Washington Could Ruin Washington

Federal spending cuts will mean fresh economic problems for the Washington, D.C., metro area.

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"When you look at job growth we're having and what kind of job growth we've had, we were, between 2000 and 2010, Number 1 in the country. Now we are the 10th-fastest growing" in terms of the number of jobs being added, Fuller says.

The Washington metro area's unemployment rate stood at 5.3 percent as of December—far lower than the national rate of 7.8 percent but also representing its first uptick since 2011. That may not be much of a shift, but Fuller believes that recent sluggish local job creation could be the start of a trend.

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How bad could it get? That depends on whom you ask. Fuller is at the bearish end of the spectrum. He estimated in 2012 that the combination of sequestration cuts and already-enacted defense cuts would cost D.C. more than 14,000 jobs, along with 122,800 in the state of Virginia and 36,000 in the state of Maryland. All told, he believes that these cuts would slash 1 million jobs from the nation's payrolls.

Many have questioned Fuller's gloomy projections, however. The Center for International Policy, a foreign policy research and advocacy organization, on Thursday put the total national job cuts resulting from Pentagon cutbacks at around 300,000 to 500,000. That's still a hit to the economy, but it's also less than half of Fuller's projections.

For his part, Dinegar believes that metro area unemployment will definitely rise if sequestration happens, along with stagnant economic growth in the region. That doesn't just mean slower spending at restaurants and longer unemployment lines; it could worsen quality of life in the District.

He points to D.C.'s Metro transit system, which would lose some federal funding due to the sequester. Between that funding cut and lower ridership that could result from an economic slowdown, he says, that could take $22 million from the Metro's operating budget, or around 1.4 percent of its $1.6 billion operating budget. At first glance, that's not a large bite, but for an agency already facing regular shortfalls, it could mean service cuts.

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All of these potential problems would mean an end to a long period of relative economic health in the nation's capital. By the numbers, the Washington, D.C., metropolitan area experienced a remarkably mild recession. The national unemployment rate topped out at 10 percent in late 2009.

The D.C. metro area's jobless figure, meanwhile, only crept as high as 6.7 percent. According to Commerce Department data, D.C. is also one of the relatively few metro areas in the nation that didn't experience a single year of negative growth during the downturn.

Washington, D.C., Mayor Vincent Gray seems to understand the gravity of the situation. This week, in his State of the District Address, Gray advocated diversifying the metro-area economy, with more growth in health care, technology, and hospitality.

Still, that is not to exclude the rest of the country from the potential ill effects of deep spending cuts.

"Certainly the entire country is going to be affected," says Jason Peuquet, research director at the Committee for a Responsible Federal Budget. He points out that federal workers and defense contractors, while concentrated in the Washington area, are found nationwide.

This all makes spending cuts sound like an altogether bad decision, but a broader view complicates the picture. While any large spending cuts could be detrimental to the D.C. and national economies in the short to medium term, particularly given shaky economic growth since the recession, deficit reduction means much greater economic growth potential nationwide in the longer term.

Indeed, there are some who argue that D.C. has been too healthy for too long. The flip side of the federal government buoying the D.C. economy, says Cato's Edwards, is that D.C. benefits at the expense of taxpayers.

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"Every dollar we spend on Social Security, for example, comes from someone else through payroll taxes. It's just middle-income America taxing middle-income Americans."


Corrected on : CORRECTION: An earlier version of this article mistakenly attributed a report to the National Security Network. The report is from the Center for International Policy.