Hampton Roads' Reliance on Military Spending Comes Home to Roost

Norfolk Naval Base

For many decades the Hampton Roads region has blindly relied on U.S. military spending to power the local economy.  On a larger scale, Virginia has made the same mistake, but nowhere to the extent of Hampton Roads.  Far too little effort was made to attract other businesses and to diversify the local economy and, as a result, for years there has been a brain drain of college educated young adults who often choose to go to New York, Atlanta or Washington, D.C. for not only a more vibrant economy, but also for more socially diverse and welcoming to all communities.  Now, with government and military spending cuts the proverbial chickens are coming home to roost.  A piece in the Washington Post looks at the results of such shortsightedness and until recently social conservatism.  Here are highlights:

NORFOLK — The hammerhead crane hangs over the shipyards here, a pistol-shaped steel cage that could lift 350 tons in its day. It is rusting, its power system has been disconnected, and the U.S. military has no plans to ever employ it again. . . . . The crane is obsolete, built to lift turrets onto battleships the Navy no longer deploys. But its fate embodies the economic uncertainty that has swamped one of the nation’s most military-dependent regions.

For three-quarters of a century, the Hampton Roads area rose and fell with the federal defense budget, always confident that any cutbacks would prove temporary. Under President Obama, a new reality has sunk in. Spending cuts have stalled growth in the region, pushed thousands of blue-collar workers out of good-paying jobs and forced civic leaders to contend with a once-unmentionable question: how to survive if the military spigot never opens again.

The Norfolk area has suffered disproportionately, even among defense communities, from decisions by Obama and Congress to reduce the size and composition of military budgets. Economists and union leaders say that is because Hampton Roads has been late to follow the lead of other regions, including the Washington area, that took steps over the past decades to incubate private industries and balance out their reliance on defense.

Norfolk has become a national outlier, saddled with a workforce that is less educated than many comparable communities and an economy that has depended too much, for too long, on government.

Communities across America have struggled with economic transition in recent decades . . . Many of them have followed a similar playbook. They use tax breaks and other government incentives to attract clusters of businesses in knowledge-based industries such as technology. And they woo entrepreneurial, high-skilled workers who might work at those companies — or start their own businesses.

Norfolk had not launched such an effort, in earnest, until 2012. . . . They need one now. Defense spending has fallen quickly from making up more than half of the Hampton Roads economy to less than 40 percent.

Over the past two years, nearly 4,000 manufacturing workers in the region have lost their jobs, according to the Labor Department. Layoffs from defense contractors, including 700 members of the Boilermakers union who were given pink slips less than a month before Christmas, came as the Navy reduced spending on ship building and maintenance.
The cuts have drained buying power from the local economy. Compounding the problem, there are nearly 30,000 fewer military jobs in the region today than a decade ago, and the remaining members of the military stationed here have seen their pay curbed in recent years.

Federal defense contract spending in the region was $9.4 billion in 2015, a $1.5 billion drop from the previous year — and lower than 2009 levels, even before adjusting for inflation. . . . Norfolk lost more businesses in the economic recovery than any other major city in the nation, according to census data compiled by the Economic Innovation Group.

The debate over how to transition the region’s economy is not far along. The local chamber of commerce and a nonprofit economic development are seeking to identify “clusters” of industries that could carry the region going forward and have preliminarily found a few, including biotechnology and advanced manufacturing. But their report is not finalized, and local leaders are only beginning the process of figuring out how to seed the growth of those industries.

Regional officials do not hold much hope of defense spending surging again, at least not in a way that will lift Hampton Roads. Today’s Navy is shifting focus to the Pacific Ocean, which means more action for West Coast shipyards and less here. Across its branches, the military is spending more on information technology, which benefits higher-tech regions such as the Washington area.

Compounding the problem is the backwardness of the Republican controlled General Assembly that seeks to inflict right wing Christian beliefs on all of Virginia and which will not even take climate change seriously even as it threatens some of the major military bases in Hampton Roads.  Since taking office, Democrat Governor Terry McAuliffe has been on a mission to attract new businesses and industries to Virginia and argued that Virginia must be welcoming to all.  So far that message has fallen on deaf ears with the Virginia GOP.