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Federal spending cuts will affect state’s economy in 2014, expert says

RICHMOND—An economist told Virginia’s bankers and business leaders that Virginia’s economy will lag the national one in 2014.

Sarah House, an economist with Wells Fargo Securities, told a meeting of the Virginia Bankers Association and Virginia Chamber of Commerce recently that the same reliance on federal government spending that buffered Virginia’s economy during the recession is now holding down the state’s economic growth.

Virginia’s economy suffered during the recession, like all states, but not quite as badly as many because of federal government jobs and spending in the state. But now that the federal government is cutting spending, especially on defense, Virginia is feeling a crunch.

Federal spending, House said, “really helped buoy growth of course, now the tables have turned and we’re seeing cuts to that spending.”

She said Virginia’s income growth in 2014 will continue to trail the national growth rate—she predicted that nationally, income will grow about 3.5 percent, but Virginia’s rate will be more like three percent.

A different economist speaking to the group was a bit more bullish, at least when it comes to the national economy and one industry in particular.

Stephen Moore, editorial board member and senior economics writer for the Wall Street Journal, said emerging energy technologies—namely fracking and horizontal drilling—could drive economic growth and turn the U.S. into an energy exporter, rather than importer, by 2020.

He noted that Virginia has energy sources and “can certainly do much more exploiting oil and gas.”

The question of fracking—hydraulic fracturing—for gas in the Northern Neck has been in the news lately. Sen. Richard Stuart, R-Stafford, has filed legislation that he says is intended to provide more state regulation over any fracking in that part of the state.

Virginia leaders also want to explore for oil and gas offshore, and Sen. Bryce Reeves, R-Spotsylvania, has filed a bill that would direct how royalty money the state could receive for such drilling would be used.

Chelyen Davis: 540/368-5028