Washington, D.C., may have been the United States capital since the earliest days of the republic, but it is only in recent years that it has emerged as one of the nation’s leading cities. The metropolitan region has ridden the growth in federal government spending, benefiting from what Aaron M. Renn in City Journal calls the “leaky bucket” model of economic development — skimming a take from the Mississippi-sized flow of federal money through the capital.
New York remains preeminent among American metros but Los Angeles and Chicago, the two main contenders for the nation’s second city, are struggling in a slow-growth economy. Washington has a faster-growing population, a better educated workforce and a higher per capita income. And, of course, it has the federal government.
Renn questions whether Washington can maintain superior growth with the leaky bucket model, however, as the national debt exceeds $16 trillion and the pressure builds to cut spending. The prospect of diminished federal spending should set off alarm bells for Virginia, which has become dependent upon the federal government for so much of its own economic growth. But never fear! Renn sees how the region can reinvent itself:
Washington has discovered a new way to extract value from the federal government, based not just on spending but on an ever-expanding regulatory state. An array of programs—the Sarbanes-Oxley and Dodd-Frank acts governing finance; the government’s auto-industry takeover; the EPA’s declaration that carbon dioxide is a pollutant—takes regulation to new levels of detail and intrusiveness, even extending to the micromanagement of particular companies. The trend began long before President Obama took office, but its quintessence is Obamacare, an annexation by the federal government of one-sixth of the American economy via 2,000 pages of byzantine legislation, not counting the thousands of pages of implementing regulations still to come. …
This new basis for prosperity could pay huge dividends to the region. The model here might be the defense industry, which has already centralized many operations in the area. Northrop Grumman, for example, recently moved its headquarters from Los Angeles to Washington. Boeing shifted its headquarters from Seattle to Chicago to be closer to defense operations and customers in Washington. Other industries, such as health insurance, may follow suit. Even if they don’t relocate to D.C. entirely, they’ll need to be represented there.
So, never fear, in the absence of a major political upheaval that imposes an alien vision of smaller, less powerful government, the Washington region’s future is secure. That’s good for Washington, Renn gripes, but not so good for the rest of the country.
The regulatory superstate depends on inflicting pain on the rest of the country, pain that only Washington itself can relieve—if you pay up and have the right connections, that is. Washington’s fortunes and America’s are increasingly at odds. The region is prospering because it’s becoming something that would have horrified the Founders: an imperial capital on the Potomac.
As an economic adjunct to Washington, however, Virginia is not like the rest of the country. What’s good for Washington is good, not bad, for the Old Dominion. We Virginians benefit from the oppression of our fellow citizens. The economic spillover from the District of Columbia keeps our economy, and our tax revenues, humming!
— JAB
