It has finally dawned upon the Washington Post news staff that the new crowd of deficit hawks in Congress may not portend well for the regional economy. Indeed, it won’t. The only thing that could be worse than the rough patch we’ll experience if Republicans make good on promises to slash federal spending by $100 billion would be continuing down the budgetary path to Boomergeddon (when Uncle Sam defaults on his debts and investors refuse to lend anymore), in which case the shortfall could exceed $1 trillion.
Here’s my favorite line in yesterday’s story, “Federal austerity could hit the region’s economy hard“:
Some forecasts suggest that the growth of federal spending and procurement could plunge to 1 percent or below in 2011 from an average of about 8 percent annually during the past several years. That could hurt even if the local economy benefits from improvements this year in the U.S. economy.
Some people, like Rodger Provo who alerted me to the WaPo article, find it incomprehensible that conservative Virginians would “continue their assault on the federal government,” the cornerstone of the state economy. I consider it a sign of good sense. First, because growing federal command over the economy through direct spending, regulations and allocation of capital is bad for the economy generally. That would include Virginia. Second, because something that can’t go on forever… won’t. I’d much rather have a prolonged but gradual slowdown that we can adapt to rather than a crash that induces blind, mind-numbing panic.
