Sequestration’s Effects on Defense, the Economy and Metro Areas

On July 2, the Metropolitan Policy Program and the defense industrial base project in the Foreign Policy Program at Brookings joined forces to examine economic opportunities of mutual interest and potential collaboration. The event also examined the effects to date of sequestration, particularly upon American foreign and national security policy. 

Bruce Katz keynoted the event with a focus on the research of his program as presented in his new book, The Metropolitan Revolution.  I then convened a panel that included Richard Bush, director of the Center for Northeast Asia Policy Studies at Brookings; Mackenzie Eaglen of the American Enterprise Institute; Nelson Ford, CEO of LMI; and Jay DeFrank, senior vice president at Pratt and Whitney.

Several themes ran through the discussion, and reflected the synergies and common themes that can emerge when one combines metropolitan studies with defense budgeting and economics:

• Sequestration is an inefficient tool for dealing with federal programs of relevance to national security as well as metropolitan renewal.
• It is not so much the magnitude of sequestration cuts—to defense, or to key domestic “discretionary” programs such as in education, science research, and infrastructure development—that causes problems (though most speakers today did view the magnitude of the 10-year sequestration cuts, should they continue, as excessive).  Rather, it is their indiscriminate character.
• Reducing budgets modestly while increasing the flexibility of key agencies and metropolitan areas to access and employ federal funds in ways that suit their needs would be less problematic.
• Indeed, there are numerous existing federal programs that could be scaled back. Mackenzie Eaglen emphasized the unnecessary growth in the civilian workforce within the Department of Defense (though her comments were not an endorsement of the current furlough approach to coping with sequestration);
• Yet the process of cuts cannot go too far.  Even with new tools such as public-private financing partnerships for key metropolitan projects, the federal government has a role to play.
• For example, science, technology, engineering, and math (“STEM” subjects) are indeed national priorities, relevant to any serious metropolitan economic strategy and essential for future national security.  This pertains to education and to other forms of national and public sector investment.  But speakers at the event underscored how programs of lesser priority, for example for generous health care benefits for military retirees (as underscored by Nelson Ford), have stronger political patrons in many cases.  This is unfortunate for the country and its future economic and national security prospects.
• On balance, while many of the comments highlighted problems in current national policy, and decried the current dysfunction in Washington, there was a theme of optimism as well.  American metropolitan areas are innovating in ways never seen before, and not generally seen elsewhere in other countries.  Manufacturing is on the ascent, partly thanks to the North American energy revolution, but also to the conscious decisions and efforts of the nation’s mayors and other local officials and planners, and the strength of the nation’s institutions of higher education.  Models for innovation and growth can be found from New York to northern Ohio to Portland to Detroit, and beyond.
• And what cities as well as the defense sector need, we know how to create and build in this country—through strong education, robust R&D, investments in infrastructure, public-private partnerships, and the like.  If Washington can make some modest contributions towards playing its role in the process, we can truly get on with the job of national economic renewal and of restoration of the pillars of U.S. national power more generally.