Tough(ish) Times for the People of Washington
The decades since the Great Depression have been very good to Greater Washington, D.C., which has grown from a swampy backwater with fewer people than metro Buffalo or Cincinnati in 1930 into one of the biggest, most affluent metropolitan areas in the country.
The current economic expansion, though, has been only so-so for the Washington area. Job growth has slightly trailed that of the rest of the country, while per capita personal income has gone sideways.
That flattish line becomes a steady decline when you measure Washington-area per capita income as a share of U.S. per capita income (be aware that the y-axis in this chart doesn’t go to zero; if it did you could barely see the fluctuations).
I was initially puzzled by the sustained drop after 2009, but then I remembered: the sequester! Actually, that doesn’t perfectly explain it, because actual budget sequestration didn’t take effect until 2013. But the new Republican House majority did start cracking down on spending in 2011. Which reminded me of the Bill Clinton administration, which also featured lots of frugality -- some proposed by the White House, some imposed by the Republican House of Representatives. So I redid the above chart, with presidents noted in the year they took office.
I sense a pattern here: Republican presidents have been much better for the relative standing of the Washington area economy than Democratic ones! True, the Gerald Ford and George H.W. Bush administrations weren’t great, but the Richard Nixon, Ronald Reagan and George W. Bush years all saw the Washington area make significant income gains relative to the rest of the country. The Jimmy Carter and Barack Obama years (through 2014, at least) saw the area lose ground. As for the Clinton administration, it saw a drop at the beginning, then a similar recovery at the end. That had me stumped for a second. Then I remembered the dot-coms, and the stock-market riches they bestowed upon employees and venture capitalists. The San Jose and San Francisco metro areas, home to the bulk of the dot-com insanity, showed big income gains from 1998 through 2000. The Washington area had its own dot-com boomlet, led by AOL, so that probably explains the late-Clinton recovery.
What explains the rest of the pattern in Washington-area incomes? Well, here are the trends in government spending over the same period:
Mandatory spending on entitlements such as Social Security and Medicare has been rising, with the combination of the Great Recession and the retirement of the Baby Boomers responsible for much of the big recent boost. But there’s no reason entitlement spending would boost the Washington-area economy relative to the rest of the country. Discretionary spending has been on a general downward trend (as a share of gross domestic product, not actual dollars), but the defense part of discretionary spending has moved in waves -- falling through the 1970s, rising under Reagan, falling under Clinton, rising in the George W. Bush years, falling under Obama.
When defense spending goes up, a lot of the gains go to contractors in the Washington area, especially Northern Virginia. Virginia has the second-highest per capita federal spending of any state (after Alaska), and 44 percent of that spending is on military contracts and personnel. In recent decades, Republican presidents have been more likely to preside over increases in military spending, and Democrats more likely to preside over cuts. And the Washington area economy has felt the difference.
Funny thing is, though, that the Washington area leans Democratic, and seems to be leaning ever further in that direction. See, it’s not just Kansans who sometimes don’t vote in their own economic interest.
The Washington-Arlington-Alexandria metropolitan statistical area was the nation's sixth most populous in 2015, according to the Census Bureau, while the Washington-Baltimore-Arlington combined statistical area was the fourth most populous. Meanwhile, the Washington-Arlington-Alexandria metropolitan area had the eighth highest per capita personal income among metropolitan areas in 2014, according to the Bureau of Economic Analysis.
In case you're wondering why I was measuring Washington-area per-capita income as a share of U.S. per capita income: I'm giving a speech in Birmingham, Alabama, this week and wanted to compare metropolitan Birmingham's per-capita income trajectory with those of a few wealthy areas such as Washington and San Francisco.
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