Gross National Profit: Washington’s Wealth and Waste

[Originally published by the American Magazine]


After decades of decline, the nation’s capital today is wealthy and growing. Metro Washington now has six of the nation’s ten wealthiest counties. In 2012, Falls Church became the nation’s richest city, a far cry from when it was a 1970s refuge for Vietnamese immigrants fleeing Saigon. The region’s median household income is $88,233, second in the nation behind California’s San Jose–Sunnyvale–Santa Clara metro area, which is part of Silicon Valley and has a median household income of $90,737.

But while in other cities this might be a success story, in Washington it comes with a catch. Rather than resulting from private industry, it merely underlies the growth of the city’s leading employer, the federal government. The city’s flourishing has seemed especially perverse in recent years, as the rest of America has lagged economically. Every tax dollar spent represents less money in the private sector to create jobs.

For perspective, it’s worth remembering the recent history of our nation’s capital. Its population didn’t begin skyrocketing until the expansion of the federal government during the Progressive era, and later under President Franklin Roosevelt. By 1950, the population had nearly doubled since World War I, reaching its all-time peak of more than 800,000. But during the next half-century, Washington suffered gradual decline, due both to changing American perceptions about urban living and the city’s unique politics. In 1973 it was granted home rule, following longtime congressional control. What ensued was a period of poor leadership, symbolized by the crack-smoking, budget-imploding mayor Marion Berry. By Clinton’s presidency, the city had gone back under federal receivership, and by 2000 it had dipped to its lowest population levels since the Great Depression.

It wasn’t until the 2000s — and particularly the last three years — that Washington began growing again, with many high-end condos and restaurants sprouting up, and neighborhoods becoming gentrified. Part of this was due to a reversal of longtime trends, including better city management and America’s great inversion back to the cities. But mainly it was because of a half-century of federal government growth, more notably in the last decade.

As late as 1930, the proportion of federal spending to GDP was still below 5 percent, and by 1950 it was 15 percent. It was only in ensuing decades that the rate consistently hovered around 20 percent, and, starting with Obama’s presidency, it spiked towards a full quarter of GDP. Federal spending per household has risen gradually over this period, going from under $12,000 in 1965 to around $30,000 after the 2009 stimulus. Although the number of federal workers has dipped, they have been replaced by government money spent on private contracting, which tripled last decade.

This growth has of course been mirrored in the DC area, where federal spending has more than doubled since 2000. Today, the federal government fuels 40 percent of the regional economy, and after accounting for various multipliers, more than half of its jobs. Washington, DC, has fewer unemployed individuals per advertised job than any other US city.

Washington Wealth

One growth industry, due to the vast expansion of the federal government’s tax and regulatory rules, is lobbying. Businesses spent $3.24 billion last year on lobbying, up from $1.45 billion in 1998 and $200 million in 1983. Two-thirds of US senators and representatives joined the lobbying industry after leaving office in 2012, up from a small fraction in the 1960s.

DC’s culture was neatly summarized in Mark Leibovich’s recent book This Town. Applying years of insider access as a New York Times Magazine correspondent, Leibovich described Washington as a “gilded city” that had grown even more driven by greed and self-absorption — a place where everyone from senators to journalists relentlessly seek power and cheap fame. Part of this is because of a social media industry that had increased everyone’s public visibility. But it is also because of the Washington lobbying boom. Echoing Jefferson’s and Madison’s direst warnings, this boom had, Leibovich explained, turned the federal government into a profession that people entered to become wealthy, not to practice their ideals. This cultural change, moreover, had severed the city from the realities faced by the people nationwide who were funding it all.

“There’s a disconnect,” said Leibovich, “between the economic boom of this town for the last many years and the economic despair in the rest of the country.”

The Washington Post’s Greg Jaffe adds, “Washington has long been a place where power outshone money, where companies tried to be discreet about their influence. The new Washington has lost some of those old inhibitions and has begun to resemble other global financial centers. Power still animates the city, but so increasingly does the pursuit of wealth.”

A look at how money flows through Washington today suggests that much of it is being spent excessively. Take, for example, the overpayment of federal employees. Currently the region houses about 14 percent of America’s 2.1 million civilian federal workforce, one in five of whom earns an annual salary of more than $100,000. In 2012, federal civilian employees’ median salary was $81,704, compared to $54,995 for the private-sector employees; after accounting for fringe benefits, those figures go to $114,976 versus $65,917, respectively. A USA Today study determined that federal workers earned higher-than-average pay in eight out of ten occupations (with dozens of job titles such as computer support specialist, cook, crane operator, electrical engineer, janitor, lawyer, office clerk, secretary) and had fringe benefits that were four times what was found in the private sector. Higher salaries are but one of many advantages of being a federal employee. Others include fewer hours worked, better job and retirement security, and earlier retirement.

Along with public-employees’ salaries far exceeding that of their private-sector peers, another sign of government’s waste is evident in how it has managed assets within the city itself. A recent report determined that nationwide approximately 77,000 federal buildings, or nearly one-fifth of the overall stock, are unused or sorely underutilized, and that maintaining them costs taxpayers $8 billion. Roughly 14,000 of these exist in DC alone, as onerous federal regulations prevent them from being sold off.

But this hasn’t stopped new ones, often with questionable levels of extravagance, from being built. In 2004, the US Patent and Trademark Office moved into a 5-million-square-foot campus in Alexandria, Virginia, centered on a high-arching glass atrium that could have housed an office in itself. Several years later, the federal Institute of Peace moved into a shiny $108 million headquarters just off the National Mall. Massive, gleaming new offices have also opened recently for the Department of Defense, at $1 billion, and the Department of Homeland Security, at $3.4 billion, while the General Services Administration is pursuing its own new 50-acre campus in the suburbs.

A slow national economy has also not prevented Washington from adding to its impressive stock of museums and monuments. In the last decade, it has planned or completed numerous projects, including the US Capitol Visitor Center ($621 million), Smithsonian Museums dedicated to Native Americans ($219 million) and African Americans (projected $500 million), the Martin Luther King Jr Memorial ($110 million), and the Dwight Eisenhower Memorial (projected $142 million). While projects like these have been popular — especially when viewed collectively on the National Mall — because they convey the power and competence of the federal government, today they seem less alluring, as the government finances them by adding to the enormous debt it owes to other nations.

The million-dollar question is: will Washington, DC, be the city that solves America’s problems? Obviously, large portions of the country think so, endorsing leaders and policies that further funnel money into the nation’s capital. But it appears that much of this money, rather than being used judiciously by high-minded statesman, has become a slush fund for bureaucrats, buildings, and dubious financial gain. Allowing taxpayers and localities to keep their money would be more practical than making them send it to a distant government that has clearly lost touch.