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InsiderOnline Blog: February 2013

A Growth Model that Works for Pretty Much One City Only

The beltway has been booming, notes Aaron Renn:

 [P]rosperous urban regions in America are increasingly divided into two kinds. Some, like the Bay Area, embrace a “vertical” model of success, generating increases in economic output and per-capita income with stagnant or declining population and jobs. Others, like Dallas, are “horizontal,” featuring growth in population and jobs but stagnant or declining output and income. But Washington is an exception: it is the only metropolitan area with a population of at least 1 million that achieves the best of both worlds, combining Dallas-style population and job growth with the fabulous output and wealth of a San Francisco. In that respect, it is a city without peer in America.

What’s the explanation? Renn offers:

Washington has discovered a new way to extract value from the federal government, based not just on spending but on an ever-expanding regulatory state. An array of programs—the Sarbanes-Oxley and Dodd-Frank acts governing finance; the government’s auto-industry takeover; the EPA’s declaration that carbon dioxide is a pollutant—takes regulation to new levels of detail and intrusiveness, even extending to the micromanagement of particular companies. The trend began long before President Obama took office, but its quintessence is Obamacare, an annexation by the federal government of one-sixth of the American economy via 2,000 pages of byzantine legislation, not counting the thousands of pages of implementing regulations still to come.

All this intrusion emanates from the legislative and especially the regulatory machinery in Washington. The city has become, in effect, the Brussels of America. So a wider and wider variety of businesses and organizations must be located there to lobby the government that decides their fate. (According to the Center for Responsive Politics, total spending on lobbying rose from $1.6 billion in 2000 to $3.3 billion in 2011.) These firms pay local taxes. So do their workers, who also buy houses, patronize stores, pay tuition at private schools, employ local doctors and lawyers, and so on. The regulatory superstate is turbocharging Washington’s local economy. [City Journal, Winter 2013]

Posted on 02/05/13 06:29 PM by Alex Adrianson

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