As 'fiscal cliff' approaches, officials look to lessen federal reliance

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Local,Maryland,Matt Connolly

Washington-area governments are learning quickly that they need to break free from their dependency on the federal government as the "fiscal cliff" approaches.

A looming $1 trillion in cuts over the next decade -- half from defense spending and half from nondefense spending -- will be enacted if President Obama and Congress fail to reach an agreement by the end of the year to reduce the deficit. That could lead to a loss of 450,000 jobs in the Washington area, according to the Metropolitan Washington Council of Governments.

"I don't think it's going to happen," Alice Rivlin, a senior fellow at the Brookings Institution and former vice chairwoman of the Federal Reserve, said in a speech to the COG on Wednesday. "It's like a storm, though. You have to prepare."

Still, local contractors and governments are suffering in the uncertainty of what the federal budget will look like in the future. Some businesses have already begun cutting, with members of departments like accounting, human resources and legal among the first to go, said Rockville lawyer Alfred Wurglitz, who specializes in government contracts and finance.

"Those cuts look like they save you some in the short term, but is it going to cost you long term?" Wurglitz asked. "You might be cutting off your nose to spite your face."

The uncertainty underscores the difficulty for local economies that rely on federal money. While federal spending increased 8 percent a year from 2000 to 2010, it only rose by 1 percent in 2011, according to Stephen Fuller, director of the Center for Regional Analysis at George Mason University.

"Federal employment has declined for 18 consecutive months," Fuller said. "Cliff or no cliff, that's a big change."

It's not just government employees and contractors that feel the effects, either.

"That filters down to the dry cleaner, to the restaurant, to the grocery store," said Fairfax County Supervisor Pat Herrity. "This area isn't used to it."

The COG put out a plan this year to diversify the economy and wean the region off some federal sources of funding and jobs. The plan is focused on growth industries like technology, hospitality and health care.

"We'll always have a big federal presence, we know that," D.C. Mayor Vincent Gray said in a speech to the COG on Wednesday. "But if our growth depends solely on the growth of the federal government, we will have missed the point."

mconnolly@washingtonexaminer.com

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Matt Connolly

Examiner Staff Writer
The Washington Examiner