NEWPORT NEWS, VA. -- It rises from a berthing pit at the city's southwestern river's edge, a ghostly rust-colored behemoth. From a distance, the steel structure more nearly resembles a massive 10-story parking ramp than the $3.5 billion Navy super aircraft carrier USS Abraham Lincoln it is destined to become within two years.

Nearly 7,000 engineering and computer wizards, steelworkers, electricians and other crafts workers have meticulously forged, shaped and outfitted huge chunks of the carrier -- some weighing 900 tons -- that riggers hoisted into place with a giant crane as if they were joining Tinkertoys.

The Lincoln and the future USS George Washington, which for now is little more than a low-lying steel platform that shares a dry dock with the Lincoln on the James River, symbolize the economic lifeblood of the Tidewater area and the extraordinary influence exerted by Newport News Shipbuilding Co., the largest privately owned shipyard in the country and Virginia's single largest employer.

"That's our bread and butter," said Harlan E. Brown, an electrician who has worked on carriers and submarines in the yard for 35 years.

The prosperous shipyard, a 550-acre swath stretching for more than two miles along the James River, sets the tone and the agenda for the community.

Edward J. Campbell, president and chief executive of Newport News Shipbuilding, is viewed by many as the most powerful business person in the area. When the shipyard refused to participate in a major downtown redevelopment project unveiled by city officials in 1982, the project fizzled, and today the city is stuck with block after dreary block of boarded-up buildings that had been acquired for redevelopment.

For decades, Newport News Shipbuilding has thrived on a steady diet of carrier and submarine contracts. The massive shipyard, with more than 27,000 workers, has built the majority of aircraft carriers now commissioned by the Navy and is the only firm that builds the Nimitz-class nuclear-powered carriers.

Yet the fragile boom times for the shipyard could grind to a halt, spelling long-term problems for the shipyard and the region's economy, if Congress decides this fall to scrub the Navy's $6.9 billion proposal to build two more nuclear carriers as replacements for carriers scheduled to be retired in the late 1990s.

The story of the shipyard is one that illustrates how national public policy decisions reverberate in a local community. The final consensus of Congress, now being ironed out in a debate over such momentous issues as President Reagan's so-called Star Wars program and naval strategies in the Persian Gulf, will directly affect the economic welfare not only of the shipyard workers but also of the community. Similarly, the Star Wars program will have important economic repercussions for the high-tech firms in the D.C. area.

Prospects for approval of the two new carriers seemed good earlier this year, after the House of Representatives overwhelmingly approved a two-year defense authorization bill that included $640 million in fiscal 1988 for the carriers.

But the authorization bill that emerged from the Senate Armed Services Committee, also containing carrier funding, has become deeply mired in a bitter controversy over Star Wars, with no resolution in sight. Republicans have refused since May 13 to allow floor debate on the bill unless Democrats drop a provision that would bar testing of any space-based antimissile weapons without congressional approval.

Moreover, some in Congress are questioning the need to authorize two more super carriers when the Navy is short of smaller ships -- such as air defense Aegis cruisers, fast patrol boats and mine sweepers -- to handle sensitive missions in trouble spots such as the Persian Gulf.

"When we ask for two big deep ocean carriers, people will say, 'Hell, you don't have enough small boats to do the small jobs,' " said Sen. John W. Warner of Virginia, the ranking Republican on the Armed Services Committee and one of the staunchest proponents of the carriers. "And the future portends increased demand" for those types of small boats, he added.Layoffs at Stake

The shipyard laid off 1,200 workers in November after the company lost in the bidding for a major Navy submarine overhauling contract. Although many of those workers were recalled, the layoffs sent shock waves through the community and provided a chilling reminder of the local economy's sensitivity to the ups and downs of defense contracting. Shipyard officials warn that "significant" future layoffs are inevitable unless Congress authorizes additional carriers.

"If there's a gap in production, your work force reduces or you lose the talent that you have, and you have to retrain the talent later on," said Jack Garrow, the company's vice president for public relations. "All of these things take time and cost money."

The financial stakes are substantial, both for the shipyard and for the hundreds of suppliers and subcontractors throughout the country that share in the contract. The $3.5 billion cost of each carrier is enough to finance the operation of the D.C. government for an entire year, with $500 million to spare, or to build six Tysons II shopping and office complexes in Fairfax County.

