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Reality Gap: U.S. Struggles, D.C. Booms

July 24th, 2010

From Politico

America is struggling with a sputtering economy and high unemployment — but times are booming for Washington’s governing class.

The massive expansion of government under President Barack Obama has basically guaranteed a robust job market for policy professionals, regulators and contractors for years to come. The housing market, boosted by the large number of high-income earners in the area, many working in politics and government, is easily outpacing the markets in most of the country. And there are few signs of economic distress in hotels, restaurants or stores in the D.C. metro area.

As a result, there is a yawning gap between the American people and D.C.’s powerful when it comes to their economic reality — and their economic perceptions.

A new POLITICO poll, conducted by market research and consulting firm Penn Schoen Berland, underscores the big divide: Roughly 45 percent of “Washington elites” said the country and the economy are headed in the right direction, while roughly 25 percent of the general population said they felt that way.

Click here for full poll results.

The online poll, the first in a six-month Power and the People series, surveyed 1,011 people nationally to compare their views with the views of 227 people who live in the D.C. metro area, earn way more than the national average and are involved in some form in policy or politics.

The sample of Washington elites was aware of its propitious situation: Seventy-four percent of those surveyed said the economic downturn has hurt them less than most Americans. They should be self-aware, given the economic indicators for people who live and work in the area.

Since the most recent recession began in December 2007, metropolitan Washington has shed about 71,000 employees on nonfarm payrolls, the fewest number among the nation’s 15 largest metropolitan areas.

In May, unemployment in metro Washington hit 6 percent — an uptick from April’s rate for the area but well below the national average of 9.5 percent and far milder than the May rates of the shattered manufacturing towns of the Midwest, including Flint, Mich. (at 14.7 percent), Elkhart, Ind. (at 13.7 percent) and Rockford, Ill. (at 13.9 percent).

“The unemployment rate in Flint today is as high as it was when my grandfather graduated from Flint Central High School in 1935,” Flint Mayor Dayne Walling told POLITICO. Walling pleaded for something few in Washington are willing to do in this political climate: jack up government spending right now.

“I understand that the federal government has a large, long-standing structural problem with its spending, and that needs to be addressed,” he said. “But the middle of an economic crisis is not the time for that conversation.”

As Democrats were celebrating passage of the financial regulatory bill this week — legislation that will create many new government jobs for regulators and implementers — Wisconsin was among many states reporting new signs of economic distress. The state lost jobs in June in both the private sector (for the third time in the past four months) and government (despite the stimulus plan).

Washington has been largely shielded from the economic downturn, even in 2009, when most states and cities were hit the hardest.

During 2009, the Bureau of Labor Statistics reported more than 11,000 initial claimants for unemployment insurance associated with extended mass layoff events in the Flint metropolitan area and less than half that number for the D.C. metro area — a region that includes the District itself and the wealthy, highly educated counties of Northern Virginia and southwest Maryland. It’s a sobering reminder of the District’s distance from the epicenters of the Great Recession.

In part, that’s because the federal government drives about a third of the national capital region’s economy by direct employment — Uncle Sam employs about 10 percent of the area’s 3 million-person work force — or by federal procurement dollars, more than $20 billion of which landed in nearby Fairfax County, Va., alone last year.

“This is our auto industry, or financial services, or entertainment,” said Stephen Fuller, director of George Mason University’s Center for Regional Analysis, alluding, respectively, to the economic foundations of the Detroit, New York and Los Angeles metropolitan areas. “The federal government is our business. And on top of that, we have an administration that’s clearly expanding the role of the federal government in the context of the national economy — as a manager and as a provider of funds. That hasn’t been the case in the past, except in the case of wars.”

The economic crisis has been a job creator for those outside government, too. Many New York firms have opened new offices and created new jobs in D.C. to deal with the growing web of regulations. Northrop Grumman — one of many contractors profiting from government growth — is moving its operations from Southern California to Northern Virginia. Several other firms have moved here of late, too.

Even media companies, which have been hammered by the economy and bad industrywide trends, are hiring in town. Competition among Bloomberg, POLITICO and other outlets has resulted in bidding wars for reporters with sophisticated understanding of government policy.

And more money is on the way, in the form of well-paid agency jobs associated with reforms of the nation’s health insurance sector and financial markets: Both bills call for substantial new federal oversight by agencies such as the Health and Human Services Department and the Internal Revenue Service. And the professionals who take those jobs will need homes, buy furniture and pay taxes, said David Robertson, executive director of the Metropolitan Washington Council of Governments, “and that’s going to have a multiplier effect in our region.”

The Center for Regional Analysis projects the federal government will add 6,500 new jobs in the area each year through 2012.

All of this could have big political consequences. It doesn’t take polls and studies to know that much of America thinks very little of the Washington governing class.

Indeed, one of the defining characteristics of this election cycle has been the rise of anti-establishment political power in key races — fueled by a belief that this city just doesn’t get it. The old perks of power, such as chairmanships and pork, are often liabilities as voters turn to tea party candidates and newcomers opposed by the establishments of both parties.

The disconnect between D.C. elites and the general public is stoking the growth of more direct popular movements like MoveOn and [the] tea party,” said Mark Penn, who helped conduct the poll. “The D.C. elites are largely isolated from the economic downturn, and this means that they can easily fail to understand the depth of dissatisfaction out in the country.”

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