Bill Clinton photo

Press Briefing by Deputy Assistant to the President for Economic Policy Gene Sperling; Special Assistant to the President for Technology Policy Dorothy Robyn; Director for Defense Policy At the N.S.C. Steve Jones; Deputy Associate Director for National Security At O.M.B. Don Gessaman; Director to the N.S.C. for Defense Conversion Policy David Lane

March 11, 1993

The Briefing Room

9:20 A.M. EST

MS. MYERS: Without further ado, defense conversion.

MR. SPERLING: I'm Gene Sperling. I'm the Deputy Assistant to the President for Economic Policy. We have a few other people here who are experts in the area of defense conversion and will be available if there are any technical questions. Dorothy Robyn who is the Special Assistant to the President for Technology Policy; Steve Jones is the Director for Defense Policy at the National Security Council; Don Gessaman is the Deputy Associate Director for National Security at OMB; and David Lane is another Director to the NSC for Defense Conversion Policy.

Today we will be at the Westinghouse -- the electronics service division of Westinghouse, where we will be announcing our defense reinvestment and conversion policy. This will be a detailed description of what our Fiscal Year '93 defense conversion program will be for '93.

Q: Is it part of the stimulus package?

MR. SPERLING: Give me a chance. I mean, the first major point is that this is a major sea change in economic policy. This is a sweeping policy shift from the last 12 years in a couple of major ways. For example, in 1990 there were $200 million allocated for defense conversion. It is only recently -- it took over 18 months for any of that money to get out of the Defense Department to Commerce or Labor, and only recently has most of it been spent.

We are coming from a period where, when at DARPA, where Craig Fields had tried in 1990 to integrate military and civilian considerations at DARPA where he was fired, and by a period where there had been no real belief in having in integrated approach to defense reinvestment and conversion.

In 1992, in October, Congress passed the Defense Reinvestment and Conversion Act. This appropriated -- it had been reported $1.7 billion; it is actually $1.4 billion for defense conversion. This money was never spent by the Bush administration. The act was fought for and led largely by Chairman Aspin, and was bolstered considerably by then-candidate Clinton's support of such programs, particularly his manufacturing and technology papers.

This will be -- the announcement today, therefore, is the announcement of this money being released, the details, line by line, of where this money will be going as part of a four-part defense reinvestment and conversion strategy.

In addition to the $1.4 billion from the 1992 Defense Reinvestment and Conversion Act, there will also be an additional $300 million that would be part -- come from redirection of existing funds and from the stimulus package. Together, that comes to $1.7 billion.

This is just the beginning. This is the announcement of the details. We also will be giving out what our general investment patterns will be throughout the President's term, throughout the entire budget for Fiscal Year 1993 to Fiscal Year 1997. And I will walk through those as we are now handing out the papers that we will be giving out today.

All the people here have been working pretty much night and day on putting together the program you're going to see now. They will be continuing to work night and day as part of an overall interagency working group that is under the direction of Bob Rubin of the National Economic Council. The meetings will be chaired on a day-by-day by members of both the National Economic Council and the Defense Department prominent participants. And chairing it will be Bo Cutter, who is the other Deputy for Economic Policy at the National Economic Council. William J. Perry, who is the Deputy Secretary of Defense and has been very engaged in these activities professionally, over the last several years, and John Deutch, who is the designee for Assistant Secretary of Defense for Acquisitions.

Overall, they will be putting out a white paper that will be similar to the technology paper in the next few weeks which will detail our long-term strategy, which will be from '93 to '97, will be a $19.5-billion defense reinvestment and conversion program.


MR. SPERLING: All of that is new money, but it includes the money that comes from the 1992 Defense Reinvestment and Conversion Act -- $1.4 billion. So it is --

Q: grow to $1.4 billion?

MR. SPERLING: It was my understanding --

MS. ROBYN: -- no indication of what spending was to be in the out-years?

Q: Beyond the $1.4 billion it was unspecified?


MR. SPERLING: If everybody has their papers now, the package is generally seen as having four major directions. One is worker training and adjustment. Quite simply, it is the strong belief of the President and this administration that from soldiers to scientists, it is morally right and economically right that we seek to redirect the energies and talents of people who are responsible for winning the Cold War to the new investments in a new economy that we need for national economic security, national security in the post-Cold War.

This money will include for 1993 $150 million for government employer-sponsored training programs for displaced defense workers. We, by the way, at the end of the handout is a paragraph description of each program which we hope will be helpful in ciphering through.

I want to say that on the worker training, over the five-year period, the major investment will be coming from the $2- billion Displaced Worker Initiative that Bob Reich is coordinating out of the Labor Department. This is an effort, as you know, to have a more universal and unified worker training system that would deal with workers who have lost their jobs, whether through defense conversion, trade or other dislocations. This will be the major source of funding for that.

