be a sign across the highway --where the jam-ups are or what better routes are. And you even have some systems in which the road itself will control the rate of speed of the car so that cars won't all jam-up in critical spots.
NARRATOR: "Mag-lev" trains, which have reached speeds of 300 miles an hour in Europe, are now being developed in the Pittsburgh area by a consortium of business, labor, government and university groups.
The International Association of Machinists represents workers in civilian transportation, as well as weapons factories. The Machinists' membership has fallen from 830,000 in 1981 to 490,000 today, largely because of the loss of manufacturing jobs.
George Kourpias, the union's progressive president, is also looking to public transportation.
Mr. KOURPIAS: Rapid transit. We have to get into it. We ought to look at our plants that are now producing planes that no longer may be producing planes to put rapid systems there. All the major cities of America have a transportation problem. That's one area in which it could be very effective when you're talking about the large plants, such as the General Dynamics plant in Fort Worth, McDonnell Douglas and Lockheed in southern California.
NARRATOR: Henry Davis is one of the members of the Machinists Union who needs work. A skilled sheet metal worker in Baltimore, he lost his job when his employer's company was bought by a Pennsylvania firm.
Mr. DAVIS: For me, it was a terrible day. I mean, I have been working most of my adult life. I'm 45 years old now and it's like -- I have a mortgage, I have bills, and to get up in the morning and not be able to go to work or know that you don't have a paycheck coming in, it's terrible.
NARRATOR: Where are the new jobs going to come from? They can't all come from modernizing the transportation system. Lots of additional jobs could be generated by transferring resources to a broad range of useful civilian activities undertaken by private companies: Wind power and solar energy. A clean-up of the massive pollution from industry, nuclear bomb factories and military bases. Low cost housing. Modern water supply and sewer systems. In some cases, new industries could be created.
New industries, especially high-tech industries, often need a boost from government if they're going to compete successfully in a crowded world market.
Sam Gejdenson is the vigorous congressman from defense-dependent eastern Connecticut. The cancellation of the Seawolf submarine affects his constituents at General Dynamics' Electric Boat shipyard. Four thousand shipyard workers in Connecticut and Rhode Island may be laid off by the end of 1992. Congressman Gejdenson is concerned about competition from foreign companies backed by their governments.
Rep. GEJDENSON: Our American companies don't compete with Japanese or European companies. What we compete with -- AirBus is a perfect example -- is countries. Sometimes not just one country, but a number of countries joining together to compete with American industry. Without massive government intervention, the Europeans wouldn't have an airline, they wouldn't have Rolls Royce engines operating out of England, they wouldn't have the AirBus frame to put those Rolls Royce engines on.
NARRATOR: Some experts favor new partnerships between American business and government to revitalize the economy.
Clyde Prestowitz advocates a cooperative effort among private military contractors, civilian-oriented corporations and the government.
Mr. PRESTOWITZ: If we can take some of the organizations and some of the funding that has been going into defense and if we could put together joint ventures between, let's say the manufacturing technology program of the Defense Department and the auto industry on how to improve automobile productivity, and if we could take some of the activity that goes on in what used to be the National Bureau of Standards, shift that to working in something like Sematech, with the semiconductor equipment industry, we could reduce the risk of investment, we could provide additional resources to those industries and help to revitalize them.
NARRATOR: Others argue that the private sector will revitalize industries on its own if military spending stops taking so much of our resources. The federal government, says Clyde Prestowitz, should try to keep together the teams that developed weapons and shift them into civilian work.
Mr. PRESTOWITZ: Well, again, I think that the effort should be to try to put into those plants commercially-oriented projects. And I think one of the opportunities here is for a proliferation of partnerships between government and industrial plants.
NARRATOR: Are defense contractors ready for a transition to a more peaceful future? In the past, when they tried to find commercial markets on their own, they often had a hard time.
Mr. PRESTOWITZ: In the past, when we've tried it cold turkey, we found that, in fact, the mentality, the culture, the organizational forms and reactions that are inherent in defense industry are quite different from those in the commercial sector, and there has not been a great deal of success. Very few companies have really made that transition directly successfully.
NARRATOR: Some defense contractors lack skills in competing for civilian business, especially in marketing new products. They're going to have to learn to make products people want to buy and not rely on a single customer, the Pentagon.
Like many other corporations, defense contractors pay their top officers lavishly. Here is the 1990 compensation for the top executives of the top ten defense contractors:
1. McDonnell Douglas -- $598,000
2. General Dynamics -- $800,000
3. General Electric -- $5,032,000
4. General Motors -- $2,189,000
5. Raytheon -- $933,000
6. Lockheed -- $1,113,000
7. Martin Marietta -- $1,163,000
8. United Technologies -- $2,427,000
9. Grumman -- $479,000
10. Tenneco -- $2,073,000
NARRATOR: What should government do to help the country shift gears? Clearly, there has to be a strategy of economic growth for all Americans, not just programs for defense contractors and their employees. Layoffs in the defense sector, however painful, are only a small part of the overall problem.
Without growth, many of the nine million unemployed, the millions of part-time workers and those yet to be laid off by military contractors are unlikely to find work.
And using a peace dividend just to cut taxes or reduce the budget deficit, says Director John Gibbons of the Office of Technology Assessment, is unlikely to produce the necessary economic growth. The OTA says that short term dislocations from cuts in military spending can be minimized by retraining programs for workers, economic planning grants to communities, and targeted tax breaks for defense contractors investing in civilian markets.
