The Beltway Bubble

As the national economy runs into serious trouble, it seems that the Washington region is experiencing only a relatively small slowdown in our local job situation. On some level -- good for us! But still, it's striking how much of a disconnect there is not just between the perceptions of Beltway folks and realities in the country, but actual reality in the DC area and the rest of the country.

The general media and political climate would probably be quite different if the places where politicos live were feeling a bit more of the pain.

Comments

I'd like to agree, Matt, but it seems to me that the pundit class is so far removed economically from the lives of ordinary people that they could all live in the Cleveland metro area, and 'the economy' would still be something that happened to other people, but not to anyone they knew.

Posted by low-tech cyclist | April 4, 2008 2:25 PM

I don't know, it seems that wherever the politicos lived, governing would be the main industry, and all of the other employers you have in the DC area that feed off of the government would be there as well, so the bubble would continue. Look at the UK back in the 70's and 80's - London continued to do relatively well in comparison to Birmingham, Manchester and Liverpool, because the main industry was governing (with entertainment thrown in the mix - as if DC, LA and NYC combined).

Posted by Charlie | April 4, 2008 2:29 PM

We live in a big, diverse, country. A lot of places don't reflect national economic statistics.

Posted by Fred | April 4, 2008 2:38 PM

It's almost as if we should have decentralized governance... hmm...

Posted by right | April 4, 2008 2:39 PM

Let me be the first libertarian to express a complete lack of surprise at this. This is what happens when you make your living off of money taken from other people. When those ordinary people starting making less, you're still taking the same amount from them. Just sayin'.

Posted by Mark | April 4, 2008 2:46 PM

The permanent location of the federal government is always going to be surrounded by a cocoon of soothing pork. Hardship to most of the asshats in Congress is Speaker Pelosi replacing steak on the cafeteria menu with salad. Living off the dollar menu at the local McWendy King because no supermarket will locate in your neighborhood and you don't have a car isn't something they really and truly understand.

Posted by joejoejoe | April 4, 2008 2:52 PM

Re Matthew's comment "As the national economy runs into serious trouble, it seems that the Washington region is experiencing only a relatively small slowdown in our local job situation "
-------------
1) The parasite lives while the host dies.

2) Makes a nice question for the next SAT exam:

"The Bush Administration versus the Bubonic Plague: Compare and Contrast "

Posted by Don Williams | April 4, 2008 2:52 PM

Soooo, you're saying there's no pain in DC? From the Capitol you can walk to some of the most poor and violent neighborhoods in the country. The politicos will never feel pain no matter where they are.

Posted by asl | April 4, 2008 3:00 PM

People who don't think there will be DC pain have not lived here long enough. Just wait, the RIF's are coming.

It might be 2008, but it might as well be 1988. The tailing end of the Reagan boom, which had a runup both in the housing market and equitities. Sound familiar? Well both of those markets stagnated until the mid-90's.

The H.W.Bush first term was indeed a difficult time in DC and the nation. Does anyone remember Michael Moore's book "Downsize This!"? I think it was his first. Well what do people think that was from?

Believe me, it feels exactly the same. The hangover is about to set in as the budget deficit is going to need to get reigned in. At least it will be easier with a weak dollar.

Look forward to a year of recession and probably 5 years of no growth. Anyone remember the impetus for the movie slacker? The lost generation that could not get jobs? The original Gen X, who are now in their early 40s?

As a society, we really do have short memories.

Posted by Bubba | April 4, 2008 3:07 PM

In the early 1990s, there were HUGE layoffs in the defense industry as defense budgets were cut in a desperate attempt to rein in the Reagan -George H Bush debt.

Well over 1 million employees. Los Angeles' big aerospace community was devastated -- see the Michael Douglas film "Falling Down".

The Washington DC area was hit as well -- a $250,000 house lost about $60,000 of its value within the space of a year. It took about a decade for housing prices to recover their former value -- and that was really kicked off by 911 and the resulting huge increase in the defense budget pushed through by George Bush.

