OEA Bucks for New Mexico’s DOA Economy

Can Pentagon funding help a state kick its addiction to Pentagon funding?

New Mexico’s Economic Development Department thinks so. It’s conducting “a series of community meetings” to “bring stakeholders together to share information and encourage participation to keep communities informed and prepared regarding defense contractors and subcontractors, related service and goods providers, and other businesses and organizations that could be affected by federal defense cuts.”

The gatherings represent the kickoff of the “Defense Industry Adjustment Supply Chain Map and Portal Project,” an effort being funded by $1.4 million grant from the DOD’s Office of Economic Adjustment (OEA). According to state economic-development commissar Jon Barela, “New Mexico is proud of our military bases and national labs,” but they face “persistent challenges from the federal government,” requiring subsidies to “better support communities in improving their resilience to federal cutbacks.”

Today’s session, held in Santa Fe, was sparsely attended, and the overwhelming majority of those who showed up were economic-development bureaucrats and other government officials. The audience was subjected to a torrent of corporatist jargon — e.g., “strategic planning,” “targeted assistance,” “web portal connectivity,” “deliverables,” “ecosystems,” “incubators and accelerators,” “areas of vulnerability,” “industry clusters,” “SWOT analysis,” “continuum of development.”

Patricia Knighten, who heads up the department’s Office of Science & Technology, stipulated that the billions of dollars in national-security spending New Mexico annually receives from Washington have not translated into “economic prosperity.” The answer? More planning, of course, in the form of government connecting entrepreneurs to federally funded technology developed in the Land of Enchantment.

The “Photonics Commercialization Pilot Program” is one example. The state has 54 firms in the field, and department literature claims optics and photonics “are cross-cutting, with wide-reaching defense and non-defense applications.”

The meeting’s highlight was an overview of the anti-donation-clause-avoiding “New Mexico Catalyst Fund.” Backed by $10 million from the State Investment Council, $5 million from the federal State Small Business Credit Initiative, and $5 million from private sources, it “will be deployed via local funds across the state” and focus “on seed- and early-stage investments.” Knighten admitted that it “was not an easy sell to the U.S. Treasury,” which was justifiably wary about investments in the risky tech sector. Supported by Governor Martinez — who, unfortunately, is reliably susceptible to dodgy economic-development schemes — the fund will be managed by Santa Fe-based Sun Mountain Capital.

There’s no question that New Mexico must diversify its economy away from federal spending on missiles, space systems, nuclear bombs, sensors, lasers, and the like. Washington is broke, and the days of a seemingly endless stream of DOD (and DOE, and NASA) revenue making its way to the state are over.

But New Mexico’s economic-development brain trust has demonstrated a frightening predilection to pursue disastrously unsuccessful policies. The “Encanto” supercomputer, “green” energy, the spaceport, “transit-oriented development” — there’s no shortage of examples. If the state’s community of defense contractors is to transition to business models more reliant on the marketplace, the change isn’t likely to come from additional OEA grants and more busy work for bureaucrats. It will result from pro-investment, pro-entrepreneur, pro-consumer public policies. And the time to act is now.