The District’s economy contracted by 0.5%, or approximately $500 million, in each of the last two years. While sequestration and a generally tight federal budgetary environment have reduced the contribution the federal government normally makes to the District’s economy, our research indicates that the primary cause of the decline in economic growth has been a general lack of confidence on the part of the people who make hiring and investment decisions in the District.

Business Confidence Graphic

Economic Growth DC will be unveiling a mechanism for measuring business confidence in the District in the first half of 2015 called the DC Business Confidence Index (DCBCI). It will be a composite of multiple economic indicators such as retail sales, housing starts, business licenses issued, bankruptcies, venture capital invested, unemployment and a number of other monthly indicators. The Index will be scored on a scale of 1 to 100 with 50.1 and above indicating expectations of economic expansion. It will be published quarterly starting in the third quarter of 2015.

Our research further indicates that the lack of confidence is primarily the result of the perception on the part of business owners and managers of a difficult business climate. We hear this repeatedly in our discussions with people who own, manage, and conduct business in the District.

The business climate, also expressed as the cost and the ease of doing business in a particular jurisdiction, are primarily products of the regulatory system. The District, while not alone in having a difficult regulatory environment (see this article for an overview of the U.S. regulatory climate: Download PDF — Daily Beast-Philip K. Howard on the Need for Radical Regulatory Reform), has had years of hyper-regulation that have made the costs of compliance, in terms of both time and money expended, very difficult for all but the largest of businesses. This time and expense spent on compliance is time and money not spent building a business and hiring new employees.

There are tremendous growth opportunities available to the District in terms of making the city a better, easier and less expensive place to do business. The benefits of these changes will flow through the economy to every DC resident in the form of better services and lower prices, but they can only be realized if the new administration is willing to commit to reforming the District government itself in almost every respect.

One of the best ways to begin the process of reforming the regulatory system is to have a detailed understanding of how much your existing and proposed regulations cost the broader economy in terms of lost economic activity and job creation. These are factors that can be measured and Economic Growth DC has proposed a bill, called the Regulatory Review and Amendment Act of 2015 that will help District policymakers understand the economic costs that an individual regulation will or has imposed on District residents and businesses.

See a draft of the proposed legislation here: DC Regulatory Review Act Draft 1.

Changed Priorities Ahead

The level of reform that’s required to push the District’s economy closer to realizing its potential for growth is enormous. It will be a time and manpower intensive effort that will stretch for years, but it is undoubtedly the best opportunity the District has for achieving the robust economic growth that the District’s most vulnerable residents need to achieve a modicum of economic security.

Growth doesn’t solve every problem, but without it we solve none of them.