Within the system of American fiscal federalism, it's generally accepted that poor red states get a better deal than wealthy blue states. Blue states generate more wealth for a nation as a whole than they get back in social welfare spending, defense contracts, and so on.
An article in the upcoming New York Times Magazine ("Washington's Economic Boom, Financed by You") shows how the DC metro area is an exception to this. It's blue, wealthy, possibly even the wealthiest in the nation, and it receives an astonishing 15% of all federal procurement spending (the entire DC metro area contains 1.8% of the nation's population ). And, to state the blindingly obvious, the spending is the cause of the wealth.
It's tempting to assume that capital cities always enjoy fiscal and economic advantages, especially federal capitals, but DC went through some very rough times in its recent history. The federal government placed the city in receivership during the 90s. But then came three wars (Afghanistan, Iraq and terror) and hundreds of billions in new defense spending, much of which was injected directly into the local economy.
The obvious question to ask here is, if the DC renaissance has in fact been underwritten by defense spending, isn't the city now doomed, now that defense spending is on the decline? Is DC the next Youngstown or Flint? Big time defense contracts drove the boom. That's the model. Being the seat of the federal government alone was not enough to save DC in the mid 90s.
The New York Times article itself doesn't make strong prediction one way or the other, but frames the question as essentially, how much do you believe in Richard Florida's theory of "creative capital"? Will craft cocktail bars and yoga studios be enough to save DC during the age of austerity? It's also possible that Congress will decide to moderate defense cuts, or perhaps an emergency in the near-term will cause defense spending to increase again. But the DC metro area clearly has, by far, the most to lose from federal spending cuts than anywhere else in the nation, because it's so dependent, and because it has gained so much in recent years.
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