J. Scott Applewhite / AP

Defense Secretary Leon Panetta, right, accompanied by Joint Chiefs Chairman Gen. Martin Dempsey, testifies on Tuesday before the Senate Armed Services Committee.

At a time when President Barack Obama is proposing more than $120 billion in new and enhanced tax incentives for companies to manufacture in America, not overseas, one part of the nation’s industrial base -- a sector where foreigners aren't allowed to fully compete -- is under siege.

Smaller defense budgets proposed by Obama and Defense Secretary Leon Panetta will cancel some made-in-America ships, airplanes and unmanned aerial vehicles and slow down the purchase of others.

The Obama budget also threatens to shut manufacturing and repair facilities, such as the 212-year old Portsmouth Naval Shipyard, which sits on an island between Maine and New Hampshire.

Obama’s budget blueprint calls for defense outlays to drop by 5 percent over the next two years, and fall from 19 percent of federal spending this year to 13 percent by 2022.

In a four-hour hearing before the Senate Armed Services Committee Tuesday, Panetta defended his call for fewer ships, unmanned aerial vehicles, and other hardware.

And he made the case for his proposal for two more rounds of the base realignment and closure (BRAC) process that would close bases and shipyards across America.

But he faced concerns and criticism from both Republicans and Democrats on the committee -- about the threat to blue-collar manufacturing and repair jobs as well to national security.

Sen. John McCain, R- Ariz., told Panetta that “perhaps most disturbing of all” was the fact that at a time when U.S. strategy is increasingly focusing on East Asia and the Pacific, “this budget would reduce shipbuilding by 28 percent.” 

Sen. Roger Wicker, R- Miss., whose state is home to the Ingalls shipyard in Pascagoula, pointed to the 8.3 percent unemployment rate and noted that Obama’s budget proposal has various job creation ideas -- such as transportation infrastructure -- in it.

“It makes no sense to me -- at a time when there is an effort to create more jobs with other spending -- to cut defense spending, which gives us the ‘two-fer’ of protecting the country and protecting the industrial base, which is a whole lot of Americans working to provide us with the infrastructure we need,” Wicker said. “It is a fact, is it not, that this budget will have an adverse effect on our industrial base?”

Panetta replied, “We’ve taken a lot of steps to try to protect against that happening, because we absolutely have to protect our industrial base and those industries that support the defense budget. We can’t afford to lose any more and, for that reason, we design an approach that will keep them in business …”

But keep them in business with fewer manufacturing jobs, Wicker noted.

“There will be, I understand that, and that does have some impact,” Panetta admitted.

Later in the hearing, pressed by Sen. Susan Collins, R-Maine, Panetta said he would make sure that “we keep our industrial base busy, serving our needs.”

“Once that industrial base is gone, you never get it back and once those trained workers go into other fields you’ve lost them forever,” Collins told Panetta. “And that would greatly weaken our capabilities.”

Armed Services Committee members such as Sen. Joe Lieberman, I –Conn., are also opposing delays in building the Virginia-class submarine, which is built in Connecticut and repaired in New Hampshire.

As for closing excess bases and shipyards, Panetta said, “I don’t know of any other way” to cut infrastructure and get the savings needed “without going through that kind of process.”

When Panetta served as a House member from California in 1991, he saw BRAC first hand when the BRAC commission closed Ft. Ord near Monterey, costing more than 16,000 jobs.

“I’ve been through the process; frankly I don’t wish the process on anybody,” he told Sen. Jeanne Shaheen, D- N.H., who was defending the Portsmouth Naval Shipyard. 

“Twenty five percent of my local economy was hit by virtue of a BRAC closure,” Panetta told her. But he said the community did use the closing as an opportunity to develop a college campus.

“I see very little support for the president’s proposal on BRAC,” Collins said, in an interview during a break in the hearing.

“If you look at the GAO reports on the last BRAC round, it has turned out to cost the government money, rather than saving money -- at least for the first five years. So I think there’s a great deal of skepticism both about the savings that would be produced and also whether there really is excess capacity.”

She said she did not think Congress would vote to launch another BRAC round. Portsmouth was on the hit list in 2005, but the BRAC commission overrode the Pentagon recommendation that it be closed. “Tony Principi, the BRAC chairman at the time, described Portsmouth Naval Shipyard as ‘the gold standard in naval yards.’”

The economic impact of closing the shipyard would huge in southern Maine, Collins said: “It’s a major employer in York County and beyond York County. Half the workers are from New Hampshire -- it affects both states”

In bipartisan accord was her Democratic neighbor, Shaheen who said after hearing, “The number one priority is national security. The Portsmouth Naval shipyard was created … because of national security – but there are a lot of good jobs there. To look at the equation without factoring that in, along with costs, would be shortsighted.”

One dissenter on the committee was Sen. Lindsey Graham, R- S.C., who said he did not consider defense manufacturing as “a job creator for America.” He also said he does think it’s necessary to consider another BRAC round -- “as hard as that is for my colleagues.”

Carolyn Kaster / AP

House Transportation and Infrastructure Committee Chairman John Mica said he is "fairly confident" the House GOP's bill can pass.

Updated at 2:15 p.m. ET

After years of procrastination, the White House and Congress have suddenly boosted a long-term plan to improve the nation's roads, bridges and transit systems to the top of the political agenda.

This week, the House and Senate are set to take up vastly different bills providing a blueprint for shoring up the nation's aging transportation system. Lawmakers are driven in part by a desire to show voters a major accomplishment in an election year when regard for Congress is at rock bottom. They are pitching the bills as jobs generators, although it may be more accurate to say they preserve jobs that might otherwise be lost if Congress doesn't find a way to keep highway and transit programs solvent.