In 1993, there is a specific $150 million that will be transferred -- $75 million to the Labor Department and $75 million to the Veterans Administration.

Q: When you calculate these programs and the amount you're spending, it includes spending on programs that assists people besides dislocated defense workers? It includes dislocated, like trade and other things.

MR. SPERLING: Let me tell you exactly what we've done on the funds. What we have tried to do is allocate the amount that we feel can conservatively be estimated to go to defense conversion and reinvestment. So out of the $2 billion per year in worker training, we only allocate $300 million to $400 million for this program. That is a best estimate of the percentage of people that will use worker training money from the defense conversion. There is no exact science. We have tried to give conservative estimates. On technology programs that we feel will substantially benefit defense companies or companies that have relied on defense contracts, we only count 50 percent of those funds as being part of the defense conversion initiative.

So we're trying to do -- is take a conservative estimate -- in other words, if there is a $200 million technology program that we feel, overall, would overall benefit companies that are losing business from contraction in defense, as I said -- I'm sorry, I said it was $200 million -- we would count $100 million as being part of our defense conversion program. And that is just -- so we just want to be as clear as we can on what we're doing. We believe that was a conservative estimate. We believe on most of those programs that they will overwhelmingly benefit companies and workers and communities that have been hit by the defense cutbacks. But we have tried to do the best estimates. Fifteen to 20 percent was the best estimate of how much of the worker training money and our overall program would be used by soldiers and workers that were affected by defense cutbacks.

Q: Gene, the overall $1.7 billion, is this different from the $1.7 billion that was in the pipeline that he announced in Santa Monica. he was going to release for defense conversion?

Q: Question?

MR. SPERLING: The question was whether this was different than the $1.7 billion that has been talked about as being in the pipeline and that the President mentioned in California. It is slightly different in the sense that the $1.7 billion was the number that was frequently used by everybody -- by Senator Nunn -- everybody. When we had our budget experts go through, it in fact, turned out to be closer to $1.4 billion. Coincidentally, we have $300 million from redirection in the stimulus plan. So while it was $1.7 billion, I wanted to go out of our way to explain that it is not exactly -- it works out to the exact same number, but is actually $1.4 billion that was from the 1992 Defense Reinvestment and Conversion Act, plus $300 million.

Q: But this is money that's been announced before.

MR. SPERLING: This money was appropriated but never spent. This is the first time that this is being -- that an entire plan is being on how to allocate this money. And what we are also doing is laying out, even thought the defense conversion working group is still hard at work on the white paper, we are also releasing what the overall revenue investment stream will be from `93 to `97. But today's announcement is an announcement of the release of the 1993 funds and exactly how that money will go to. And if you turn to the -- if you look at the first chart, the first chart shows the broad categories of investment from `93 to `97. The second chart is a line-by-line description of the initiatives that will be used for our 1993 program.

Q: I'm interested in the U.S.-Japan management training program, particularly item three, "provide opportunities for direct involvement in research". Does that mean that we're going to be sending scientists there or are they going to have an opportunity to get into our research here, or how is that going to work?

MS ROBYN: That is a program that has actually had two rounds of competition and awards. We include it here, although it is an ongoing program. We include it because this was money that was not in the Bush baseline that Congress added as part of it's dual use-defense conversion strategy. There have two rounds of competitions awards to universities --

MR. SPERLING: American universities.

MS. ROBYN: American universities, yes. The idea is that there is an enormous amount of technology in Japan that U.S. corporations and the Department of Defense want to get access to; that we have done a very poor job as hunters and gatherers of other people's technology. This is an effort to train U.S. scientists in Japanese language skills so that they can bring technology back from Japan into the United States.

Q: Gene, before the buses go, can I ask kind of a bigpicture question? Do you have a rough idea of how many people now working within the defense realm are going to be out looking for jobs? And where are they going to find jobs considering the number of people being squeezed out of major private enterprises, be it car makers or IBM? How many people are coming out of defense, and where are they going to find jobs?

MR. SPERLING: I don't have an exact number, but I could try before the end of the day. When you're talking about the private sector, though, the important point is that if you look at the -- I mean, look at the Westinghouse as an example. Westinghouse was a company that -- this particular section of Westinghouse did predominately defense. In 1986, they were at just 16 percent of the work was nondefense. They are now moving on a path towards 50 percent. Air control things that were being done for the military, they are now selling for drug detection. They are now selling command-and-control surveillance, they're using now for infrastructure, investments to control the movement of commercial assets such as long-haul trucking companies and dealing with rush hour traffic.

