D.C. Plays "Rich Uncle" in Recession

This story was written by Victoria McGrane

At 6.2 percent, the unemployment rate in the D.C. metro region is lower than in any other major metropolitan area in the country - and far below the 9.5 percent national average.

Members of Congress from harder-hit areas can't help but notice the divide between the relative health of their part-time city and the pain back home. And it particularly rankles conservatives who've argued for a smaller federal government but now see it making up one-third of the region's economy.

"What frustrates me so much is you look at Washington and you realize how out of touch we are. This is one of the only cities that's growing. And how is it growing? Because we're filling it with federal bureaucrats," Rep. Christopher Lee (R-N.Y.) complained during a Republican press conference Thursday. "And we can't afford to pay. We have a $1.8 trillion deficit."

To be fair, the D.C. metro area has lost jobs for the last seven consecutive months, with losses still accelerating month to month. But Washington is losing far fewer jobs than any other city, and parts of the local economy are actually growing that aren't growing anywhere else, said Steven Fuller, director of the Center for Regional Analysis at George Mason University. 

And the jobs that are being created are not federal bureaucrats precisely. Rather, the job growth that's offsetting some of the job losses is coming only indirectly from the government; federal dollars are flowing to contractors, who can then afford to hire workers and pay vendors who hire more.

From June 2008 to June 2009, the region's economy added 14,000 jobs, largely in the business and professional services category - which includes lawyers, accountants and, of course, federal contractors. The region lost 42,500 jobs during the same period, for a net loss of 28,500 jobs.

Nationwide, the combined education and health services sector is the only one showing growth; it's growing in the Washington area, too.

While there are growth sectors here, the rest of the region's economy looks like everywhere else. 

Consumers are cutting back, even if they don't need to, paying off their credit cards, going out to eat less often and at cheaper restaurants. Fewer tourists and business travelers are coming. Wal-Mart's market share is increasing, while Nordstrom is losing customers. 

The District itself has a much higher unemployment rate - above 10 percent - than the larger metro area, although experts say that is the result of persistent socioeconomic conditions. A 2007 study found that more than one-third of the District's residents are functionally illiterate, and a large portion of District residents are among the most vulnerable to recession, holding retail and consumer service-type jobs that suffer most.

But there's no question that the Washington area is doing better because of the federal government.

"It's good to have a rich uncle," said Fuller.

Fifteen cents of every dollar the federal government doles out throughout the world on goods and services is spent in the D.C. metro area, which, as the Census Bureau defines it, stretches far beyond the District into Virginia, Maryland and even one county in West Virginia.

Last year alone, Uncle Sam lavished $133 billion on the area. And the money, impressive in its own right, spins off into a lot of other business, Fuller said.

"Our economy weathers the storms better than other places," Fuller observed. "It isn't recession-proof, but boy, we have a safety net."

And the policy plans of the Obama administration have experts predicting the uptick in government spending that typically accompanies a recession to expand beyond the normal stimulus spending, which would help the region's economy recover that much faster.

"It is a different world," Rep. Candice Miller (R-Mich.) said of D.C. She says she feels a palatable anxiety in the air when she's at home, where the statewide unemployment rate has risen above 15 percent, the highest in the nation.

"You can feel it when you get off the airplane, you can feel it when you're driving around. There's not all the traffic at rush hour, you don't have to wait to get a table in a restaurant. It's a much different life out here."

"I do think it's difficult for people to appreciate it," she said, referring not just to those rooted in the D.C. experience but to her colleagues from other states as well.

While constituents back home tend not to concern themselves with the state of D.C.'s economy, Rep. Mark Souder (R-Ind.) said he got an earful during the stimulus debate when folks caught wind of a plan to spend $200 million to fix up the National Mall.

"I'm sitting there with RV plants shutting down, parts people going down, GM plant furloughing people for 11 weeks ... and we're talking about fixing the pond around Jefferson Memorial and planting trees on the way down to the Lincoln Memorial?" recalled Souder.

He said his constituents saw the Mall money, which was ultimately stripped out, and other stimulus items as money that would benefit the bureaucracy and the D.C. region - which is already fat on government jobs.

The question he heard: "Aren't they thinking where they're putting the money" for where the jobs are needed?

But Souder also said that, for all the griping about D.C. he hears from back home, people can't help but like some parts of the city.

He hasn't even heard a single complaint about the Capitol Visitor Center, despite the fact that it came in $350 million over budget and four years late.

"For all the animosity, there's a tremendous pride because it's the national capital."
By Victoria McGrane