There’s been much speculation about what the reduction in federal government spending will mean for the future of the District, and I generally don’t put too much stock in any one forecast. But given that Knight Kiplinger is the editor and president of the forecasting publication, the Kiplinger Letter, which claims to be the “most widely read business forecasting periodical in the world,” it’s worth considering his expansive thoughts on what the next few years hold for the District’s economy.
Delivering the keynote address at Friday’s annual meeting of the Washington, DC Economic Partnership, Kiplinger began by highlighting the main factor that’s likely to crimp D.C.’s recent economic strength: the contraction of the federal government. The D.C. area, he said, received three times as much per-capita funding through the federal stimulus as the rest of America, helping it prosper as much of the country struggled.
“After 50 years of lavish spending, the federal government has now been put on a low-fat diet,” said Kiplinger, who repeatedly emphasized his native Washingtonian cred and his deep family roots in the city. The effects of sequestration, he said, have thus far been “masked by the vast amount of construction underway in our city that was planned and started before the sequester.”
But soon they’ll be felt, he’s sure, as federal government spending experiences not just a slowdown in growth, but an actual reduction. That’s already reflected in a recent report from the Urban Land Institute on investor appeal, in which the D.C. area slipped from first place in 2011 to eighth place last year to 22nd this year.
On the plus side, Kiplinger outlined six factors operating in D.C.’s favor:
1. A “diverse and growing private sector.” As public-sector jobs have declined in D.C. in the last few years, private-sector jobs continue to grow. As the new WDCEP development report highlights, industries like health and education are fueling the D.C. economy to an increasing degree.
2. “Well-educated, talented people.” Smart people are good for the economy, whether they work for the government or not.
3. “The impending retirement of D.C.’s baby boomers.” Middle-aged Washingtonians hold many of the city’s positions of authority and influence. As they retire, there’ll be more job opportunities for young people, who will continue to flock to the city.
4. “Population growth by natural increase—-that means births.” More young people are staying in the city as they have kids. (The WDCEP report shows a declining birth rate, but that’s probably attributable to all the single people moving to D.C. and reducing the number of births per 1,000 residents, rather than fewer people being born to existing residents.)
5. “A gradually improving public education system.” Emphasis on the word “gradually.” D.C.’s public school system is no model, but Kiplinger pointed to modest improvements in traditional public and charter schools, in the areas of standards, facilities, and teacher quality.
6. “Room to grow.” Kiplinger highlighted a few of the mega-developments coming to D.C., at St. Elizabeths, the Southwest Waterfront, and Walter Reed. He’s personally opposed to modifying the Height Act and allowing taller buildings, arguing that it would “undercut” the spread of development to new areas. He also predicted that it won’t happen. “Political pressure will probably keep the height limit where it is,” he said.
Overall, Kiplinger forecasts “a slower-growing D.C. than we have seen over the last several years.” But he actually framed that as good news: A slowdown in D.C.’s wealth growth, he said, would lessen the resentments of other Americans toward the flourishing capital region.
Personally, I’d rather take the wealth and the resentment.
Photo by Darrow Montgomery