A week after Donald Trump (temporarily) melted away half a billion dollars of Boeing stock with a tweet, Boeing announced on Tuesday it will move the headquarters of its $30 billion defense, space, and security unit from St. Louis to the suburbs of Washington, D.C. Like the company’s $1 million donation to the Trump inaugural events, the move had been discussed “for months,” according to the Washington Post—and was not related to the recent tit-for-tat over the bill for Boeing’s new Air Force One, which Trump called “out of control.”
Instead, a company spokesman told the paper, the move was “all driven by being closer to the customer.” It was spearheaded by the division’s new chief, Leanne Caret, who “puts a premium on personal engagement with senior leaders of the Pentagon, NASA and the Hill.”
Who knows what the crowd pleaser–in–chief meant with his promises to “drain the swamp,” or why people believed that he would. But at least in one respect, Trump’s off-the-cuff interactions with Carrier, Boeing, and Lockheed Martin have underscored a real feature of Washington swampiness: the benefits of good personal relations with government officials. No wonder the Washington area is home to a spillover economy of firms whose dependence on federal contracting has propelled them toward the Beltway, and lured peers in consulting, accounting, and information technology.
What is an agglomeration economy, after all, if not a swamp—a vibrant little ecosystem teeming with symbiotic relationships?
Boeing will still have 14,000 employees in St. Louis; only two dozen executives and about 50 staff will head to Crystal City, the bleak bank of offices between the Pentagon and Washington National Airport. Still, it’s the latest sign that firms that do business with the government have something to lose by leaving leadership in cities like St. Louis or Los Angeles, which military giant Northrop Grumman left in 2011.
“Historically, the Washington D.C. area never had many high-tech jobs apart from a sizable cluster of defense contractors,” writes Enrico Moretti in his 2012 book The New Geography of Jobs. “But in the past twenty years the region has become remarkably successful at attracting a wide array of innovative companies to the high-tech Dulles corridor and the downtown area.” The D.C. area now has 11 of the 20 richest counties in the United States and average wage growth has, since about 1990, leapt ahead of the national rate.
D.C. is a powerful example of how certain cities have become prime beneficiaries of the clustering effect that characterizes “knowledge workers.” But not all of that growth has a first- or second-degree connection to the institutions of the federal government. In fact, the city’s private-sector employment continued to grow even when the federal workforce was shrinking during the sequester in 2013. “From 2007 to 2012,” Aaron Wiener wrote at Washington City Paper, “of the city’s large sectors, food service took the prize, growing by 24.3 percent, followed by health (17 percent) and education (16.1 percent).”
Which makes it all the more inane that Congress doesn’t do more to try to fight the concentration that is associated with federal activity. Washington’s gain, even of just a few dozen Boeing executives, is St. Louis’ loss. The Midwestern city has suffered from top-level corporate flight for decades. As Brian Feldman showed in a Washington Monthly article this spring, the departure of decision-making leaders from a company like D’Arcy, the advertising giant, had an outsized impact on the city’s health even when a kind of branch office was left behind. He argues that corporate flight—as much if not more so than the deindustrialization that Donald Trump has publicly taken on with the Carrier deal—is responsible for St. Louis’ decline. No wonder cities and states have offered billions to seduce corporations like Northrop Grumman and factories like Carrier. It’s time for more “creative solutions” to regional decline, suggests Ryan Avent at the Economist.
Washington can’t stop firms from acting in their own self-interest and moving into growth hubs like Houston. (Though it could take a more aggressive approach to antitrust enforcement, stopping mergers whose long-term effect is concentrating economic power.) But it could change the calculus of that self-interest by moving federal magnets out of the Washington metro areas.
That’s what Paul Kupiec, in the Wall Street Journal, and Matt Yglesias, at Vox, proposed last week. Kupiec suggests the FBI, which is playing local jurisdictions against each other as it plans its move out of D.C., might be particularly well-suited for a move to Detroit, Cleveland, or Milwaukee. Yglesias looks both at agencies that have already decamped for the suburbs and those that are supposed to have some distance from the Washington power structure. A good example of the former is the National Institutes of Health, which employs 20,000 people in Bethesda—within the Beltway but outside D.C.’s city limits. But why not put it in Cleveland?
Each writer minimizes the potential downsides. “Moving agencies out of the DC area to the Midwest would obviously cause some short-term disruptions,” writes Yglesias. “But in the long run, relocated agencies’ employees would enjoy cheaper houses, shorter commutes, and a higher standard of living.”
“With modern communications technology,” Kupiec writes, “there is no reason that the FBI’s new headquarters, or the headquarters of other federal government agencies, must be located in the nation’s capital.”
I’m not sure about either of those points. The recent growth of certain regions (the Bay Area, Boston, New York) at the expense of others has illustrated just how consistently white-collar jobs gravitate toward each other. Distribute the bureaucracy and its quality will suffer. Every office in the D.C. region, government or not, benefits enormously from proximity to other offices—not just to politicians. That’s why they pay the big money. Modern communications technology is no substitute for the capital’s deep talent pool that allows a corporate executive to take a government job without selling her house.
So it would be something of a sacrifice. But that’s also why it will work so well: That’s why shifting agencies and departments further afield would have the desired ripple effect, luring the businesses and consultancies that deal with them, in addition to the more mundane secondary effect of, say, more people going out to dinner in Detroit.
What Donald Trump needs to do isn’t drain the swamp, but spread it around.
