Key Challenges for U.S. Go Unaddressed With the End of the Cold War

It is ironic that the end of the Cold War has reversed many traditional political positions on national defense. It is mainly the members of Congress who were critical of Pentagon spending who are now opposing so hard the relatively few cutbacks in the defense budget. For example, the evaporation of the Soviet strategic threat--the original justification for the Seawolf submarine--is not deterring the representatives from Connecticut and their allies from pushing to restore that clearly sensible budget cut.

Sadly, the cynical formula is still operating: You can convert the most dovish member of Congress into an instant hawk simply by threatening to cancel a major defense project in his or her state or district.

The Connecticut case is only the most egregious example. Other states with military bases or defense contracts in danger of being terminated are assembling their congressional delegations to fight the battle of Pentagon pork. Often these are the same folks who criticized the military buildup of the early and mid-1980s.

Unfortunately, the current effort in Congress to shield specific regions from the economic impact of lower defense spending arises because the leaders of the federal government--Republicans and Democrats alike--have not faced the five key challenges that arise from the end of the Cold War:

* Reduce the military force structure to the lower level of funding likely to be available. President Bush and the Congress have to make those difficult choices that the Pentagon has taken only hesitantly since the mid-1980s--substantially reducing the procurement of weapons systems.

Promptly carrying out the initial $50-billion budget cut will reduce the great uncertainty that hangs over the defense companies, their employees and families. The great majority of the people involved will keep their current jobs because defense spending is going to continue at historically high levels, albeit lower than now. But nobody knows who will be the lucky survivors. Thus, the pressure is growing to subsidize the “conversion” of defense companies. But conversion is a snare and delusion--or will-o’-the-wisp, at best.

* Maintain the social safety net for laid-off defense workers. Unemployment is rising in centers of defense production. As a compassionate society, the United States provides a great variety of help to people caught in that situation. Nevertheless, there is no justification for providing special benefits to unemployed defense workers. They should be treated as generously as, but not more or less than, people who lose their jobs because of lower housing sales resulting from tight monetary policy.

* Provide adequate support for science and technology. Because the military is a major financier of research and development, a large reduction in defense spending means a substantial decrease in total federal support for science and technology. That curtailment is troublesome because R&D; is a major contributor to economic growth and thus rising living standards. However, this does not justify using the military budget to finance civilian R&D;, as some special interests are now urging.

Yet government can take some sensible actions without spending a lot of money. The Department of Defense should reduce its barriers between defense and commercial technology. Consolidation of military and industrial product specifications would help. Increasing the procurement of commercially produced high-tech products that meet military needs will strengthen the private-sector base for innovation.

* Deregulate the military procurement process. A viable group of experienced companies is needed to meet current defense needs and to provide a base for expansion should the international outlook worsen.

Unfortunately, American business--military and civilian--is faced with a major expansion of burdensome regulations. Now is the time to streamline the military procurement process. That would reduce the overhead costs of defense contractors, enabling the armed services to get more weapons systems for the money they spend. Reducing the bureaucratic paperwork would also increase the ability of defense contractors to transfer new technology between civilian and military products.

We can raise the effectiveness of the money spent on military procurement by removing the numerous special benefits inserted into military procurement law by members of Congress anxious to protect defense jobs in their states and districts.

* Defense companies need to continue the substantial downsizing underway. They must maintain the financial strength to operate in this difficult market environment, or they will go under. The history of past conversion efforts, and surely they have been numerous, produces a long and sad litany of failure.

Forcing defense contractors to try to penetrate markets alien to them is no favor to their employees--who would find themselves abruptly laid off when those ventures failed. It is foolhardy to ignore the evidence. As a typical study of past experience concluded: “Detailed research has not identified even one successful product in our economy today which was developed through a military-to-civilian conversion approach.”

The best national economic policy to accompany defense reductions is for the federal government to focus on the responsibilities uniquely its own--developing growth-oriented monetary and fiscal policy and reducing tax and regulatory obstacles to economic expansion. The real peace dividend will occur when defense workers and other productive resources move to the civilian economy.

The size of the defense cutbacks now contemplated is a smaller proportion of the U.S. gross domestic product than was the case in the reductions in military outlays in the 1950s and ‘60s. The basic lesson that the nation learned after Korea and Vietnam--and also after World War II--is still pertinent: Once the federal government erects an adequate framework for a growing economy, it should get out of the way.