Washington's Government-Based Economy Booms

NYT:

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...

Peak Washington of the early 2010s, many economists believe, got its start during the Reagan Revolution of the 1980s. Reagan’s messianic push to get government out of the way of private-sector growth famously led to lower taxes and reduced regulation. It also led to a subtle change in the way government did business. Hiring became secondary to contracting, and more and more public projects were outsourced to private firms.

Washington’s economy did well under Reagan (added military spending gave it a boost), but the move to contract out more and more government work proved to be a crucial long-term change. In 1993, Bill Clinton announced a “reinventing government” initiative, which ultimately included cutting the federal work force by about 250,000 positions. The agencies winnowed their rolls, but over the course of the Clinton years, their budgets expanded, and in many cases, the work just went to contractors. Those contractors often came at a bloated cost, too. In a study released in 2011, the Project on Government Oversight found that using contractors can cost the federal government about twice as much as federal employees for comparable work. According to the study, the salary for a federally employed computer engineer would be about $135,000; a contractor might bill the government around $270,000 for similar work.

It was not until the Bush years, though, that this increasingly wealthy not-federal-but-still-government work force truly metastasized. The amorphous war on terror and the creation of the Department of Homeland Security — plus the wars in Afghanistan and Iraq — bloated the country’s spending by about $1 trillion. The contracting dollars that were pumped into the local economy, Fuller says, more than doubled between 2000 and 2010, when it reached $80 billion a year. This, in turn, created hundreds of thousand of desk jobs and fostered a sprawl of nameless, faceless office parks lining the roads out to Dulles Airport.

In the process, tens of thousands of new workers, often well-paid young white-collar professionals in areas like technology, bioscience and engineering, also entered the local economy.

Nice to know that "smaller government" mainly just means better-paid private sector contractors.  Well, I pretty much knew that, but it is good to see it getting some press coverage.