Washington DC’s booming economy built on the backs of the country it leads

And interesting article in the New York Times details a recent development in and around our nations capital. During the past 10 to 15 years, there is been a massive economic boom within Washington DC, and the surrounding counties in Maryland and Northern Virginia.

How Washington managed this transformation, however, is not a story that the rest of the country might want to hear, because we largely financed it. As the size of the federal budget has ballooned over the past decade, more and more of that money has remained in the District. “We get about 15 cents of every procurement dollar spent by the federal government,” says Stephen Fuller, a professor of public policy at George Mason University and an expert on the region. “There’s great dependence there.” And with dependence comes fragility. About 40 percent of the regional economy, Fuller says, relies on federal spending.

Congress may have passed legislation to avert the middle-class tax increases of the so-called “fiscal cliff,” but it has only postponed what is known as the “sequester” — $1.2 trillion in budget cuts. And that’s on top of several hundred billion dollars in cuts that the Pentagon has already agreed to. The capital’s boom days, in other words, might be over. “Rather than leading the nation, we’re going to be lagging it going forward,” Fuller says.

The author goes on to explain why this came about, pinning much of the blame on the Reagan administration (curiously). Arguably, there are the multiple years of trillion plus dollar deficits that probably had an effect as well, though that is not emphasized very much in the article. The Cato Institute , in it’s usual clear style, add the following to say in the article:

David Boaz, executive vice president of the Cato Institute, told me: “Washington’s economy is based on the confiscation and transfer of wealth produced elsewhere. Out in the country they’re growing food, building cars and designing software — all these things that raise our standard of living. Here in Washington, everyone is writing memos to each other about how to take some of that money and which special interest should get it.” I asked him if he liked living in the city, which has become undeniably nicer. Boaz sputtered a bit. “I can’t walk to lunch from my office without having to avoid the construction projects!” he said. “For Washington, it does mean better restaurants and better entertainment, and the potholes get filled faster. But for the country as a whole? I don’t think it’s a good thing for America.”

Balance the budget without raising taxes IS possible

The Washington Times describes how to close the deficit without raising taxes. Obviously, there are two competing thoughts on the subject: the Center for American Progress (left leaning think tank) proposes perpetually higher taxes and an actual increase in overall spending. On the other aide, the Heritage Foundation describes a way that balance can be archived without taking more funds out of the private economy.

Obama’s favorite think tank, the Center for American Progress, submitted a plan that calls for the federal government to eat up more than 20 percent of the American economy through taxation every year, in perpetuity. Being the liberals that they are, CAP calls for even higher levels of spending — above 22 percent of GDP by 2022 alone.

Contrast CAP’s plan with that of the Heritage Foundation. It returns taxation to just above the historical U.S. average at 18.5 percent of GDP. By cutting spending to pre-Great Society levels, the Heritage plan not only balances the budget but actually begins to lower our cumulative national debt.

Heritage achieves these savings by repealing Obamacare; making the wealthy pay more for their Medicare benefits and shifting the program to a premium-support model; capping Medicaid spending and turning the program over to the states; and transforming Social Security back into an anti-poverty program as originally promoted by President Franklin Roosevelt.