Rep. Herbert H. Bateman (R-Va.), a member of the Armed Services Committee whose district includes Newport News, said that a delay of a year or two in approving the carrier proposal would be a "drastic" setback for the Navy and could have a "very, very negative" impact on the shipyard's work force.

The shipyard, founded 101 years ago by railroad magnate Collis P. Huntington, is a sprawling network of dry docks, steel fabrication plants, foundries, computer centers, test laboratories and towering cranes that dominate the riverfront.

Geographically, the security-conscious shipyard is an isolated fortress, far removed from the commercial and residential areas and the budding high-tech plants in the northeastern section of the city. From an economic standpoint, however, the shipyard is at the core of the region's prosperity and high employment levels.

The shipyard's work force reached a peacetime high of 30,000 in 1985, at the zenith of the Reagan administration's extraordinary buildup of a 600-ship Navy. The work force declined last year, however, partly because the company lost out in the bidding for several major Navy contracts to build and overhaul submarines.

"We're a shipbuilding community," said Thomas N. Downing, a prominent lawyer and former House member. "If the shipyard is down, the area is down. When the shipyard is booming, the area is booming . . . . We're always pleased when we see a contract coming in or a ship being launched."

Many of the workers in the yard are third- or fourth-generation shipbuilders who have seen Newport News grow from a sleepy southern town to a prosperous city with a population of 162,000. Blue-collar workers, who enjoy salary and benefits exceeding those offered by other high-tech plants in the area, carefully monitor the ebb and flow of government contracting.

Despite occasionally stormy labor relations at the shipyard, including a strike in 1979 by Local 8888 of the United Steelworkers of America to gain recognition, workers are generally defensive about the shipyard and its nearly unbroken string of carrier contracts. As the Navy nears the end of its peacetime buildup and the shipyard's backlog of work begins to wane, a lot rides on the company landing another carrier contract. "The carrier projects have been a major part of shipyard work for 28 years," said Russell Axsom, a longtime employe and president of Local 8888. ". . . It was work you could always look to. Now we're looking to the {proposed} two other carriers to take us right on through the 1990s."

Carlton Hall, a general supply clerk at the yard, said that employes in defense plants "are naturally protective" of government contracts because "the private sector doesn't offer that much anymore." With the large-scale commercial shipbuilding industry drying up, he noted, shipyard employes who were laid off last fall had almost no luck in finding jobs until they were finally recalled.

"Government spending has far surpassed the private sector," said Hall, who is treasurer of Local 8888. "So we have to defend what we've got, because there's nothing else out there." A Top Employer

The shipyard is second only to the military as the dominant employer in the state. Hampton Roads, one of the best natural harbors on the Atlantic Coast, is the headquarters of the Navy's Atlantic Fleet. The Tidewater area is peppered with military bases and installations.

Newport News Shipbuilding is under contract to build 13 Navy ships, 11 Los Angeles-class submarines and the two Nimitz-class aircraft carriers. It recently completed a major, two-year overhaul of the USS Dwight D. Eisenhower.

The Navy has urged the shipyard to begin competing for contracts to build the massive Trident nuclear-powered submarines, as a means of breaking a monopoly held by General Dynamics' Electric Boat Division in Groton, Conn. The company has yet to give the Navy a final answer as it ponders the financial implications of gearing up for such a contract.

The shipyard marked a major technological and engineering breakthrough in October 1984 with the launching of the USS Theodore Roosevelt -- the first aircraft carrier manufactured using advanced techniques of modular construction. Company officials said the new techniques reduced the normal construction time from seven years to five.

"In the old days they'd lay a keel and build up, steel plate by steel plate," a company official said. "They built the hull and then put in the electrical work. It was very hard and confining for the workers. You'd have to be a contortionist. Now those sections are built outside the dock, joined together and then lifted into place."

The process requires mind-boggling engineering feats to break down a ship's design into components for the hull, decks, bulkheads and compartments and incorporate the major mechanical and electrical systems. According to some, it is akin to assembling a mammoth, nuclear-powered Rubik's cube.

The shipyard operates an automated 11-acre steel production plant and a 6.5-acre steel fabrication shop that converts steel and other raw materials into massive "subassemblies" that are then wired and fitted on nearby staging areas before being lifted into place by giant cranes.

