There is a compelling basic logic to the idea of a capital city that concentrates government functions in one place so agency leaders can consult with Congress and staff can coordinate across agencies. The Treasury Department is located next to the White House, and there’s literally a secure tunnel between the buildings so the president and his team can take advantage of Treasury’s considerable institutional knowledge and expertise when crafting economic policy. Foreign diplomats are sent here to Washington, so America’s domestically based workforce of foreign service officers also needs to be based here.As Yglesias notes, a bunch of Federal agencies have already moved out of DC into the outer suburbs, which tells you they don't care that much about easy access to Congress and the White House. This includes the Social Security Administration, which is near my home outside Baltimore; the National Weather Service, in Silver Spring; the Geological Survey, which is in Reston, Virginia; and so on. Right now the FBI is in the process of selling the Hoover Building and moving to the suburbs, and the Department of Labor has just put out bids for companies to help it do the same.
But a lot of important things the government does are not political in this way.
The National Institutes of Health, for example, employs a staff of some 20,000 people — a disproportionately well-educated group of technical experts — out in the suburbs in Bethesda, Maryland. They play a crucial scientific and public interest role, but they’re not involved in day-to-day politics. The NIH’s work could easily be done from Cleveland, where 20,000 highly educated, taxpaying workers would be welcomed. Their presence would create secondary jobs in industries like restaurants, education, and home remodeling. And an infusion of skilled workers alongside the metro area’s existing health and educational resources would help build up the larger regional biomedical research sector.
In a world where things like relocating a government agency run smoothly, moving some would be a good idea; there is no reason why so much tax money should be spent in Washington rather than Cleveland or St. Louis.
But in this world, relocating a Federal agency is a hugely expensive nightmare. Relocating the FBI has already taken two years and they still haven't chosen a site, and they started with the limitation that the new site had to be within easy commuting distance for their existing employees. Imagine how hard it would be if they were considering sites everywhere from Omaha to Buffalo. In the old days I suppose a handful of powerful Senators would have gathered in a smoke-filled room and done a deal to divvy everything up, but those days are long gone. These days the battle for something like the NIH would be vast, bloody, and hugely expensive; the total amount spent by the various states and cities on lobbying to get it would probably exceed the economic help it would give to the winner this century. The cost of finding a site, developing it, and moving everybody there would also be astronomical. The FDA is hamstrung these days because the agency can't fill 500 vacancies among its technical staff; hiring those employees is so burdensome and time-consuming that by the time they fill one job somebody has retired and another one is vacant. Can you imagine what would happen if they tried to move the whole thing to Louisville?
So while this seems like a good idea I doubt it is really a feasible way to get more good jobs to fading cities.