ALBUQUERQUE, N.M. — I have been known to say, though not even half seriously and always in private conversation, that the best thing that could happen to New Mexico’s economy would be the closing of the Sandia and Los Alamos national laboratories.
My reasoning, half-baked as it might be, is that if thousands of brilliant scientists and engineers were suddenly cut loose from what have been some of the best paying jobs in the state, some meaningful number of them would undoubtedly stay in New Mexico and try to find another way to make a living.
However, with the labs gone and all of the technical companies that support them folding up for lack of business, they’d soon find their only option would be to start their own companies. They would put their prodigious intellects to work on solving, for a reasonable profit, some of the most interesting problems around. Hundreds of new firms that do not rely on government funding would spring up to produce great new products that have nothing to do with either nuclear weapons or new energy technologies that are economically viable only with the help of government subsidies.
Hundreds of established firms that never before had an incentive to find customers outside of the labs would find they have much to offer the private sector. They would redirect their energies, marketing and product development to a whole new kind of customer. Their growth would depend on the value of their products in a competitive marketplace and not on their ability to write federal grant applications or woo lab procurement specialists.
Reality has an ugly way of intruding. So do economic forecasts.
Los Alamos National Laboratory needs to eliminate between 400 and 800 jobs and cut $150 million from the $900 million it spends on goods and services. My Journal colleague Jackie Jadrnak reported that LANL spends $200 million in the northern part of the state.
On top of that, the University of New Mexico Bureau of Business and Economic Research estimated that budget cuts required by federal law to begin in 2013 will cost New Mexico 20,000 jobs, including 5,420 professional and business services jobs. That is a fairly broad category of jobs. It includes lawyers, architects and accountants. For purposes of the BBER analysis, it includes the kind of scientists and engineers who work for or sell services to the national laboratories.
These numbers spring from BBER’s forecasting models, which are computer simulations of the way New Mexico’s economy behaves. Necessarily, some parts of the model are more robust than others. We know, for example, that all of us spend some amount of our income on baseball games, aspirin, lawn fertilizer and socks. Statistically we can say that a lost dollar of income will mean less spending and, therefore, lost economic activity and lost jobs. That is why BBER can say with some confidence that if federal spending cuts cost us 12,000 jobs or so, another 8,000 jobs will be lost when 12,000 formerly employed people stop buying socks and lawn fertilizer.
What we cannot say with any certainty is how an employee at Los Alamos or Sandia National Laboratories will respond to a budget cut. We don’t know if the Department of Energy, for example, will cut all programs across the board or if it will decide that developing new nuclear bomb triggers is more or less important than finding new nanoparticles for industrial use. In other words, we really don’t know what sort of skill set these newly unemployed people will take with them when they leave the labs.
The first hole shot through my hypothesis, therefore, is that a scientist who knows only how to make bombs may not be as employable as one who knows how to make an ultra-light, ultra-strong building material out of rearranged atoms.
The second hole is that there is not a lot of obvious pent-up entrepreneurial zeal at the labs. Some interesting companies, like Micro Optical Devices (now part of EMCORE) and InLight Solutions, have a connection to the labs. Some very smart, entrepreneurial people have spent time in the labs. There have been interesting companies and entrepreneurs spun out of the labs.
My hypothesis (which might better be described as wishful thinking) notwithstanding, big federal spending cuts are going to be trouble for New Mexico. New Mexico lost about 52,000 jobs between 2008 and 2010. BBER is forecasting job losses of about 40 percent of that if the budget cuts proceed over the next 10 years, as the law requires. Even if BBER is off by a factor of two, that’s 10,000 lost jobs.
New Mexico has long had a love-hate relationship with the federal government. We all know we rely too heavily on federal spending and that we need to develop a much bigger private sector. We all know that the trajectory of federal indebtedness is unsustainable and potentially dangerous. We all know New Mexico will be called upon to share in the national effort to restrain federal spending.
At the same time, let’s not kids ourselves. This is going to hurt. A lot.