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Who profits, who loses from fatter defense budgets. South, West get bulk of Pentagon contracts; US may pay a price in slow growth, investment, productivity

To folks in places like Newport News, Va., and Pascagoula, Miss., big defense budgets have always been good news. There they build things like nuclear aircraft carriers, which cost more than $3 billion each and help boost the local economy.

But for most of the rest of the country, growing Pentagon budgets - economically, at least - cost more than they are worth. Recent studies show that this trend is accelerating, even in parts of the Sunbelt where military spending has been gravitating.

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A 1982 study by Employment Research Associates of Lansing, Mich., found that 70 percent of all Americans live in congressional districts that experience a net loss in tax money when the defense budget is increased. Of all the major industrial states, only California has more congressional districts that gain than lose from such spending.

Even within some Sunbelt states, however, the study found extreme disparities. Mississippi, for example, enjoys a net economic benefit of more than half a billion dollars. But four of its five congressional districts pay out more in their ''Pentagon tax'' than they gain, since spending is concentrated in shipbuilding along the gulf coast.

Employment Research Associates soon will issue an updated report showing the impact of military spending on metropolitan areas. Economist Marion Anderson, who heads the Lansing firm, says ''things are getting worse on a sustained basis.''

Using Pentagon figures, the Northeast-Midwest Institute is tracking similar trends. Analyzing the 1982 defense budget, the group finds that 80 percent of all defense installations, 75 percent of all defense personnel, and 60 percent of all prime contracts go to states in the West and South.

The Washington-based institute shortly will report new findings based on projected Pentagon spending for 1983. ''We are finding a continuation of the same kinds of trends,'' says Margaret Downs. ''In some cases they are being exacerbated, but they are not being reversed.''

It remains to be seen whether these trends will have any appreciable political impact, either in the continuing Pentagon budget debate or in this fall's congressional elections.

Typically, members of Congress fight to protect military spending in their own districts by not leaning too hard on questionable installations or weapons produced elsewhere. For example, House and Senate conferees recently passed a ''compromise'' 1983 defense authorization bill that was $500 million more than the Senate had authorized and $2.6 billion more than had been approved by the House.

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Congressional Quarterly notes that the House Armed Services Committee (whose members face reelection in November) added nearly $300 million more for military construction projects to what the Reagan administration had requested. Nearly 70 percent of that was for projects in committee members' districts.

The 1983 Pentagon budget still must run the more rigorous appropriations gauntlet, and the question of economic impact may be scrutinized more closely there.

The Joint Congressional Economic Committee recently warned that a rapid defense buildup could add to inflation, accelerate regional imbalances, create costlybottlenecks in defense-related industries, and worsen cost overruns. In a report titled ''The Empty Pork Barrel,'' Employment Research Associates finds that on balance, burgeoning Pentagon budgets add to unemployment by draining away funds that, if spent elsewhere, would generate more jobs.

The New York-based Council on Economic Priorities analyzed the United States, Japan, and Western European countries, and found that those with relatively smaller military budgets ''had faster economic growth, investment, and productivity increases.'' The US, which spent the most for defense, had the lowest investment rate and productivity increases and the third lowest overall growth rate, the study found.

The Reagan administration position is that defense spending must be measured primarily ''against the threat,'' as Defense Secretary Caspar W. Weinberger says.

But Murray Weidenbaum, who recently resigned as President Reagan's chief economic adviser, told the Associated Press that planned defense buildups could add to the federal deficit and harm the economy. There are indications that such warnings could be heard politically.

''If the public continues to question the soundness of defense strategy . . . and if inflation is aroused by defense dollars, then some GOP officeholders may be sent packing,'' warns the Ripon Society, whose members are moderate Republicans. ''The defense increase must not wreak havoc on the economy and realism must guide deterrence strategy. If not, voters will react in November, leaving Republicans the clear losers.''

How many jobs will $1 billion generate? Retail trade 65,000 Education 62,000 Hospitals 48,000 Newspapers 30,000 Apparel manufacturing 28,000 Fabricated metals 16,000 Guided missiles and ordinance 14,000 Source: Employment Research Associates, Lansing, Mich.

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