Air University Review, November-December 1984

Economic Impact of Peacekeeper in Minuteman Silos

THE Peacekeeper system development program being conducted during the Reagan administration is intended to modernize the U.S. intercontinental ballistic missile (ICBM) system and, in so doing, revitalize U.S. strategic deterrent capabilities threatened by Soviet advances in weaponry. The program, including the deployment of Peacekeepers in existing Minuteman silos, calls for an expenditure of $16.6 billion over the 1983-90 period. (All dollar figures are expressed in constant 1982 dollars, and all years refer to fiscal years.) This expenditure will provide for missile research, development, test, and evaluation (RDT&E); missile procurement; and system construction improvements to existing Minuteman silos. In addition to strengthening our strategic forces, production and deployment of the Peacekeeper will have significant national and regional economic effects on the demand for industrial output, employment, skilled labor, and critical materials.

The Peacekeeper missile has been designed as an ICBM capable of delivering ten reentry vehicles (RVs), or warheads, to independent targets at ranges greater than 5000 miles. In comparison with other ICBM systems currently in the U.S. inventory, the missile has greater resistance to nuclear effects, the ability to carry more warheads, and greater range and targeting flexibility. Peacekeepers are to be deployed in existing Minuteman silos in Wyoming and Nebraska supported by Frances E. Warren Air Force Base. The Peacekeeper program schedule calls for the initial operational capability of 10 missiles by late 1986, with the full operational capability of 100 missiles expected by late 1989.

Based on the latest program schedule and cost data provided by the U.S. Air Force and the application of input-output models developed by Data Resources, Incorporated, and the Bureau of Labor Statistics, a preliminary economic impact analysis of the Peacekeeper program was conducted for the fiscal year 1984 Five-Year Defense Plan, covering the fiscal year 1984-88 period. The general approach used to assess the effects of Peacekeeper development on industrial output and employment was a five-step procedure. (See Figure 1.) The objective of the assessment was to identify the affected industries and to estimate the growth or sales (output) potential and the employment opportunities generated for these industries by Peacekeeper-related economic activities. The growth potentials for the various affected industries, and for the country, were measured in both dollars and jobs.

Specifically, the input-output technique and models were used to determine estimates of:

• The input requirements from each of the 400 supplying industries for the system RDT&E and acquisition.

• The input requirements from each of the 156 industries contributing to the Peacekeeper silo construction/improvement.

• Strategic materials and skilled manpower requirements associated with the Peacekeeper program.

These estimates, in turn, were used to develop summary economic impact assessments.

The total outlay for Peacekeeper RDT&E and procurement for the 1984-88 period is estimated to be $12 billion, at an annual average of $2.4 billion. (These figures do not include silo modifications.) The production activities from the 400 various industries providing input to the system are expected to result in an increase in sales or services totaling $21.5 billion, or an annual average of almost $4.3 billion. An analysis of these projections indicates:

• Thirty of the 400 industries would contribute almost 90 percent of the total value of production or sales generated by Peacekeeper RDT&E and procurement activity.

• The missile industry's share in the total value of production would be the largest; its sales would increase by $12.2 billion over the period under consideration, at an annual sales value of $2.4 billion.

• Other major sectors benefiting from Peacekeeper RDT&E and procurement outlays would include aircraft ($1.28 billion), radio and television communication equipment ($830 million), semiconductors ($960 million), and electronic components ($565 million).

The estimated outlay for silo construction/ improvement activities is $232 million over the five-year period, at an annual average outlay of $46.4 million. An analysis of the data on the economic impact of silo modification activities shows:

• The total value of production or sales for industries involved in silo modification activities would increase by $432 million over the five-year period, at an annual average value of $86.4 million.

• Major industries needed for Peacekeeper silo modification activities would be suppliers of fabricated metal products, professional services, cement and concrete products, and wholesale trade.

• Thirty industries would contribute more than 87 percent of the increase in output or sales resulting from Peacekeeper deployment activities.

