by James A. Bacon
The pain of federal budget sequestration cuts in Virginia is not yet over. Look what The Washington Post reports today:
According to the Defense Department research, things are likely to worsen over the next four years. From 2010 to 2012, Virginia experienced $9.8 billion in defense cuts, with the vast majority of losses in Northern Virginia. Direct defense spending in the state is projected to drop from $64 billion this year to under $62 billion in 2019.
That’s only $2 billion in cuts compared to $9.8 billion previously. That sounds bad but not that bad. Actually, it is, says Sen. Mark Warner, D-Virginia: “If we have the return of sequestration, it’s going to be even worse than it was a couple of years ago, because every agency, particularly the Defense Department, has cleared out most of their coffers.”
I’m not sure exactly what “cleared out their coffers” means, but I’m guessing it means that defense agencies have burned through their budget gimmicks and are planning real cuts.
Adding to the woes, the impact of federal budget cuts will percolate through the rest of the economy. As government contractors consolidate, they’ll need less office space. That puts pressure on lease rates region-wide, there will be less construction work, and the necessary process of restructuring from inefficient and expensive land-use patterns to more cost-effective patterns will drag out. Meanwhile, transportation planning assumptions, predicated on wildly out-of-date assumptions about growth and development, will veer farther and farther from reality.
The rule is so simple: Things that can’t go on forever… won’t. The defense spending boom of the post 9/11 era could not continue forever… and it didn’t. The downturn and all the ugly consequences stemming from it were utterly foreseeable — I’ve been ranting about them for years.
I don’t lose a lot of sleep over real estate developers losing a fortune. They’re big boys and they know how to hedge their bets. (If they don’t, they shouldn’t be in the business.) I’m a lot more worried about the state and local government sinking billions of dollars on infrastructure designed for the go-go 2000s. It is astonishing to me that serious consideration is still being given to the Bi-County Parkway near Manassas, and I have serious questions about the assumptions underpinning the billions of dollars of improvements planned for Interstate 66 and the second leg of the Rail-to-Dulles project. Any project whose revenues are predicated on assumptions of increased traffic, which are based on the 2000s-era economic growth rates extended in a straight-line projection forever, will create nothing but headaches for taxpayers.There are currently no comments highlighted.