A new game plan for Washington’s economy

Posted: April 20, 2015 at 4:05 pm, Last Updated: April 20, 2015 at 6:05 pm

For more than three decades, the Washington area economy grew relentlessly, driven by increasing federal expenditures feeding local suppliers. Between 1980 and 2010, the local economy expanded by a factor of 20, from $4.2 billion to $82.4 billion. There was considerable growth in federal employment as well, which peaked in August 2010 at 387,000 civilian jobs.

By 2010, total federal spending accounted for $169 billion of the region’s $433 billion output (a 40 percent share).

In 2010, things changed. In about four years, federal employment declined by nearly 22,000 jobs and federal contracting declined 14 percent. The consequences of this downturn have been painful both in terms of economic output and jobs. While unemployment remains below the national rate, Washington can no longer claim the best numbers among the largest metro areas. And forecasts don’t look terribly bright.

Where do we go from here? Well, one option would be to sit tight and hope for a turnaround in federal spending. Or, we can work to build a globally competitive regional economy that does not overly rely on federal spending.

The first strategy leaves our future to forces beyond our control. I prefer the second alternative: Finding a way to determine our own future.

The question before us is how do we build an economy that provides high value-added products and services to customers outside of our region, targets high-growth sectors and leverages existing competitive advantages and assets.

In the words of my colleague Steve Fuller (head of Mason’s Center for Regional Analysis and source of the above-mentioned data), how does Washington transition from a “company town” to a global business center.

To make that transition, we need to:

1. Map out our capabilities.

2. Identify the sectors where those capabilities can be most effectively deployed.

3. Determine what policies may need to change and what key investments need to be secured.

The Washington region, which spans Virginia, Maryland and the District of Columbia, and several counties and cities, lacks a unified political structure. It also lacks a leading business organization. The situation is still
accurately described by this 2012 column by Steve Pearlstein in the Washington Post.

So we have decided to take the lead and help craft a road map to guide the transformation of the regional economy. There are many groups across the Washington area with the expertise and interest in growing the regional economy. As a public institution with well respected researchers we hope to act as an honest broker to bring these groups together and analyze the paths forward.  The University’s Center for Regional Analysis will drive the effort.

In the weeks to come, we will reach out to individuals, groups and institutions from across the region. We will collect insights, look at the data and synthesize what we discover into a coherent and practical set of recommendations.

Our first steps have been well received. Stay tuned for more news about this ambitious and necessary project.

(This piece in today’s Washington Post on the slowing down of regional population growth could not be better timed)

Write to Ángel Cabrera at president@gmu.edu

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