The stakes are high for Congress to yet again come to a deal. Without a budget agreement by March 1st, $1.2 trillion in automatic federal spending cuts will begin and that could mean furloughs for tens of thousands of government workers. But the area economy has already suffered from this high political drama.
You may not have seen it in your paycheck or felt it in your bank account, but for the first time in recent memory, area salaries actually dropped in 2012.
Leading local economy-watcher, Dr. Stephen Fuller of George Mason says "the federal payroll went down for the first time since the middle 90s." He explains that good jobs have been going away, down 8,000 so far from the peak in mid-2010.
Long considered one of the best economies in the country, Fuller says "the Washington area is still fat, but we are at risk of losing our edge." As highly-paid federal workers retire, they are being replaced by workers with lower salaries. That transition could change the region's spending habits. "We won't be able to support so many white tablecloth restaurants or high end housing if this continues." Fuller believes we are experiencing an economic sea change that could continue over this decade. An estimated 22,000 federal jobs are expected to be lost in the region by 2017.
Even if the government stops the budget cuts, the local economy could be in for a rougher ride this year since we're taking home smaller paychecks. You can blame the hike in the payroll tax, which takes 2 percent more out of worker paychecks. "it took more than $4 billion out of the local economy," says Fuller, explaining "that's a percentage point" of our local economy's growth.