So part of the goal -- were not going to claim that there are not going to be any dislocations. There will be some dislocations. But I guess what I'm saying is that we have an opportunity here to do something that has never been done before, which is to take a comprehensive and integrated approach to a defense drawdown and to have both on worker training side for those who were dislocated. But if you look at the overwhelming amount of funds, of the $20 billion, the overwhelming amount of funds is in new technology investment, is in investing in community economic strength. All of these things offer the opportunity to minimize the amount of dislocation and to minimize the amount of people that actually lose their jobs.

The Westinghouse that we'll go to today is a success story. It is a success -- it is an example of the kind of thing that could happen at the national level.

Q: Do you have some idea of how many workers will be affected or may benefit from this program, whether dislocated or not? I mean, is there some calculus of numbers of people affected that lie behind these numbers? I mean, obviously you just didn't take these numbers and throw them out there and decide they'd just land wherever they landed, did you?

MR. SPERLING: On the worker training, the chief economist at the Labor Department, Larry Katz, did calculate what he thought was the projection. Why don't I get that to you -- I won't be at the event myself, but I will -- Dorothy or Paul Begala or somebody will have that. I'd rather give you a right answer than a rough guess right now.

Q: Why is Westinghouse a success story if they've laid off 4,500 workers during the course of the transition from Cold War to peacetime?

MR. SPERLING: Well, you also remember we just went through an economic recession. We've also been through the worst job growth period in the last three years. Many, many companies have been hard hit. But they are a success story to the degree that they have been able to use their talent, their specific talents that were used in specifically defense capacity to civilian and commercial uses, and the notion, the simple notion of air traffic control that could have been Air Force, now being use for drug detection, command control being used to help traffic problems in the cities. This is the perfect example of taking scientific knowledge, scientific talent that we have in our country right now, and rather than letting that go to waste, redirecting that to needs that we have in our communities and for civilian economic growth.

I mean, when you think about what it takes for a person to get a Phd in science it is a long process. It cost that person and it costs our society a lot of investment. When a scientist gives up their profession that is a tremendous loss when you consider what needs to be done to replace that one person. When you have a plan that redirects, whether it's through redirection through the Energy Department's work, through the Commerce Department's towards civilian technology, towards our civilian economic needs, it is tremendously beneficial to the economy.

Q: Do you have any estimate of how much federal money the Westinghouse company received to enable to make this transition?

MR. SPERLING: No, I don't.

Q: Did it receive any?

MS. ROBYN: It does have DARPA funding, I think.

Q: DARPA is not a defense conversion program or wasn't when --

MS. ROBYN: No, DARPA has always been a duel use agency.

Q: But not a conversion program.

MR. SPERLING: Well, no, but your point raised is the right question. DARPA in the past has been tremendously successful in spurring commercial technologies. The problem was it kind of had to be like this -- you couldn't acknowledge that there was any civilian use, you couldn't take any account of it. When Craig Fields said, this is ridiculous we should be integrating our military and civilian strategies, he was fired. This is part of the ideological blinders that have been part of the past that have kept us from making the adjustments we need for defense conversion and being more competitive.

And so now what you have is the opportunity for DARPA to take these things into account so that when a company like Westinghouse makes a conversion it doesn't have to be a kind of see no evil, hear not evil; it can be part of an integrated approach to helping us convert from a Cold War economy to a post-Cold War economy.

Q: Gene, could I ask a specific question? Will any DOD funds be used to help dislocated or laid-off defense industry workers, as opposed to government employees?


Q: How much of the $18 billion or $19 billion? How much will come from the Pentagon's budget?

MS. ROBYN: Well, in 1993, there is $75 billion defense funds that will be transferred to the Labor Department within the next several days, if they have not already, for the Department of Labor's Dislocated Worker Program. Beginning in FY '94, that Labor Department program is funded out of Labor Department money, but in FY '93 it is --

Q: So that's only $75 million during this five-year period coming from the Department of Defense?

MR. SPERLING: No, no. The Department of Defense will be investing major amounts of money in transition and various personnel policies to ease the transition. But the heart of our worker training proposal will be guided by the Labor Department. But Defense obviously will be investing considerably in various personal assistance --

Q: That's for military personnel or government employees. I'm talking about laid-off GE or Westinghouse or General Dynamics employees because of reduced contracts. Will Pentagon money go to help them?

MR. SPERLING: I'm sorry, I just wanted Steve -- Steve is the Director for Defense for National Security Policy -- I just wanted him to have a chance to answer that question.

MR. JONES: For the program that Dorothy talked about, $75 million that's going to labor, that is for a range of dislocated workers, including people in industry who are losing their jobs.

Q: But that's $75 million over five years --

MR. SPERLING: The 1994 to -- the Defense Department, it's safe to say, is currently reviewing their entire program policy for '94 to '97. So on the specifics of the long-term plan, that will be out in a few weeks when we do our white paper. So I don't know if it's possible --

Q: Is it because you don't have budgeting sources for the rough -- for the $20 billion program that you can't tell us how much of that will be redirected Pentagon money? I'm sorry, over five years. Is it because you haven't determined the funding sources for that?

