For years, the fate of the Washington metropolitan economy has been keyed far more closely to the trend in federal spending than to fluctuations in the national economy. For years, that trend has been unambiguously upward. Now, the substantial shifts in government size and policy implied by the Reagan economic program may require the Washington area to adjust to the kinds of dislocation that other company towns have long faced when their major employer goes on the skids.
Thus far, the local business community remains bullish. Area employers are concerned that continuing high interest rates may spell still harder times for certain sectors--the housing industry and financial institutions, in particular--but they point to the strong growth of private sector employment in recent years as an indication that the local economy can make up for government job losses. A recent study by the Greater Washington Board of Trade, for example, contrasted the 4,400 federal layoffs expected before Oct. 1 of this year with the 19,000 jobs added to the local private sector in 1979 and concluded that, for the moment at least, all that is needed is to help federal job losers find new employment.
Local governments are understandably less sanguine. Federal budget cuts will mean fewer services for area citizens and job losses in city and county governments as well. With reduced resources, local governments will face new burdens: Cuts in federal job, welfare and service programs will reduce local income and increase demand for local assistance. The merger of special purpose federal programs into larger "block grants" means greater local management responsibility. It also means that private organizations and interest groups that formerly received direct federal aid will be knocking, instead, on the doors of local governments.
Neither the business community nor the area's governments, however, have had time to assess the full measure of what may be in store for the local economy. Federal layoffs now planned are likely to be followed by larger waves. To meet its 1984 targets, the administration must more than double the budget cuts already enacted. Some programs that are still federally administered may be shut down or transferred entirely to states and localities. This means more federal job losses for Washington--not likely to be offset much by military hires--and more burdens for local governments.
There is also the question of how private the local private sector really is. Much recent job growth has come from the trade associations, legal, accounting, research and communications firms that have come to do business with the federal government. This influx, in turn, has raised demand for housing, hotels, retail stores and so on. Those firms that are here are likely to stay, making up for their losses from reduced regulation and social spending with defense business and by advising their clients how to adjust to the new realities. Newcomers, however, may need more than the proximity of the federal government to attract them.
Finding jobs for laid-off workers is an important and humanitarian concern. It does not, however, produce the new jobs needed to compensate for permanent losses of federal jobs and money. What is needed is a combined effort by the area's businesses and governments to attract new jobs not dependent on the federal government. It's time for Washington to become more than a company town.