After the Red Line, the big local news story today is the District’s huge budget shortfall. As reported in the City Paper and the Post, the District is short $340 million over the next two years, largely due to low tax income as a result of the recession. Because D.C. is likely to pay for this year’s deficit out of the reserve fund, the entire $340 million will likely have to be found in the 2010 budget.

The Post has a little application on its website that lets you choose where to spend less and where to raise new revenues. The level of detail is obviously not even slightly realistic, but it does make you realize that there aren’t too many good options for how to close a budget gap right now.

Sustainable transportation advocates should be watching this very closely. In the very short term, we have certain projects that we specifically want to see become or remain funded (the bad news that ClearChannel is uninterested in expanding SmartBike is the first one that jumps to my mind as something where cash is really the only obstacle). More importantly, though, if cities stop being places where Americans want to live, or even if the upward trajectory on that front stalls out, there is no hope for sustainable transportation. If you lose density, you slide backwards on these issues very fast.

And a major recession coupled with large budget cuts can very quickly upset the progress cities have made over the last twenty years. You can easily get into a cycle where the bad economy leads to budget cuts, which impact everything from education to public safety. As city services suffer, more urban residents move out and take with them their tax dollars and their eyes on the street. Taxes increase to try and make up for the declining tax base, which increases the cost-of-living, further driving out those with the ability to leave. Then rinse and repeat. It’s a giant feedback loop that can spiral downward very quickly. This is part of what happened in the 1970’s and 80’s: structural changes shifted people toward the suburbs, but the vicious cycle got out of control when stagflation and then the inflation-busting recessions hit the cities hard.

Cities are more vulnerable to these feedback loops (negative or positive) than other places, since they have to perform so many interconnected functions for very diverse populations. So even though Matt Yglesias is right that the District is holding up better in terms of housing prices than outlying areas, I worry that the District could be hit much harder by even that smaller decline (though the fringe suburbs, Prince William County, say, will be hit the hardest, because they still need to build their infrastructure). How the D.C. council trims its budget in this most difficult fiscal and economic moment has the potential to disrupt the District’s positive momentum, if it starts a negative feedback loop. I’m actually pretty bullish on the District’s health right now, so this post shouldn’t be read as a prediction at all, just as a reminder of how contingent sustainable transportation is on the always fragile health of our cities.