US Defense Cuts Hit Industry Hard

AT General Electric Company's (GE) jet-engine plant near Boston, the first of 700 workers who will be laid off this year recently got their pink slips.

As part of his program of post-cold-war "defense conversion," President Clinton wants to help these workers find new jobs - or, better yet, to help their employers keep them on in new civilian lines of work.

Neither option will be easy, particularly in New England and southern California, and cities such as St. Louis and Seattle, where the defense industry plays a central economic role. In some cases, economists say, Mr. Clinton's policies may make the adjustment more difficult.

"All the worker training in the world and all the community assistance in the world will do no good if there are no jobs for those workers and no businesses for those communities," Clinton said Thursday in announcing his $1.7 billion defense-conversion package.

"We're trying to find any jobs; comparable jobs are not the issue," says Fred Breimyer, president of the New England Economic Project, a research group.

The White House package would include technology assistance for companies to adapt product lines from military to civilian uses, money for retraining laid-off workers, and aid to communities affected by defense-industry downsizing and base closings.

The jet-engine plant in Lynn, Mass., highlights the difficulties such efforts will face. GE has long been the most-prominent employer in this town. In recent years, the plant's employment has fallen from 10,000 to 6,300 and now is poised to fall even further.

GE and its archrival in Connecticut - United Technologies Corporation's Pratt & Whitney division - are the world's leading makers of aircraft engines, supplying both military and civilian markets. But the commercial-aviation business is in a severe downturn of its own. For GE and Pratt, which plans 6,700 layoffs, the best job-saving policy would be a healthy airline industry that could buy commercial planes.

The administration is studying options in this regard, but it has already made one proposal that will have the opposite effect, says Murray Weidenbaum, director of the Center for the Study of American Business at Washington University in St. Louis.

The Clinton energy tax would hit the airline industry, which has posted losses of $10 billion in the last four years, with a $1 billion fuel tax, Mr. Weidenbaum notes.

At GE, 60 percent of the 700 job losses will be managerial positions and 40 percent unionized production posts. Finding new work here for similar pay will be difficult, Mr. Breimyer says.

The regional economy appears to be approaching a trough, he says. "We see stability being approached in many industries. The period of decline appears to be over," he says. But even among healthy industries, few companies are adding workers.

Three percent or higher growth in the national economy could go far toward compensating for the defense slowdown, Breimyer says.