- The Washington Times - Friday, June 7, 2002

Federal contract spending in the Washington area grew by 10 percent to $31.4 billion last year, a second year of double-digit gains, this time inspired by the nation's increased defense and security needs, according to a report released today.
Analysts expect the sizable gains in spending, which helped Washington prosper during the recession last year, to accelerate this year as Congress boosts funding from education to intelligence gathering and considers creating the first new federal department in a decade for homeland security.
Federal procurement spending, a mainstay that helps cushion the Washington-area economy during national downturns, helped propel regional output to a record $280 billion last year, according to the annual report by the Greater Washington Initiative, a local business-research group.
The expanding local economy enabled employers to add 40,100 jobs last year, the most of any region in the nation, the study found. Federal hiring did not contribute to that upswing, however. Federal jobs continued to shrink as more work was contracted out locally.
"Our community's strong spirit and resilient economy is impressive," said John M. Derrick Jr., chairman of Potomac Electric Power Co. (Pepco) and head of the research group. "2001 was a traumatic year, and yet the region has emerged even stronger than before."
The study found the area's median household income, $66,888, to be among the highest in the nation.
In another measure of the region's growing wealth, the study found more than 500,000 area students enrolled in "gold rating" public school systems, made up of schools ranked among the top 18 percent nationwide by Expansion Management magazine.
The emphasis on education and culture in the region resulted in area businesses and residents diverting an estimated $2.5 billion into art and cultural projects, the study found.
But the recession had a marked impact on investment in new enterprises last year, with venture capital spending down 37 percent to $1.7 billion, the study found. Still, that was nowhere near the 63 percent drop nationwide.
The number of companies that expanded or moved into the Washington area also was down, to 685 from 1,059 in 2000, but it remained strong.
"It is a credit to the strength of the Greater Washington market that this region had such robust growth in the face of the September 11th attacks and the overall slowing of the U.S. economy in 2001," said Thomas Morr, managing partner at the research group.
He noted that a recent study by the Mellman polling group found that despite security concerns, 73 percent of American business executives thought of the greater Washington area as a good place to do business, up from 61 percent in 1998.
Growth in federal procurement spending picked up around the turn of the century after stalling in the mid- to late 1990s when Republicans took control of Congress and focused their efforts on shrinking the federal government and balancing the budget.
When deficits disappeared and surpluses emerged in the late 1990s, legislators loosened the purse strings once again and Republicans joined Democrats in boosting spending on favored programs from education to health care to farm programs.
Congress since September has followed President Bush's lead in dramatically increasing spending on defense, intelligence and security, while it has continued to generously fund other programs.

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