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Commentary: Republican victories could take a bite out of region's economy

By Jim Dinegar
Monday, November 8, 2010; 19

Last week, the U.S. Bureau of Labor Statistics reported that the unemployment rate in the Washington region fell to 5.9 percent and that the area led the nation in the number of jobs created. But given the overwhelming message sent by voters at the polls around the country -- reduce the deficit -- that may be the last good jobs report the region sees for some time.

Though Republicans were elected in large numbers around the country, elected officials in both parties will seek to outdo each other on cutting government spending. The region has benefited greatly from government spending -- from the defense contractors surrounding the Beltway to law firms and lobbyists who are responsible for weighing in on the regulations for health-care and financial reform. That steady and growing source of funding has largely shielded this region from the painful effects of the downturn seen in other parts of the country.

But I fear we will become the flip side of the growth capital of the country, and that the Washington region will feel the reductions first and feel them the hardest.

The gridlock of the coming congressional lame duck session will portend difficult dealings for the year ahead -- and that has serious implications for government-funded new programs next year. Without an agreement, if your project is new for fiscal 2011, it's almost impossible to proceed because you won't have the authority to hire or to spend or commit monies. Without an agreement, there will be no new money for medical research for the National Institutes of Health, contracting firms and even arts, health and education nonprofits.

The new Congress in January is going to cut, cut, cut. Deficit reduction for this region means a great deal. Already, the Obama administration is preparing to reduce Defense Department spending by 10 percent per year for each of the next three years -- directly affecting this region's research, consulting and support work. There does not appear to be an appetite to suspend those cuts as "deficit reduction" will trump all arguments.

Republican leaders have indicated their desire to kill the health-care reform law through repeal or by starving it of funding. A number of law firms and lobbying firms have been working hard to write the regulations for its implementation. Those groups that stood to benefit from work associated with health-care and financial reform laws should take a good, hard look at whether they will continue or be reversed.

The inability to compromise combined with the directive to reduce spending will likely prevent the reauthorization of a multi-year transportation plan, instead leaving this critical infrastructure funding mechanism to limp along year to year. When projects are appropriated in multi-year bills, you have a high degree of certainty the funds will follow. Without multi-year funding, you end up living hand to mouth. That could have implications for the Tysons Corner-to-Dulles rail project, expanded funding for Metro, the Intercounty Connector and the Purple Line.

As the Dow approaches 12,000 and people around the country are beginning to feel better about the economy, the situation may be different here. Our region has bragged about being better and stronger and not feeling the implications of the recession as deeply as the rest of the nation. It appears we may be headed for our time in the recession and the end-of-the-year strategizing that happens now must incorporate this likelihood into planning for next year and the year after.

Jim Dinegar is president and chief executive of the Greater Washington Board of Trade.

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