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From: cato@cato.org (Cato Institute)
Subject: Capital Cities Siphon Resources

February 28, 1996

Capital Cities Siphon Resources, Impoverish Productive 
Sectors of Economy

Capital cities in the United States are "parasite economies" that drain
resources from surrounding areas, according to a study released today by the
Cato Institute.

"Productive resources are taken from the average taxpayer and put into the
pockets of lawyers, lobbyists, legislators, bureaucrats and government
contractors," says economist Richard K. Vedder.  "Trends in government
spending are putting largesse into the hands of those seeking to profit from
government decisions, not the less fortunate."

Vedder cites evidence that the relative affluence of American capital cities -
- including Washington, D.C. -- is the result of income redistribution that
impoverishes outlying regions, especially in the poorest states.  

The study, "Capital Crimes: Political Centers as Parasite Economies," uses
statistical comparisons of factors such as income, population change,
unemployment and working conditions to show that capital cities siphon wealth
from surrounding areas. For example, Vedder notes that the average annual pay
of workers in Washington, D.C., exceeds the national average by 48 percent and
that the per capita income levels in the capital cities of the poorest states
are about 17 percent above the state averages.

"Government is said to redistribute income from rich to poor or from young
workers to older retirees," says Vedder, "but there is evidence that
individuals use government to redistribute income from the general taxpaying
public to themselves."

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Policy Analysis no. 250

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