The federal government has been slow to move even in the more limited effort to help communities, workers and companies directly affected by military cutbacks.
Mr. KOURPIAS: Two years ago, the Armed Services Committee got through the Congress $200 million to spend on training and retraining, some extended unemployment benefits, and I don't think that money has been touched yet.
Rep. GEJDENSON: The administration sat on the money. They wouldn't spend it. We finally had to be Nick Mavroules, who was one of the original writers of the bill, along with the Majority Leader Dick Gephardt, myself, Mary Rose Oakar and Ted Weiss, to hold a special hearing on why the money wasn't being released to get them on board.
NARRATOR: Finally, the money was given to the Labor and Commerce Departments to use for grants to defense-dependent communities and workers.
The Defense Department's small Office of Economic Adjustment, or OEA, with $5 million to spend, coordinates these efforts. It has been active since the 1960s helping communities adjust to the closing of military bases, bases such as Dow Air Force Base in Maine, which was converted to Bangor International Airport. The airport and private businesses nearby employed over 3000 civilians as of 1989.
Experience from the 1960s through the 1980s has shown that more civilian jobs can be created on closed bases than were there under military management. It takes vigorous community involvement to bring in new businesses and schools and some federal money for grants.
But layoffs by defense contractors are another thing, and there the Office of Economic Adjustment has much less experience and no real track record. Yet most of the jobs affected by military cutbacks will be in defense industries.
Mr. KOURPIAS: It's the United States Government that created that industry. Therefore, the United States Government does have an obligation to see that it helps the communities that supported that industry all these years.
NARRATOR: One cost-effective government activity is the program to help members of the US Army who are returning to civilian life. The number of military personnel is slated to be reduced about 100,000-a-year between 1992 and 1995. At 62 sites in the United States and overseas, the Army Career and Alumni Program, or ACAP, has already counseled over 70,000 soldiers and their spouses on how to look for civilian jobs.
JIM HOFFMAN: I stress the fact that we are not an out-placement firm. We do not provide actual jobs. We provide them training and guidance as to where jobs may be available.
NARRATOR: Jim Hoffman, the deputy of ACAP, emphasizes the importance of individual counseling.
Mr. HOFFMAN: We feel that the individual counseling's necessary because we can try to take some of that stress out of that transition process. And the husband and wife can go through this together, which will make it more of a family unit as they move from the military back into the civilian job market.
NARRATOR: The Army spends on $24 million a year on ACAP. The program has helped Army truck drivers locate jobs in trans-portation and military police find jobs in law enforcement. Four thousand employers are looking to the military to direct qualified ex-servicemen and women their way. The other military services have comparable programs without the individual counseling.
The federal government also retrains some civilian workers. But Machinists President George Kourpias is not impressed with the scope of the program.
Mr. KOURPIAS: And then when you do train or retrain a worker, where's he going to find a job? What is there left for him to work at, as far as an industrial plant is concerned?
NARRATOR: So again we come back to the refrain that's heard today from coast to coast: Jobs. Jobs. Jobs.
Clyde Beard is an unemployed carpenter.
CLYDE BEARD: If we spend, people are going end up paying me to spend it on what I do. And then, in turn, I'm going to turn around and buy a new car, or a new truck, or a house, or whatever, you know. So, the big money has to start flowing before we get our money, and I think it's just slowed down right now. This is the third recession I've been through.
NARRATOR: Meanwhile, some members of Congress are wondering when the savings from military cuts are going to reach most Americans.
Senator JIM EXON (D-NE) (Senate Budget Committee hearing): "Everybody is looking for the elusive pot-'o-gold at the end of the defense rainbow and wonder how much it is."
NARRATOR: The pot of gold will come only with the political will to cut military spending significantly to reflect the new realities of the post-cold war world and the political will to break the budget agreement between Congress and the president. That agreement today prevents savings from the military budget being transferred into domestic spending. The outcome will be decided in the rough-and-tumble of the American democratic system.
Reductions in military spending, in the long run, will strengthen, not weaken, the country. It seems obvious to many Americans that the savings, if spent wisely, can boost the economy, provide new jobs and bring back the sense of hope that has been undermined by years of accumulated domestic problems.
Mr. FAUX: We know that in the 21st Century, less than ten years from now, we have the technology to build high speed trains, to build vertical lift-off aircraft, to build automated highways, electric cars, computerized transportation systems. We ought to now be investing in that, not simply as a research and development issue, but in a clear plan to develop industries that can put people to work building those kinds of facilities.
Mr. BEARD: This is America and we live in a great country, I think. And we keep this attitude, we will prevail.
Admiral LaROCQUE: Well, we started this program with the simple question: Can we afford peace? Well, I think the obvious answer to most everyone is that, yes, we can afford peace. Put another way, the question simply is: Should we continue to build weapons or build America?
We obviously are of opinion in this country that we no longer need to maintain a military establishment of the size and composition that we had during the cold war with the Soviet Union. The question is: Can we kick this military-industrial habit and reorient the industries of America to build America rather than focus on building weapons? It's a matter of willpower, yours and mine.
And until next time, for "AMERICA'S DEFENSE MONITOR," I'm Gene LaRocque.
[End of broadcast.]
CONDITION OF USE: Credit "AMERICA'S DEFENSE MONITOR"
(Center for Defense Information).
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