Region not ready for impact of federal budget cuts

Hank Silverberg,

WASHINGTON — The National Capital Region could face a major economic hit in the next few months unless Congress acts to halt looming across-the-board cuts to the federal budget, according to a Metropolitan Washington Council of Governments report.

To combat that grim economic picture, COG, which provides planning for the region, recommends that the area promote its economic diversity and go beyond the image of being simply a “government town.”

The impending cuts, known as sequestration, would trim $1.2 trillion from the federal budget. The cuts take affect January 1 if Congress does not act and could lead to the loss of an estimated 240,000 local jobs.

In 2011, federal employment declined for 8 months. And between 2010 and 2015, the federal government’s share of the regional economy is expected to decline by 3.5 percent, the report said.

In 2010, the federal government spent about $166 billion in the metro area. “For a region with such a high level of federal investment, these cuts would have an enormous ripple effect throughout the entire economy,” the report says.

COG chair Frank Principi says this region is simply not ready for the economic changes a smaller federal government would bring.

“It has a cascading effect on the private sector and the non-profit sector,” Principi says.

Less government spending also means fewer federal dollars going to private contractors, which today employ thousands of people in the region. Contractors have warned lawmakers that layoffs are likely if federal contracting shrinks.

Fewer federal and contract workers means less consumer spending on everything from movie theatre tickets to car sales at local dealerships.

The report says over the long term, the region can make up for the loss of jobs and federal spending by promoting biotech firms, the hospitality industry and the cybersecurity industry. Urban planning will also play a part in rebalancing the regional economy, Principi said.

“We need to think outside the box when it comes to urban planning”says Principi. “We need to make decisions that link land use with transportation.”

Focusing on local activity centers where residential and commercial development are combined with transit hubs will help, he says.

Regional planners say such centers would take traffic off the road and allow people to live, work and play in the same place. The region’s congested roads have a negative impact on the area’s economy. Reducing traffic and long commutes saves workers money they would otherwise spend on gas and it means less government funding is needed for public transit.

Principi pointed to Potomac Town Center, a new development centered around a Wegman’s supermarket in Prince William County that could soon also be the home of a new stadium for the Carolina League Potomac Nationals. That development includes a streetscape mixed with retail stores and residential units, which are expected to be built soon.

Follow Hank and WTOP on Twitter.

(Copyright 2012 by WTOP. All Rights Reserved.)

More from WTOP

Log in to your WTOP account for notifications and alerts customized for you.

Sign up