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Posted at 07:35 AM ET, 01/04/2012

Judging the impact of federal government cuts on the region


Source: George Mason University’s Center for Regional Analysis

Okay, this is kind of a scary topic for some folks to think about. Did you read Steven Pearlstein’s column from Monday about the impact of federal spending cuts on our region? He basically says the gravy days of relying on the federal government are over.

You might disagree, but even so, it’s clear federal cuts are coming in a big way. There’s the budget deficit, the supercommittee, the election year and who knows what will happen with a new Congress and possibly a new occupant of the White House.

So, what does that mean for local home values, and when would we see the impact?

Last month, John McClain of George Mason’s Center for Regional Analysis presented an overview and outlook of the housing sector at the National Press Club as part of the Northern Virginia Association of Realtors press conference. He tried hard to be optimistic. “It’s not as dynamic and robust as we would like,” he said. “But there is good news out there.”

Manufacturing is up. Consumer confidence is up. Retail sales are up. Even the stubborn unemployment rate ticked down below 9 percent at the end of 2011. But housing? Not so much. In every past recession, it’s the housing market that has been a major contributor to pulling us out of a recession and into a rebound. But this time around, “that’s what’s been missing,” McClain said.

McClain also offered the first projection I’ve seen of what might happen locally if the federal government cuts spending to reduce the deficit. This region has depended on annual 10 percent increases each year over the past several years in federal procurement.

Under McClain’s worst-case scenario, if the region saw a 10 percent reduction in federal spending, the region would still grow a tepid 0.4 percent in 2013, even with a local loss of 30,000 federal jobs.

And if you’re interested in politics, he’s got a really cool chart (see above) looking at how federal employment has grown or shrunk under recent presidents. Quick: Do you think federal jobs have grown or shrunk with a Democrat in the White House? What about a Republican? I bet the chart was a little surprising.

In the short term, his outlook for 2012 is that “we’re going to probably muddle along; 2012 will be a lot like 2011 — maybe slightly better than 2011.” McClain and other economists are much more hopeful for 2013.

Okay, well, does that make you feel better? Happy New Year, everyone!

By  |  07:35 AM ET, 01/04/2012

 
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