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Should America break up Washington?

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CONCERNS about regional inequality and frustration with elites are contributing to interest in an intriguing idea: reining in the economic and political power of Washington by dispersing government agencies more widely. Tyler Cowen muses on the subject here. Matthew Yglesias makes the case for such a policy here. Ross Douthat makes a somewhat different but related argument here. So: is this a good idea? It certainly isn’t a terrible idea, but the more you dig into the matter the less it looks like an out-and-out good one. (Some disclosure: I work in Washington now, and once, long ago I was a federal government employee at the Bureau of Labor Statistics.)

It might be useful to begin with a little perspective. Funnily enough, Washington was a purpose-built capital, located outside the major cities of the day, partly in order to prevent a Philadelphia or New York from becoming dominant. America’s metropolitan geography remains multipolar in a way few other rich economies manage. Washington, for its part, is neither the largest, or the richest, or the fastest growing of America’s major metropolitan areas. The economy of the Washington metropolitan area accounts for a smaller share of American GDP than Ottawa’s share of Canadian GDP. What’s more, of the 1.8m or so civilian employees of the federal government, only about 15% are located in the Washington area.

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All that doesn’t mean that an even more dispersed distribution of federal government activity would not be a good thing. One important question to ask is what the intent of dispersion would be.

One potential motivation is cost savings. Land in the Washington area is expensive, which means that salaries must be higher than those paid elsewhere in order to compensate employees for the local cost of living. Moving could reduce costs. There are some problems here, however. The expense of a place is in part down to the amenities the area provides: weather, cultural and consumption opportunities, employment opportunities for spouses, and so on. Cheaper cities (particularly those facing long-term economic decline) will often be lacking in these amenities. Some of the savings realised by moving an agency to Buffalo, for instance, would be given back through the salary premium needed to attract employees to Buffalo. Also, government agencies are staffed by real human beings, many of whom will have optimised their lives for being in Washington. Moving agencies would therefore require the government to either compensate the people being moved for the cost of uprooting them, or to suffer mass personnel losses.

But perhaps economic development is the preferred motivation. One thing to note about government employment is that the vast majority of it consists of work that is boring but important. For much of the work done it is useful, though not absolutely critical, to be near other agencies and the political leaders who consume agency output. At the same time, the spillover effects of that sort of employment to outside, private industry are quite small. So, government agencies would provide some boost to a local economy, but the growth multiplier would probably not be especially large. That might not be a huge problem if such relocations were a part of a broad regional development strategy that included lots of other investments. One risk would be that relocation becomes the strategy, crowding out other, more effective development tools.

The goal of relocation could be to “drain the swamp”, so to speak. But most civil servants are not parking their yachts in Washington harbour or meeting with lobbyists. Most are apolitical professionals doing work that is not particularly flashy, and not particularly influenced by Washington culture. Another thing to consider is that there could be economies of scale in government oversight. Washington is home to a cluster of watchdog organisations which keep an eye on many government functions; The Washington Post is devoted to coverage of federal government agencies in a way other newspapers might struggle to match (particularly in towns where the dominant industry is not government). While it is not quite the same thing, there is some evidence that more isolated capital cities are more corrupt.

But to take a step back: when people think of the private-sector excess in Washington associated with government largesse, most of what they’re talking about is the military-industrial complex. The company names on shiny buildings in Northern Virginia are mostly those of military equipment manufacturers. In the Metro, there are advertisements for companies that produce weapons. Since 2001, the region has boomed on the back of investment in security, intelligence, and cyber capabilities, much of which has gone to private contractors. Military spending—particularly the sort focused on technology and research—does often have large spillover effects. California’s economy would be a shadow of itself had it not been for government investments in aerospace in the south and in computing in the Bay Area.

In other words, moving large portions of the bureaucracy wouldn’t really address the thing that contributes most to the problem. And, geographic concentration might not be what should concern us most about the shadow state of private military contractors. But one takeaway is that large-scale government investment in research does have spillover effects that can support local economic development. Of course, you don’t need to move anything to provide much more of that. The federal government should be spending more on basic research, and there is no reason it could not concentrate new spending in particular areas in an effort to boost local development.

There is one small difficulty with that, which is that some concentration is needed for the strategy to work. A massive research centre in one city might spark the growth of an industry cluster. New grants scattered evenly across hundreds of cities and towns will not. But if there can only be a few winners, the political fight over which places should get the spoils could be impossibly nasty. In one sense, putting government agencies in Washington is a solution to a political problem; things go there because the politics of putting them elsewhere gets very messy very quickly.

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