As US defense spending grows, so does regional rivalry for contracts

Thanks largely to President Reagan's defense buildup, these are days of relative feasting for what President Eisenhower called the military-industrial complex.

Yet for a large portion of the United States, swelling military budgets mean a relative loss in economic benefits when regions are compared with each other.

In particular, the 18 states in the Northeast and Midwest find themselves falling farther behind the South and West in arms contracts, military construction, and armed forces personnel deployment. The Northeast and Midwest already are harder hit than other regions by unemployment. And they are receiving relatively less than the rest of the country from the one area of federal spending that is growing steadily, their representatives argue.

In a report this week titled ''The Pentagon Tilt: Regional Biases in Defense Spending and Strategy,'' the Northeast-Midwest Institute cites the following:

While the military construction budget increased 43.4 percent between 1981 and 1983, the Northeast-Midwest regional share dropped from 20 to 15.3 percent. This is much less than the region's 45 percent share of the US population. During the same period, the gap between the Northeast-Midwest and the South and West in money spent per capita on nonprocurement items (pay, research, operations, and maintenance, totaling more than half the Pentagon budget) rose from 150 percent to 170 percent.

Since military procurement is spread over a number of years, it's too soon to know the precise regional disparity for President Reagan's first two years. But the Northeast-Midwest regional share of prime weapons contracts dropped from 72 percent in 1951 to 39 percent in 1981. Regional officials say the trend is continuing.

''The situation has gone from bad to worse,'' says Sen. Alan Dixon (D) of Illinois. ''We're financing the defense buildup, but deriving no economic benefit from it.''

This may be overstating the case; all regions in fact are receiving more from military spending under the Reagan buildup. But the Northeast and Midwest complain that their share is continuing to shrink. Others argue that when such things as procurement subcontracts are figured in, the Northeast-Midwest is not doing that badly.

But there is no question that enormous amounts of money are involved. The Defense Department accounts for some 78 percent of all federal purchases of goods and services. Economists at Data Resources Inc. of Lexington, Mass., estimate that 13 percent of the net new jobs created by 1987 will be defense related. The Regional Science Research Institute figures that regional and local spending tied to defense may be three times specific military outlays because due to a multiplier effect.

All of this impels representatives of the Northeast and Midwest to seek better treatment from the Pentagon. They are calling for: an expansion of the current $4 billion test program that targets procurement to areas of high unemployment; more competition in Pentagon purchase of goods and services; increased stationing of combat forces in the Northeast and Midwest (since they are closer to the NATO theater); and government technical assistance for industries in the region (especially small business) seeking defense contracts.

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