Reality gap: U.S. struggles, D.C.

booms
By: Jim VandeHei and Zachary Abrahamson
July 18, 2010 10:16 PM EDT

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.”
© 2010 Capitol News Company, LLC