What war economy would do for San Diego

Once again, Americans are beginning to talk about guns versus butter. Do we want to remain a military superpower, or do we want our social safety net and our corporate welfare programs?

In San Diego, guns are butter. Directly and indirectly, military spending accounts for more than 20 percent of the local economy and one-fourth of the jobs.

Therefore, it is prudent for San Diego to plot a course in case the nation’s voters express a desire to turn swords into plowshares — to convert, at least partially, military weapons, technologies, and personnel to peaceful uses. The concept goes by several names, including arms conversion and economic conversion, and in the past, it has generated far more talk than action.

Nonetheless, San Diego is considering the question. Leadership of the San Diego Association of Governments is discussing the matter and may appoint a committee to study the ramifications of possible arms conversion, says Marney Cox, chief economist for the organization. The entire establishment — elected officials, universities, etc. — is “very supportive of more, not less, military” but may have to bow to the national will. There are small groups in the county devoted to economic conversion, but their influence is anemic.

Now, United States military spending is burgeoning. Officially, it is around 20 percent of the federal budget. But critics say that’s vastly understated. If you take into account supplemental defense budgets, veterans’ benefits, military retirement, State Department defense spending, military-related foreign aid, Homeland Security, the Department of Energy nuclear arsenal, and the interest on the debt related to defense spending, the military takes up about half of the budget, say peace movement leaders.

Whether that’s true or not, the national discourse is getting more dovish. Polls show that United States intervention in certain Greater Middle East countries is not popular. Republican presidential candidate Ron Paul has always opposed military buildups, and now two of his brethren — Mitt Romney and Jon Huntsman — are expressing reservations, and dropout Haley Barbour considered taking a bold antiwar stance.

However, there aren’t many antiwar protests these days, and nonmainstream peace proposals get nowhere. The “Nuclear Disarmament and Economic Conversion Act” was introduced every congressional session between 1994 and 2009 and never got near first base; this year it has been reintroduced in somewhat different form. It’s not expected to fly.

But, increasingly, people are quoting moderate voices, often from the past, telling how military spending is a critical — often deleterious — part of the American economy. You can read today that the late, great American diplomat and historian George F. Kennan said during the cold war that “Were the Soviet Union to sink tomorrow under the waters of the ocean, the American military-industrial establishment would have to go on, substantially unchanged, until some other adversary could be invented.” Many consider that prescient, indeed.

Once again, publications are quoting former president Dwight D. Eisenhower’s warning about the military-industrial complex, along with his lesser-recited statement, “Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed.” Eisenhower, a retired general, was a moderate Republican.

Republican Robert Gates, who just retired as defense secretary, said this year, “Given America’s difficult economic circumstances and parlous fiscal condition, military spending on things large and small can and should expect closer and harsher scrutiny.”

Gates, a longtime cold warrior, laments the state of affairs. He wants America to throw its weight around — one reason he may have departed. But, says Cox, “Gates is saying that in the old days we were able to support a lot more military activity because the economy could afford it. That is changing. With our eroding economic base, we can no longer support these defense expenditures.”

A study published this spring by the San Diego Military Advisory Council indicates that with the ripple effect (events in one industry spreading out to other industries), military spending in San Diego in 2009 generated $30.5 billion of economic impact and generated 354,627 jobs, or 26 percent of regional employment. This year, the economic impact should be $34.7 billion, while military-generated jobs grow to 385,391.

Direct spending grew by 10.1 percent in 2007, 14.1 percent in 2008, and 12.3 percent in 2009, according to the report. That was impressive growth in some bad years. Growth for 2010 and 2011 is projected at 5 and 3.5 percent, respectively. Kelly Cunningham, economist for the National University System Institute for Policy Research, notes that San Diego County personal income dropped 1.1 percent in recessionary 2008 and 2009, compared with a national decline of 1.8 percent. San Diego’s smaller drop resulted from a $1.9 billion jump in federal payrolls, $1.5 billion of which was military.

Had federal and military pay remained constant, along with other transfer payments (Social Security, unemployment compensation, welfare, etc.), San Diego’s personal income would have plunged 3.1 percent; that would have been one of the worst performances in the nation.

A big rise in military pay has helped. According to the U.S. Department of Commerce, the number of active duty troops in San Diego only rose from 109,800 in 2001 to 112,000 in 2009. However, compensation leaped 97 percent during the period, 53 percent adjusted for inflation, says Cunningham.

According to the San Diego Military Advisory Council, 58.4 percent of direct military spending in San Diego comes from procurement, such as manufacture of equipment. Active duty salaries are 26.8 percent, retirement and veterans’ benefits 8.9 percent, and civilian salaries 5.4 percent.

Just as with pro sports, the arts, and redevelopment promoters begging for government handouts, the ripple effect can be exaggerated, consciously or unconsciously. Still, says Cunningham, “When you are dependent on one customer, you are dependent on their whims or decisions. It’s better to have more diversification.”

Of course, arms conversion, if there is any, doesn’t have to hurt San Diego. “It’s possible we could benefit,” says Cox. “The military is moving from the East Coast to the West Coast. Secondly, we have a heavy concentration of Marines, and they tend to be disproportionately less impacted by cutbacks.”

Any conversion process will likely be slow, giving metro areas such as San Diego time to adjust. And there will be plenty of political haggling that could considerably water down any efforts. Still, San Diego is doing the right thing by preparing for any eventuality. The problem is that nobody knows quite what form conversion might take, and the decisions will be made elsewhere.