Achieving orbital escape velocity: The Antares rocket, designed by Orbital Sciences Corp., is just one sign of the Washington region’s economic vitality.
by James A. Bacon
It was long the conventional wisdom — which I shared, by the way — that the Washington regional economy was cruising for a bruising when the federal government encountered its inevitable reckoning with fiscal reality. Well, sequestration, a sort of semi-reckoning, has kicked in, and the Washington economy appears to be shrugging it off.
Indeed, the main thesis of a front-page Wall Street Journal this morning is that private-sector growth is replacing government growth as a source of economic dynamism. Federal spending as a proportion of the regional economy has slipped from 40% to 36% since 2010 — yet the regional economy continues to grow faster than the national average.
What’s happened? The region’s deep talent base is part of the story. But Washington has had a deep talent base for decades. What’s different is that the region now has a generation of successful entrepreneurs who have cashed in their chips from the government-contracting businesses they built and now are investing in start-ups that have no government connections at all.
Writes Elizabeth Williamson:
More than a generation of heavy federal spending, it turns out, has provided the seed money for a Washington economy that now operates globally—less tied to the vicissitudes of the capital’s political rhythms.
The new moneyed brain trust is being led by professionals in defense, intelligence and data—many of whom excelled initially due to government ties. They’ve propelled the D.C. region as a leader in the cybersecurity and data sectors, as well as in more-specialized arenas including educational products and health-care data management.
Along those lines, Stephen Fuller, George Mason University’s regional economist, attributes the economic dynamism to the fact that the region has “become more business-based. … The stuff we learned how to do for the federal government can be sold to other people—a different economy is going to emerge that in the long run may be a better-balanced economy than the one we have now.”
Bacon’s bottom line: If Fuller’s thesis is correct, if the Washington regional economy has reached escape velocity from federal spending, then that is positive news indeed, both for Northern Virginia and for Virginia as a whole. One of my nightmares, frequently articulated on this blog, is that a slowdown in federal spending would have devastating consequences for the economy, tax revenues and the fiscal strength of state and local governments. The WSJ article awakens me to the possibility that those fears may be exaggerated.
There is a second level of re-appraisal that must occur. I have frequently raised the specter of slower economic growth in Northern Virginia as justification for mistrusting the long-range job and population forecasts that underpin infrastructure spending (especially transportation spending) plans for the region. If the region continues to grow like gangbusters, I’ll have to scrap that argument.
Whatever the region’s growth rate, the debate over transportation and land-use policy in Northern Virginia will continue without let-up.