Washington’s Economic Boom, Financed by You

Mark Twain(…) Peak Washington of early 2010s, many economists believe, got its start during the Reagan Revolution of the 1980s. Reagan’s messianic push to get government out of the way of private-sector growth famously led to lower taxes and a reduced regulation. It led to a subtle change in way government did business. Hiring became secondary to contracting, more public projects were outsourced to private firms. Washington’s economy did well under Ronald Reagan era (added military spending gave it a boost), but the move to contract out more and more government work proved to be crucial long-term change. In 1993, Bill Clinton announced “reinventing government” initiative, which ultimately included cutting federal work force by about 250,000 positions. The agencies winnowed their rolls, but over the course of Bill Clinton years, their budgets expanded, and in many cases, the work just went to contractors. Contractors often came at a bloated cost, too. In a study released in 2011, the Project on the Government Oversight found that using contractors can cost the federal government about twice as much as federal employees for comparable work. According to the study, salary for a federally employed computer engineer would be about $135,000; and a contractor might bill the government around $270,000 for similar work. It was not until the Bush years, though, that this increasingly wealthy not-federal-but-still-government work force truly metastasized. Amorphous war on terror and creation of the Department of Homeland Security, plus wars in Afghanistan and Iraq, bloated the country’s spending by about $1 trillion. The contracting dollars that were pumped into the local economy, Stephen Fuller says, more than doubled between 2000 and 2010, when it reached $80 billion a year. This, in turn, created hundreds of thousand of desk jobs and fostered a sprawl of nameless, faceless office parks lining the roads out to Dulles Airport. In the process, tens of thousands of the new workers, often well-paid young white-collar professionals in areas like technology, bioscience, engineering, also entered local economy. And many of these young professionals, as Jim Abdo hoped, worked 14-hour days and wanted to live near work, friends, coffee shops, yoga studios. This infusion of human capital, combined with proximity to the Federal tap, proved attractive to a huge number of other businesses looking to hire. Google has opened an outpost in Washington. LivingSocial owns a huge, hiply decorated space downtown. Audi, Intelsat, Hilton Worldwide and dozens of other firms have opened up offices or moved their headquarters to the region. Health care sector, with its proximity to National Institutes of Health, has greatly expanded, too. “Maryland got the life sciences, and Virginia got death sciences,” Jim Moran, Democratic congressman who represents much of the military corridor in Northern Virginia, said. “Of course, NoVa, given two wars, it’s done even better than suburban Maryland.” But contours of Washington’s wealth are far different from those in other boom towns. In New York or San Francisco, inequality has become fractured: the upper middle class has pulled away from the middle class, the rich from the upper middle class, and the really rich from the rich and so on. Washington, though, has become an increasingly two-class town. About a third of households make less than $60,000 year, while around 45% make more than $100,000 a year. And relatively few are what might be traditionally considered middle class. Perhaps that, more than anything, explains the appearance of the new gilded-age Washington, which is less about wealth than it is about the growth of one of the most ascendant petite bourgeoisies that the United States has known (…..)

Link: http://www.nytimes.com/2013/01/13/magazine/washingtons-economic-boom-financed-by-you.html

Acerca de ignaciocovelo
Consultor Internacional

One Response to Washington’s Economic Boom, Financed by You

  1. Professor Uziel Nogueira says: I lived in Washington DC from 1982 to 1996. Since then, I’ve been visiting the city at least once a year. One thing that calls my attention is the feverish pace of building construction in the District and suburbs of Virginia and Maryland. The architecture of my old Friendship Heights’ hood became uptrend and highly sophisticated. As a professional trained economist, I was amazed how this real state boom was taking place while the country was fighting two major costly wars. At the same time, taxes representing only 20% of GDP while in other G-7 countries the same figures are well over 35%. How long does the DC construction boom will last? Well, as long as the rest of the world continues to take dollars in huge amounts and the greenback keeps its dominant position, there will be plenty of money to finance a real state boom ( or bubble?) in the nations capital.

    http://www.nytimes.com/2013/01/13/magazine/washingtons-economic-boom-financed-by-you.html

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