This report from George Mason’s Center for Regional Analysis makes clear that sequestration has had a significant impact on the region’s economy. The loss of federal government and contractor jobs has created headwinds for the region’s economy. The question is why? The answer lies in the enormous dependency the District has on government expenditures. They make up 35% of the District’s economy. The average of the 50 states is 11.5%, so the District is three times more dependent on government spending than the average state.
This makes it especially sensitive to cutbacks in federal spending. Due to the growth of mandatory spending programs, the discretionary portions of the federal budget are likely to remain under pressure for the next generation. That means diversifying away from government spending isn’t just a laudable goal, it’s an economic necessity.