President Barack Obama chimed in Monday with his own plan to spend nearly half a trillion dollars over six years on transportation infrastructure. But the president's plan is much grander than anything Congress is likely to go along with that the administration has swung its weight behind the Senate bill, a bipartisan plan that more modestly proposes to spend $109 billion over less than two years.

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House Republicans have proposed spending about $260 billion over nearly five years, but the bill is drawing fire from so many quarters that the ability of Speaker John Boehner, R-Ohio, to muscle the measure through to passage is in doubt. To build support with tight-fisted tea partiers for such a large spending bill, GOP leaders added sweeteners designed to appeal to conservatives, such as expanded offshore oil and gas drilling, approval of the controversial Keystone pipeline and a requirement that federal employees pay more toward their pensions.

The bill's treatment of mass transit programs has riled urban lawmakers, including New York and Chicago metro-area Republicans who may wind up voting against the bill. It eliminates the guarantee of a portion of federal gasoline and diesel tax revenues for transit, leaving programs vulnerable to future budget cuts.

"If you are a Republican from a city that has mass transit, how can you vote for this and go home?" said Rep. Jerrold Nadler, D-N.Y., who is sponsoring an amendment to restore a portion of fuel tax revenues for transit. Seven Republicans have co-sponsored the amendment.

And six GOP lawmakers have sent a letter to Boehner and other GOP leaders saying the transportation bill will stand a better chance of passage if provisions opening leases in the Arctic National Wildlife Refuge in Alaska to oil drilling are dropped. The provisions, which include opening the East and West coasts and portions of the Florida Gulf Coast, as well as ANWR, to drilling, are supposed to help pay for transportation programs. But the Congressional Budget Office estimates they would raise less than $5 billion over 10 years for the federal government.

"Opening ANWR to drilling as a means to pay for the transportation bill is neither reasonable nor realistic," said Rep. Charles Bass, R-N.H., author of the letter.

The bill also eliminates locally popular federal programs that help underwrite bike paths, bike lanes and pedestrian safety projects, including the Safe Routes to School program, in order to concentrate funding on highways.

"The House bill takes us back to the dark ages," Transportation Secretary Ray LaHood, a former Republican congressman, told reporters Monday. He said he doesn't expect any Democrats to vote for the bill.

"I hope there will be lots of opportunities to amend it," LaHood said, to increase funding for transit and other needs. "Without amendments, this bill isn't going to pass."

But Rep. John Mica, R-Fla., chairman of the House Transportation and Infrastructure Committee and co-author of a major portion of the bill, said he is "fairly confident" based on his discussions with GOP lawmakers that the bill can pass.

"This is going to be the No. 1 job creator and economic generator bill of this entire session (of Congress)," he said. "I think members will rally behind what may be their last chance of getting jobs and a responsible blueprint for dealing with our crumbling infrastructure."

There will be changes made to the bill through a leadership-backed amendment that will address GOP members' concerns, Mica said.

"The bill isn't done," he said. "The final bill will be something conservatives can be very proud of because it has dramatic reforms and measures that people have called for for years."

But House leaders are being squeezed from both sides. If they give too much ground they risk losing support on the right. The Club for Growth, a free-market, anti-tax group influential with fiscal conservatives, and the political arm of the conservative Heritage Foundation have objected to both the House and the Senate bills. Conservatives say the bills spend too much money and transportation programs should be paid for using only fuel tax revenue. Democrats and moderate Republicans, meanwhile, oppose sharp cuts to popular programs.

GOP leaders said Tuesday they intend to divide the transportation bill into three bills. Their strategy is to allow lawmakers who oppose the transit changes or oil drilling provisions to vote again those portions, while still supporting the heart of the bill. Afterward, the House clerk will stitch the three bills together.

Floor debate could begin on the House bill as soon as Wednesday, with a final vote expected Friday. Lawmakers had filed 293 amendment requests with the House Rules Committee by Monday's 11 a.m. deadline. The committee decides which amendments can be offered during debate.

Debate began on the Senate bill late last week with a strongly bipartisan procedural vote of 85-11, and is continuing this week. The bill is co-authored by Sens. Barbara Boxer, D-Calif., and James Inhofe, R-Okla., ideological opposites who have managed to overcome substantial disagreement in an effort to pass a bill.

But Democrats, who control the Senate, have struggled to come up with the money to pay for the plan. Several GOP senators have signaled that their support for the bill could turn to opposition if changes aren't made to satisfy their fiscal concerns.

Like the House, the Senate has been hampered by a shortfall between current spending levels and fuel tax revenues, which are the main source of funding for transportation programs. Reductions in driving due to the economy as well as more fuel-efficient vehicles have lowered tax revenues. The budget office projects the trust fund that pays for highway and transit programs will go broke sometime in the 2013 federal budget year.

Without an infusion of cash from somewhere, the Transportation Department could be forced to slow down reimbursements to states for highway construction and other transportation projects. That, in turn, could lead to thousands of lost jobs.

Lawmakers could resolve much of their money woes by increasing the 18.4 cent-a-gallon gas tax and the 24.4 cent-a-gallon diesel tax, but that's politically unpalatable in an economy where unemployment remains high and many Americans feel financially insecure.

Indecision about how to shore up the Highway Trust Fund has long stymied efforts to pass a transportation plan. The last long-term plan expired in 2009. Congress has kept programs going through a series of eight short-term extensions. The current extension expires March 31.