How Washington Made Itself Irrelevant

Bruce Katz
Bruce Katz Founding Director of the Nowak Metro Finance Lab - Drexel University

December 5, 2014

Now that the midterms are behind us, let’s have an honest assessment of what’s really happening in our nation’s capital: The federal government’s power is diminishing. Washington is becoming less effective at addressing many of our nation’s problems and less consequential in bolstering the cities and regions that drive the economy. 

Given the excessive partisanship on display, it’s tempting to blame Washington’s stumbling solely on ideological polarization. But that’s not the case. The source of the federal government’s feebleness is structural, and until its run-down foundations are addressed, Washington’s influence around the country will continue to wane. 

In the past, Washington has been in the business of investing at scale in the assets that drive the economy, including education, infrastructure and research and development. No longer. Instead, we now have a shrunken pool of resources for investments, a piecemeal approach to delivering funding and few mechanisms that tie the capital to the rest of the country.

How has this happened?

First, the federal government just doesn’t have as much discretionary money to spend as it used to. Demographics and the configuration of social programs have consigned it to spending nearly half its yearly revenue on Social Security, Medicare and Medicaid, a percentage that will continue to rise as the population continues to age. These programs are absolutely crucial, but their growth puts the squeeze on everything else. Discounting the defense component, discretionary spending represents only 17 percent of the national budget. The fiscal 2015 budget allocation for non-defense discretionary spending is set at an all-time low, as a percentage of gross domestic product, and will continue to decline over time. 

The effects of this scaling back are already being felt. Federal research and development spending, for example, has declined from 4.9 percent of the federal budget in 2004 to 3.4 percent in 2014. The Community Development Block Grant, perhaps the federal government’s most iconic and flexible urban program, was originally funded at some $2.5 billion per year in 1974 ($11 billion in 2014 dollars). Despite urban population gains in the tens of millions over the past 40 years, funding now sits around only $3 billion.

Second, the piecemeal way Washington allocates discretionary spending severely limits its ability to stimulate large-scale change. It’s a legacy arrangement — money is distributed through a set of outdated agencies, many formed in the 1950s and 1960s, carrying out programs established in the 1970s and 1980s, through means more appropriate for a pre-Internet age. The funds are narrowly targeted at discrete programs run by separate agencies under inflexible rules. 

Today’s economy demands the opposite. In the metropolitan areas that produce 91 percent of GDP, economic and political conditions vary enormously, and integration and collaboration across public agencies is necessary for success. Cities need the flexibility to devise their own approaches to problems — because what works in Phoenix, for example, will not be the same as what works in Pittsburgh. To be a meaningful platform-setter for the nation, the federal government needs to allow cities and metropolitan areas to consolidate funding streams and use them to address problems in ways they see fit. 

Third, Washington no longer has the discretion to help metro areas finance important projects and carry out complicated tasks. Congressional earmarks used to serve as the vehicle that tied national representatives to the goings-on back home, but they were done away with in 2011. This has had terrible consequences — it has untethered senators and House members from the places they were elected to represent. The system wasn’t perfect, but earmarks did require members of Congress to know about and advocate for projects underway in their home districts and forced them to (occasionally) set aside their ideological convictions for the sake of a deal. Without the ability to procure federal funding for local efforts, representatives have very little discretion over what happens in their districts and are virtually irrelevant in the real decision-making processes that local, metro and state leaders are involved with every day. In the executive branch, likewise, restrictive statutes have left agencies with little flexibility to be a helpful, problem-solving partner to cities and metro areas.

Put simply, local leaders who need help no longer have any business traveling to Washington. The nation’s capital has become the site of photo ops, pep talks, news conferences and little else. As Washington fades into the background, the rest of the nation is engaging in a great experiment — can a country successfully invest in its future without the national government being a relevant player? America’s cities are already finding out.

This commentary was originally published by The Washington Post.