Defense Braces for a Bad Decade

MilitaryThe unthinkable has happened. Sequestration — automatic cuts falling equally on the defense and non-defense parts of the budget — is now in effect. And whatever the results of political maneuvering in the weeks and months to come, “The defense industry,” as a recent article in Politico put it, “is bracing for a bad decade … Senior Republicans on the House and Senate Armed Services Committees acknowledge a shrinking military is inevitable as the U.S. withdraws from Afghanistan after more than a decade of war.”

Communities and workers dependent on Pentagon contracts are bracing too. They know cuts are coming. But they are mostly in the dark about where they will fall.

It’s a mental health axiom that when you feel out of control, you should find ways to take action on what you can control. Rather than just sitting on the sidelines, watching in anxiety and frustration as this Washington catfight proceeds, defense-dependent communities and workers should get going on the proverbial Plan B. They can start figuring out how to diversify their economic base to cushion the effects of the coming downsizing.

There is help at the federal level — community planning grants, worker retraining programs, a network of Manufacturing Extension Centers offering technical assistance to businesses looking to expand into new areas. However, these programs are small and insufficient to ease this economic transition. Members of Congress should act now to hold hearings and get a handle on strengthening and supporting these transitions.

Some surprising actors are getting ahead of this curve.

Last September Florida Republican Gov. Rick Scott announced $850,000 in Defense Reinvestment Grants targeted, in part, to “help defense-dependent communities develop strategies for expanding their non-defense economy.”

The mayor of Huntsville, Ala. (aka “Rocket City”) has put a premium on diversifying an economic base heavily dependent on the space and defense industries. Since the recession his “Energy Huntsville” program has worked to build an energy business base linked to education and training. A new nonprofit, Nexus Energy Center, has partnered with a local technical college to train 200 students in renewable energy installation skills. It’s a start.

Recent experiences in other industries facing transition can be mined for lessons to apply to the defense downsizing. Newton, Iowa, lost 4,000 jobs in 2007 when its Maytag plant shut down, for example. The town created a nonprofit development corporation to coordinate local, state and federal resources for business development in Newton, and a Revolving Loan Fund to help start-ups and expanding companies with “gap” financing.

Newton also attracted TPI Composites, a company that makes the blades for wind turbines, and Trinity Structural Towers, which makes the towers they’re mounted on. The state government has helped by developing an innovative green apprenticeship program combining classroom studies and practical training in renewable energy and efficiency jobs, and provides a stipend during training. The extension of the wind power production tax credit in the recent “fiscal cliff” deal illustrates the kind of federal action that will be necessary to facilitate transitions like Newton’s.

And like Bath’s, in Maine. Bath Iron Works (BIW), Maine’s largest employer, has spent several decades deriving most of its revenue building and maintaining destroyers for the Navy. Maine’s Republican senator, Susan Collins, worries about BIW’s “reliance on having just one customer…It is important,” she says, “that BIW diversify its workload.”

Bath has begun to do so by participating in the DeepCWind consortium, whose goal is the development of a fully functioning deepwater floating wind energy project off the Maine coast. In 2011 the company characterized this effort as “fill[ing] the gaps in our workload” but never “equal[ing] the volume of work in a naval surface.”

This view needs another look. President Obama’s inaugural address signaled that climate change would be elevated on the national agenda, and the Navy’s shipbuilding budget is very much in doubt. In December the economic forecaster Zacks Equity Research gave a long-term Neutral recommendation to BIW’s parent company, defense giant General Dynamics. The reason? “The future prospects of the company are tied to the U.S. defense budget.” Uncertainty, in other words.

It’s time for a Plan B.

Miriam Pemberton is a research fellow at the Institute for Policy Studies. Contact her at Miriam@ips-dc.org. This op-ed originally appeared in the Richmond Times-Dispatch.