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D.C. region in danger of another recession

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Local,DC,Liz Farmer

The Washington region could be headed for a mini-recession if the federal government follows through on its threats to severely slash spending next year, a noted economist said Wednesday.

Already, the region's growth rate -- which outpaced other cities' during the 2009 recession -- has suffered thanks to its heavy reliance on Uncle Sam.

"We no longer lead the national economy, we follow it," George Mason University economist Stephen Fuller said. "[We follow it] just barely, but for a long time we were 2 percentage points faster."

Losing its lead
Growth rateWashington MetroU.S.
20064%2.8%
20073.2%2%
20081.5%-0.1%
2009-1%-3.6%
20103.1%3%
20112.8%1.9%
2012*2.8%2%
2013*3%2.5%
2014*3.3%3.3%
2015*3.2%3.3%
* predictions
Source: George Mason University Center for Regional Analysis

Fuller's comments came during the first of a series of presentations for the Metropolitan Washington Council of Governments Board of Directors on the region's economic future.

"This is sort of a wake-up call for everyone around this table," Chairman Frank Principi told Fuller. "We see it coming and we need to anticipate it and put a strategy in place that will accommodate for these shortcomings."

Fuller said about $169 billion in federal spending, much of which is based on procurement, now accounts for about 40 percent of the region's annual economy. But by 2015, he predicts, that will be cut down to about 36 percent.

That's already shown up in the ramping down of federal jobs that began last spring when a fight on Capitol Hill over spending cuts nearly prompted the first of several government shutdown threats in 2011. Federal jobs were lost across the region during the final seven months of last year, according to Fuller.

Now, massive spending cuts are set to be triggered in 2013 unless lawmakers step in. If the cuts happen, Fuller said the meager growth he predicts for the national economy next year could dip into the negative, with the Washington region being among the hardest-hit nationwide.

Fuller said he doesn't expect those cuts to actually kick in, but that the region has to better prepare for what's sure to be a federal spending slowdown. He said the region's other major industries -- hospitality, health and education, and professional business services -- all saw significant growth last year and they offer the key to future growth.

"So many of our eggs are in the basket of fed programs," said board member and Fairfax County Board of Supervisors Chairwoman Sharon Bulova. "This [really] demonstrates the importance of this region bringing in other sectors that aren't so reliant upon federal spending."

lfarmer@washingtonexaminer.com

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