W.B. Miffleton Jr., the project manager for the carriers, said that a complex computerized scheduling and planning system is crucial to assure that the preassembled sections and material "arrive at the appropriate place at the appropriate time." In the past, he said, crews spent weeks cutting holes through the carrier's deck to move in equipment or interior sections. "You go back to, say, the Nimitz," he said. "We were just overwhelmed by the shipping holes."

Axsom, the union president, notes that aircraft carrier work "gives you more room to maneuver than submarine work, where you're confined. It gives you room to breathe." Crafting the Carriers

The assembly work takes place in the shipyard's largest dry dock, a crypt 1,600 feet by 200 feet. The two carriers sit side by side in the dry dock. Recently, as work crews swarmed over the hulk of the emerging Lincoln, only the final section of the carrier's hull and the carrier's "island," or control tower, had yet to be hoisted into place. "It's not an assembly line, per se, but it's coming as close to that as you can get," Garrow said.

The Nimitz-class carriers are monstrous vessels, 1,092 feet long, 252 feet wide, 95,000 tons in weight and with the capacity to carry and launch 90 aircraft, including F14 Tomcat fighters, fighter bombers and a slew of helicopters and tracking planes, from the carrier's 4.5-acre flight deck. The Lincoln, begun in 1983, is scheduled for completion in December 1989, which would boost to 15 the total number of Navy carriers. The Washington, which will replace the aging Coral Sea, is to be delivered to the Navy in 1991.

The proposal for the two additional carriers still can be salvaged this year, many agree, if House and Senate leaders bypass the authorization process and agree to include initial funding for one or both carriers in the fiscal 1988 appropriations bill. Sen. John Stennis (D-Miss.), chairman of the Appropriations Committee and a member of the Armed Services Committee, has backed the carriers and will be a key player in the debate.

However, Sens. Edward M. Kennedy (D-Mass.) and Carl M. Levin (D-Mich.) are opposed to the plan, complaining that Defense Secretary Caspar W. Weinberger broke his promise of a year ago not to seek funding for additional carriers until sometime in the 1990s. Kennedy and Levin contend that the Navy has more pressing needs at this point.

The Navy concedes that it switched signals in seeking authority for the two carriers this year, ahead of previously stated construction plans. However, officials said that speeding up the funding would save at least $700 million (earlier savings estimates ranged in the billions of dollars) and would assure the United States of having 15 modern, deployable carriers by the late 1990s. "The point is, things change, and you look at what makes sense now rather than what made sense before," a Navy official said recently.

Meanwhile, the debate is being closely watched by the shipyard and its work force. In the view of Harlan Brown, the shipyard electrician, "We'll be hurting sure enough if they don't come up with a little more work for us . . . . We know there's a lot of politics mixed up in it. But carriers and subs, that's what keeps the Russians at bay right now. We would be speaking Russian now if it weren't for carriers and subs." NEWPORT NEWS SHIPBUILDING CO.

Employs more than 27,000 workers, many of whom are fourth- generation shipbuilders. Wages and benefits totaled $896 million in 1986. The shipyard, a subsidiary of Houston-based Tenneco Inc., is the largest private employer in Virginia.

1986 sales totaled $1.6 billion, with operating income of $246 million. The shipyard spent $266 million last year in purchasing goods and services from firms.

Shipyard and facilities total 550 acres, including seven dry docks, two inclined shipways, two outfitting berths, an 11-acre automated steel fabrication center, a foundry complex, machine shops, testing laboratories, a computer center and apprentice and welding schools. Newport News also owns a metal fabrication plant in Greeneville, Tenn., and a 412,000-square-foot components facility in Asheville, N.C.

Since its founding, the shipyard has built more than 700 commercial and naval ships, including 154 cargo ships and tankers, 63 ocean liners, 38 submarines and 24 aircraft carriers. The shipyard built and delivered the nation's first carrier, the Ranger, in 1934, and it produced nine carriers during World War II, including the Yorktown, Enterprise and Hornet.

In 1961, Newport News delivered the first nuclear-powered carrier, the Enterprise. It delivered the Nimitz, the lead ship of the latest class of nuclear-powered carriers, in 1975, followed by the Dwight D. Eisenhower and the Carl Vinson. Newport News is the only U.S. shipyard that builds the Nimitz-class carriers, and it also manufactures the Los Angeles-class attack submarine.