The Washington Post has a report this morning on how federal austerity could hurt the D.C. area. Some forecasts note that federal procurement could only see a 1 percent increase in 2011, as opposed to the 8 percent average over the last several years:
The Washington region rose above all other metropolitan areas in 2010 when it came to economic progress. Bolstered by federal hiring and a boost in procurement, the region recorded the nation's highest net number of jobs gained during a 12-month period as the year came to a close.
But economists are concerned that the momentum may now be threatened as the region's major industry -- the federal government -- prepares to face the budget ax. Many in Congress have expressed an interest in slowing federal spending in order to bring the $1 trillion or so deficit in line.
Welcome to the era of government austerity.
The last time the federal government went down this path, in 1995, the region felt the pain. During a two-year period, the federal workforce in the Washington area shrank by 32,000 with cuts at NASA, Agriculture, Transportation and numerous other agencies. Federal contracts were canceled. The government scrapped construction projects in the area. The after-shocks reverberated throughout the region's economy. Consumer confidence plummeted, driving down retail sales and exacerbating a depressed housing market. Declining federal aid and local tax revenues prompted several jurisdictions, including Prince George's County, to lay off employees to help close their budget gaps.
This development is unlikely to produce much sympathy in the rest of the country. Six of the ten richest counties in America are in the D.C. area -- and that includes the top three richest counties. D.C.'s economic growth is largely driven by the federal government, which has added more than 141,000 new federal jobs under Obama representing a 7 percent increase in the federal workforce at a time when much of the country has been facing double-digit unemployment and above. And federal compensation is double the private sector average thanks to the fact that federal salaries have been growing at twice the rate of the private sector.
While it may hurt the D.C. economy in the short-term, reining federal growth is an economic and political necessity that is long overdue.