MR. GESSAMAN: We've discussed the $75 million in 1993 money that the Pentagon's transferring to Labor for this year's program. Because the Defense Department doesn't actually carry out the retraining, they rely on the Labor Department to do it, the decision was made as part of Secretary Reich's overall comprehensive labor retraining program to have it cover Pentagon contract workers, rather than having a separate program within the Pentagon. So after '94, the retraining money for contract workers is all under the Labor Department's comprehensive program.

MR. SPERLING: This is part of an overall effort to stop the fragmentation of a different training program for every different problem. And this is at the heart of the training initiative that Secretary Reich is working on. Clearly, perhaps one of, if not the major beneficiary of this program, will be workers, both soldiers and workers from private industry who have been affected by defense conversion. That is $2 billion a year, and that is a major, major increase in money for dislocated workers.

Q: In the community aid money, how is that supposed to be spent. How much is there, and how much -- and what communities use that money for?

MR. SPERLING: Well, one thing that might be very relevant, especially to events of the next couple of days is that the increase from $5 million to $30 million for the -- Dorothy, help me say it right --

MS. ROBYN: Department of Defense Office of Economic Adjustments.

MR. SPERLING: -- will be designed to ensure that every single community that has a base closing is able to create an economic revitalization plan for themselves. So one of the hearts of the program is to come in early and is to give each community an opportunity to come up with a defense -- I mean, an economic conversion plan for themselves. Average base closing takes three to five years. Base closings are a major opportunity for a coordinated approach to work, unlike a layoff that can happen like this, this is an opportunity where there is an active effort, an ability to come in and help a community plan to help them adjust to change.

Q: That's $30 million --

MR. SPERLING: That's $30 million -- that's just for assisting each community to come up with an economic plan, indeed, to -- and part of that would be to consider how the funds over the longterm plan could be used and be part of their economic revitalization strategy.

Q: Gene, none of this money is actually aid to communities that are losing bases? It's just technical assistance to help them figure out on their own how to get back on their feet?

MR. SPERLING: No, that's not the case.

MS. ROBYN: Commerce Department monies -- the Economic Development Administration makes grants, revolving loan funds. It's a two-part process. The Office of Economic Adjustment comes --that's the first point of contact. They help a community develop a plan for base reuse. Then EDA picks it up and helps to carry out that plan.

Q: And how much money is that in revolving loans available?

MS. ROBYN: Well, there is $80 million for EDA. Again, this is defense money that will be transferred to EDA in FY '93 and FY '94. That will be funded directly out of the Commerce Department. I'm not sure -- it's not ear-marked for revolving loans versus infrastructure. It depends on what a community needs. There are a range of activities that can be --

MR. SPERLING: We're getting the signals you have to go. But let me just make one basic point. The announcement today is on the exact details of how this $1.7 billion will be allocated how this $1.7 billion will be allocated. We wanted to let you know what the overall categories and funding streams are and there will be a white paper that will go into detail.

On the community development, specifically, is one of the areas that we're working on the most right now, in which there could be various opportunities to target certain funds to communities that are hard hit. But, as I said, we wanted to give you the overall stream so you would understand the ballpark. These are all from things that are in the vision for change but the exact design would be worked on and will be part of the white paper that will be given out in early April.

Q: Will the President know how many people are affected by this?

MS. ROBYN: The office of technology assessment estimated in their report -- this is now almost a year old, but estimated that about a million defense workers in the private sector would be affected and about that same number of military and civilian DOD personnel.

Q: Affected by --

MS. ROBYN: Affected by defense cutbacks over roughly a five-year period.

Q: One million military, one million defense.

MS. ROBYN: Roughly.

Q: What about surrounding communities?

MS. ROBYN: That counts that.

Q: Does that count the stores in the area --


Q: But that doesn't count the additional 200,000 that the President has recommended we reduce from 1.6 base force to 1.4 base force. So that would be an additional 200,000 beyond the two million?

MS. ROBYN: Well, I'm not positive OTA's estimate was based on --

Q: Because the base force was based on 1.6 --

MS. ROBYN: -- over what period. That I can check.

Q: Two million people over what period?

THE PRESS: Thank you.

END9:45 A.M. EST

William J. Clinton, Press Briefing by Deputy Assistant to the President for Economic Policy Gene Sperling; Special Assistant to the President for Technology Policy Dorothy Robyn; Director for Defense Policy At the N.S.C. Steve Jones; Deputy Associate Director for National Security At O.M.B. Don Gessaman; Director to the N.S.C. for Defense Conversion Policy David Lane Online by Gerhard Peters and John T. Woolley, The American Presidency Project

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