People aren't thinking clearly. The stock market is not far above what it was in 2000 -- in spite of our economy being artifically pumped up by an injection of $5 Trillion in debt-fueled spending during the Bush Administration.

What do you think will happen when that faucet runs dry -- as is beginning to happen? And Bush's spending has largely been WASTEFUL CONSUMPTION -- I don't see ANY investment.

At least the Clinton era growth was based on productivity improvements from deployment of long distance fiber optics and widespread deployment of the Internet. What new industry or major technological innovation is Bush leaving us?

When this stupid fucker was a businessman, he was an alcoholic headed for bankruptcy until he was rescued by rich friends. Yet 50 million stupid morons voted to make him President and give him control of our credit card. What the hell did you expect would happen??

Posted by Don Williams | April 4, 2008 3:34 PM

And Don provides a little more DC context. I will quibble with him about a few things.

First of all, the runup in housing prices really started around 1998. I have friends who bought townhomes in Mt. Pleasant in 1995 in the $130k range and condo's in Cleveland Park for less than $100k in Ordway Gardens. That was basically the same price those properties were in 1990. There was no growth in prices at all.

However, by '99, that house in Mt. Pleasant was already over $300k and that condo was over $130k. I remember in '99 considering buying a condo in Cleveland Park myself and just watching prices that summer go from $130k for a 1BD in April to $170k for basically the same unit in August.

But then between 2000 and 2006, things just got really silly. That townhome in Mt. Pleasant is now $750k and that condo in Cleveland Park just sold last summer for $380k for a 1BD.

The RIFs were a bad time in DC during the early 90's. And it was not just BRAC related. Many federal agencies had their budgets cut and RIF'd employees too. And state governments got in the act as well.

But then, luckily, there was a new thing just coming on the horizon. And that was the internet. When Netscape's IPO in 1992 rocketed up on the same day, the whole country took notice and that IPO is basically alone responsible for rescuing our economy in the '90s. Clinton tax policy helped with the Federal budget, but economic growth in my mind is all related back to the day of that IPO.

Can't wait to see Hillary try to pull our economy out of this mess without another internet up her sleeve. Particularly since she is making "competence" the center of her campaign.

I'd hate to bring the campaign into this, but if Hillary wins, stay tuned for the 6th worst Presidency of all time. Of course GWB is #1 and then there is Coolidge, Harding, Hoover and Nixon ahead rounding out the top 5.

I can't wait to see her spin her way out of why the economy is working as well as her campaign. She'll just say that the "significant" sectors (like her Wall St., Big Oil and Big Pharma donor base) are doing well and the rest of us are the insignificant riff-raff that can eat cake or something.

Posted by Bubba | April 4, 2008 4:19 PM

"First of all, the runup in housing prices really started around 1998."

That's true. More generally, 1998 is when American consumers started spending more than they earned, making up the difference with debt. This is the inevitable de-leveraging process.

Posted by Fred | April 4, 2008 6:46 PM

The DC crowd has done tremendously in the past 15 years.

It is not just that house prices have gone up (it seldom is) but there are more and nicer houses, refurbished from the shabby slums. Is there a bubble? yes, but there are also many homes where none before existed in DC and many are occupied by Latino immigrants and african immigrants who do not really exist as far as either the population or employment statistics are concerned, even though they are driving up the demand for housing right there in river city. (Kind of like cities in NJ east of NY that have "declining populations" even though there are unprecidented building permits and electricity usage)

Is the national economy really in serious trouble? I realize wall street is constipated and we have a whopping 5.1 percent unemployment rate. The falling dollar is just desserts for all the glibberals and fauxhemians driving Volvos & Lexi, drinking San Pelligrino water& expensive coffee, wearing imported shoes and watching plasma TVs. Can't blame us "real" americans for that.
Oh, and who took out all these subprime loans? Parishioners at the Rev Wright's church I imagine.

Posted by Jozef | April 4, 2008 6:52 PM

9/11, the GWOT, Iraq, and big government Republicanism have all been wonderful for the Washington economy.

Posted by bob h | April 5, 2008 1:05 PM