Defense Downsizing Creates Need for GI Bill-Type Aid for Industry Victims
Amid worrisome news of military base closings, job losses and converting defense industry to civilian work, keep in mind that we did this kind of thing successfully in 1946.
That was when the GI Bill of Rights helped the U.S. economy make the transition from World War II.
It may be harder this time, even though we were poorer then.
The United States had suffered a decade of Depression before the war and feared falling back into it. But the Servicemen’s Readjustment Act of 1944--the GI Bill’s formal name (and an indication that we planned ahead in those days)--provided veterans with job placement benefits, four years of education or vocational training, 52 weeks of unemployment insurance at $20 per week and Veterans Administration-guaranteed loans to buy a home, farm or business.
The economy, which declined a terrifying 12% in 1946, stopped falling and began to grow again. Transition problems solved themselves.
To be sure, there was enormous pent-up demand in those postwar years. Auto plants had been turning out tanks, so there were waiting lines for cars; advertisements promised “A Ford in Your Future.” The modern defense industry began its Cold War.
Today, that defense industry is shrinking, and the waiting lines are at unemployment offices, not car dealers. We worry that defense cuts will dump the economy back into recession, yet we fear that we lack the resources to brake a downturn.
But the point about the GI Bill is not that it was a massive federal spending program. Rather, it provided broad support for individuals. It didn’t train a soldier to be a TV repairman--the new industry of that day. Rather, it said: Here’s tuition for school or a loan for a house or business.
The more today’s programs are geared to individuals and to inspiring entrepreneurs to strike out on their own, the better they will work.
Pain is unavoidable. President Clinton’s program, announced Thursday, promises $20 billion over five years to pay for worker retraining and severance and to help companies convert defense technology to civilian use.
“But the problem is one of scale,” says Robert Paulson, head of defense industry consulting for McKinsey & Co.
As Clinton is offering $20 billion to ease the transition, he is reducing defense spending by $60 billion more than previous administrations had budgeted. The outlook, says a White House aide, is that 2 million people will lose their jobs in defense downsizing, 400,000 of them in the uniformed military.
The time has come, the President and Congress are saying, to reduce the military complex--481 Pentagon facilities nationwide--that has grown since World War II. And they’re right. What remains for most Americans, in defense-related work or not, is to get a handle on the perils and consolations of the transition.
Some large defense companies will benefit immediately from the $1 billion Clinton wants to spend this year on conversion of defense technology. Rockwell International, Hughes Aircraft and Raytheon have all adapted military electronics to such products as fax machines, business telephones and microwave ovens. Lockheed has a growing subsidiary that manages commercial airports.
But the real test will come in encouraging entrepreneurs to split from defense work to create something new. It has happened before--although the connection is usually indirect. The Air Force built the first computer, but the military did not create the computer industry. The space program’s need to miniaturize electrical circuitry led to the microprocessor, but NASA did not create the electronics industry.
One problem is that defense work produces as much paper as product--endless filings with the government. And that’s not entrepreneurial. B. Kipling Hagopian, managing partner of the venture capital firm Brentwood Associates, suggests that in the transition, “defense employees go to work for small companies to get the feel of entrepreneurial culture.”
Tim McNamar, managing director of the Oppenheimer & Co. investment firm, suggests that the Pentagon open its computer databases as the National Institutes of Health did years ago. NIH created Medlars, a national database of medical research, giving physicians everywhere access to the latest on, say, skin grafts or blood chemistry. The Pentagon’s computer bases, with 50 years of technical research, could help new business.
Mainly, defense employees and military personnel should take stock of their skills and stick with what they know. If your job is writing proposals for government contracts, fine; think about technical writing or technical instruction--both growing fields. Clinton’s support for education and training could be helpful here.
Communities shouldn’t get their hopes up about new uses for closed military bases. First will come environmental clean-up of the sites, which is going to take billions in federal expenditures. Indeed, the first beneficiaries of the base-closing program will be environmental engineering firms such as Bechtel, Fluor, Parsons and Jacobs Engineering.
Another beneficiary, ironically, will be the military.
“Let’s face it,” says a defense expert. “We have had four times too many bases in this country since World War II. Keeping them open is very expensive and takes money from more legitimate military needs.”
Let’s face this too: California has benefited greatly from defense spending for half a century. Today’s distress is the price any company town pays when the inevitable downturn comes.
But don’t panic. Defense industry won’t disappear. On the contrary, it will probably level out at $200 billion a year in revenues. But now that the time has come, defense reductions should be quick and decisive.
That’s how it was done in 1946, when the nation demobilized the wartime military--with help from the GI Bill. If we could repeat that history, a lot of soldiers, sailors, defense employees--all of us--would have less to worry about today.
