II.

Economy

Washington's economic life is bound to the city's role as the federal capital. No other large US city has an economy so clearly driven by a single economic force. About one-third of Washington's workers—some 45,000 employees—are federal government employees. The executive branch is the largest federal employer; the legislative and judicial branches employ fewer people directly, but they draw various service industries to the city. Thousands of organizations such as trade associations, labour unions, and private interest groups are located in the city, and lawyers and consultants abound. Functionally related to the American government are the embassies and legations representing some 140 nations. Major international organizations, such as the World Bank, International Monetary Fund, and Organization of American States, also give weight to the financial and political importance of the city.

Tourism is the second most important aspect of the city's economy. The national monuments and museums attract more than 18 million visitors each year. The functions of federal and local government and the tourism industry have created a large service economy, which employs over one third of all Washington's workers. A subway system extends into the Maryland and Virginia suburbs. The city is served by three commercial airports—Washington National, Dulles International, and Baltimore-Washington International.

Although Washington has achieved a good measure of home rule, the federal government remains the ultimate authority in the District. The so-called federal interest in the nation's capital is protected by the right of Congress to veto any legislation passed by the city council. In addition, the District of Columbia's budget is reviewed by Congress. Congress provides an amount of money, the federal payment, to the District to compensate for the absence of a property tax on federally owned property in the city. Congress also retains the right to make laws pertaining to the District of Columbia, such as building height restrictions. Washington residents have been permitted to vote in presidential elections only since 1964.

In 1995 Washington, D.C., faced a budget deficit severe enough to force the city into bankruptcy—and the prospect of either absorption into another state (Maryland) or takeover by the federal treasury. Its current crisis is seen as being due mainly to the unbridled expansion of the city employee payroll and the soaring crime rate, the latter driving affluent residents out to the suburbs and thereby shrinking the tax base. A federal takeover would remove the city's limited autonomy. The city deficit in 1994 stood at US$355 million.