Employment that would be created by Peacekeeper development is of three types: direct, indirect, and induced. Direct and indirect employment effects are related to Peacekeeper production activities. The induced (or multiplier) employment effects are expected to result from consumption activities stimulated by the income generated in the production process. A summary of the estimates of each of the three types of employment effects is provided in Table I. The results indicate that the direct employment from Peacekeeper RDT&E, procurement, and deployment would amount to about 33,115 jobs per year for the 1984-88 period, while the indirect employment in related industries would average 14,545 jobs annually. The employment creation due to the multiplier or induced effect would be an additional 47,660 jobs annually. Overall, the Peacekeeper program could be expected to provide an annual average of 95,320 jobs during the 1984-88 period.

Although the employment and output effects associated with the Peacekeeper activities would be spread throughout the nation, they would not be uniformly distributed. The largest share of the employment and income benefits from Peacekeeper RDT&E and production activities would be concentrated in a few states (e.g., California, Colorado, Florida, Massachusetts, New York, Pennsylvania, and Utah) where specialized firms in missile technology and aerospace support industries, such as communications, propulsion, and transportation equipment, are located.

Preliminary analysis indicates that a few large prime contractors, located in a few states, employed 75 percent of the total workers directly engaged in Peacekeeper production in 1982. The remaining 25 percent of employment was provided by subcontractors' activities spread throughout the nation. Further, a significant share of the prime contractors' employment and production activities was concentrated in the western states. The employment and income activity related to the silo modification for the deployment of Peacekeepers would be concentrated in parts of southeastern Wyoming and western Nebraska.

Approximately 163 labor skills related to Peacekeeper missile production were identified. The results show that the greatest demand for high-skill labor would occur for engineers (particularly aeroastronautic, electrical, and mechanical), engineering and science technicians, scientists, and computer specialists.

In regard to material requirements, seventy-two strategic materials are needed for the Peacekeeper production. The demand is greatest for aluminum, chromium, copper, manganese, and primary nickel.

PRELIMINARY findings indicate that the planned development, procurement, and deployment of Peacekeeper in Minuteman silos with actual expenditures of approximately $12.3 billion during the fiscal year 1984-88 period would have significant economic effects throughout the nation. Industrial output and employment would grow considerably in aerospace-related industries, as industrial sales of approximately $23 billion would be generated by the program over the five-year period. The program-related output could be expected to create an annual average increase of 47,660 jobs over the 1984-88 period, with a peak-year (1986) employment of 56,150 jobs. When the induced consumption effects of the economic stimulus provided by missile production activity are taken into consideration, a total annual average of 95,320 jobs would be created.

The analysis presented here is a summary version of the paper we presented at the Allies Social Sciences Associated Meetings in San Francisco, 28 December 1983. We wish to express our appreciation for contributors by Dr. Kris Swaminatha, Senior Economist, ANSER, Inc., in preparing this article.

G. E. F. and G. H. V.

Brigadier General Gordon E. Fornell (B.S., Michigan State University; M.B.A., Wharton School, University of Pennsylvania) is the Special Assistant for Intercontinental Ballistic Missile Modernization, Office of the Deputy Chief of Staff for Research, Development, and Acquisition, Hq USAF. A command pilot with extensive experience in forty different types of aircraft, General Fornell also has had numerous command and staff assignments, including Chief, Aeronautical Systems Division, Directorate of Development and Acquisition, and KC-10 Program Director of the Air Force Logistics Command, Acquisition Logistics Division. General Fornell is a graduate of Squadron Officer School and Air War College.

Lieutenant Colonel Glenn H. Vogel (B.S., University of Missouri; M.S., University of North Dakota) is Chief of Technical Engineering and Analysis for the Peacekeeper ICBM and the small ICBM, Office of the Special Assistant for ICBM Modernization, Office of the Deputy Chief of Staff for Research, Development, and Acquisition, Hq USAF. His previous assignments include combat crew member, 321^st Strategic Missile Wing; Launch Director for Minuteman, 349^th Strategic Missile Squadron; MX Requirements Officer, Hq, Strategic Air Command, and more recently, MX System Test Manager, Air Force Systems Command. Colonel Vogel is a graduate of Air Command and Staff College.

The conclusions and opinions expressed in this document are those of the author cultivated in the freedom of expression, academic environment of Air University. They do not reflect the official position of the U.S. Government, Department of Defense, the United States Air Force or the Air University.

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