Obama Could Create Jobs And Support Defense

Since the President probably is still working on the big economic proposal to be unveiled in September, I would like to offer him a few thoughts. Over the past two and a half years the administration has put forward one spending initiative after another. It is difficult to remember them all or to distinguish one idea from the other. How many times can the White House advocate for more spending on infrastructure before the idea, however plausible, loses credibility with Congress and the American people?

President Obama could take a leaf from President Roosevelt’s playbook during the last great economic downturn. During the Great Depression the federal government spent funds from stimulus programs such as the Works Project Administration (WPA) to support expansion of shipyard capacity and even to build warships. Pre-war shipbuilding made a significant contribution to positioning the United States to become the Arsenal of Democracy. It also helped win the battle of Midway; the aircraft carrier Yorktown was built with Roosevelt-era stimulus funds.

The administration likes to tout its stimulus plan as having halted the economic downturn and prevented even more job losses. I would suggest that continuing high levels of defense spending probably had a lot to do with this. In fact, on a dollar-for-dollar basis, defense spending probably had a greater positive impact on the economy than infrastructure spending because the money generally went for high value products and services.

President Obama would be wise to consider opportunities to invest in the defense sector as a way of both stimulating the economy and supporting national security. Let me provide just one example. Both China and Russia have just demonstrated their first entrant in the competition for a fifth-generation fighter, something the U.S. already has in the F-22. The fact that the Russians and Chinese have entered the competition earlier than anticipated is a cause for alarm since the U.S. halted the F-22 program at only 187 aircraft. Mr. President, how about providing the funds to restart the F-22 line and build another 50 or 60 aircraft? That is a lot of high-tech jobs and a significant improvement to national security.

A less well recognized candidate for increased government investment that would create jobs, improve infrastructure, remove impediments to economic growth and help national security is the domestic shipbuilding industry. Simply put, the United States has always supported a domestic shipbuilding industry and merchant marine on national security grounds. The centerpiece of this policy is the Jones Act, passed in 1920, which requires that vessels engaged in trade between two U.S. ports be American-built, owned and crewed. This is important for national security because the Navy both acquires its support vessels — tankers and supply ships — from U.S. shipyards and uses that same industrial base for overhaul and maintenance for its surface combatants. This industrial base could not be sustained on Navy funding alone, hence the need to support commercial activities such as the construction of Jones Act ships.

The first thing that the President could do is provide continued funding for the Title XI Federal Ship Financing Program. Title XI provides loan guarantees on contracts to build or overhaul commercial vessels in U.S. shipyards. The guarantees can be employed to cover the production of any type of commercial vessel including barges and offshore oil rigs. Title XI encourages the maintenance of commercial facilities and a skilled workforce that can also be employed in constructing and maintain Navy vessels.

An even bigger boost to the nation’s economy and national security would result from an administration decision to expand implementation of the Marine Highway Initiative. The MHI is intended to accelerate development of waterborne shipping services thereby reducing congestion on land as well as saving money since waterways shipping is extremely cost effective for the movement of high volume and bulk freight. Because of the Jones Act, initiatives under the MHI that involve funding support for the construction of carrier vessels would go to U.S. shipyards. The results would be a double boost to the economy (ship construction and reduced freight costs), the creation of jobs and support for national security. Mr. President, put more money behind the MHI.