Rejoice, Virginians, in the Rise of America’s Imperial City


Washington, D.C., may have been the United States capital since the earliest days of the republic, but it is only in recent years that it has emerged as one of the nation’s leading cities. The metropolitan region has ridden the growth in federal government spending, benefiting from what Aaron M. Renn in City Journal calls the “leaky bucket” model of economic development — skimming a take from the Mississippi-sized flow of federal money through the capital.

New York remains preeminent among American metros but Los Angeles and Chicago, the two main contenders for the nation’s second city, are struggling in a slow-growth economy. Washington has a faster-growing population, a better educated workforce and a higher per capita income. And, of course, it has the federal government.

Renn questions whether Washington can maintain superior growth with the leaky bucket model, however, as the national debt exceeds $16 trillion and the pressure builds to cut spending. The prospect of diminished federal spending should set off alarm bells for Virginia, which has become dependent upon the federal government for so much of its own economic growth. But never fear! Renn sees how the region can reinvent itself:

Washington has discovered a new way to extract value from the federal government, based not just on spending but on an ever-expanding regulatory state. An array of programs—the Sarbanes-Oxley and Dodd-Frank acts governing finance; the government’s auto-industry takeover; the EPA’s declaration that carbon dioxide is a pollutant—takes regulation to new levels of detail and intrusiveness, even extending to the micromanagement of particular companies. The trend began long before President Obama took office, but its quintessence is Obamacare, an annexation by the federal government of one-sixth of the American economy via 2,000 pages of byzantine legislation, not counting the thousands of pages of implementing regulations still to come. …

This new basis for prosperity could pay huge dividends to the region. The model here might be the defense industry, which has already centralized many operations in the area. Northrop Grumman, for example, recently moved its headquarters from Los Angeles to Washington. Boeing shifted its headquarters from Seattle to Chicago to be closer to defense operations and customers in Washington. Other industries, such as health insurance, may follow suit. Even if they don’t relocate to D.C. entirely, they’ll need to be represented there.

So, never fear, in the absence of a major political upheaval that imposes an alien vision of smaller, less powerful government, the Washington region’s future is secure. That’s good for Washington, Renn gripes, but not so good for the rest of the country.

The regulatory superstate depends on inflicting pain on the rest of the country, pain that only Washington itself can relieve—if you pay up and have the right connections, that is. Washington’s fortunes and America’s are increasingly at odds. The region is prospering because it’s becoming something that would have horrified the Founders: an imperial capital on the Potomac.

As an economic adjunct to Washington, however, Virginia is not like the rest of the country. What’s good for Washington is good, not bad, for the Old Dominion. We Virginians benefit from the oppression of our fellow citizens. The economic spillover from the District of Columbia keeps our economy, and our tax revenues, humming!

– JAB

9 Responses to Rejoice, Virginians, in the Rise of America’s Imperial City

  1. “Boeing shifted its headquarters from Seattle to Chicago to be closer to defense operations and customers in Washington.”.

    Were the Boeing executives in one of those new Dreamliners when they decided to land in Chicago rather than risking the rest of the flight to DC?

    Seriously, Jim – even by your standards this is absurd.

    The federal government has been regulating healthcare for decades. Is Aetna still in Hartford? UHG in Minneapolis? Kaiser Permanente still in Oakland? HCA still in Nashville?

    Meanwhile, where is Dominion Resources located? Why does Henrico County (home of Phillip Morris) have the second lowest cigarette taxes in the US? Why is Virginia Business Magazine published in Richmond? Is Richmond the largest economic center in Virginia? Is Businessweek published in Albany?

    Richmond sucks at the teat of the state every bit as much as Washington sucks at the teat of the nation.

  2. Don said, “Richmond sucks at the teat of the state every bit as much as Washington sucks at the teat of the nation.”

    Yeah? So How does that disprove the point of the post?

    • It was a prod in the hope that you might some day follow up your 10,000 articles on how Washington benefits from the federal government with a single article about how Richmond benefits from the state government.

  3. when the govt made health insurance tax-free compensation, I would assert THAT was BIGGER and MUCH WORSE than ObamaCare yet I’ve never heard Bacon make so much as a whimper about it.

    My bet is that if employer-provided health care was made taxable then people would flock to ObamaCare and as a direct result be much more able to take other jobs that suited their needs better – regardless of health care insurance.

    One more thing. Obama cannot pass regulations. Only Congress can. Obama can choose how to implement them – but only within the confines set out by Congress.

    The EPA is permitted by law to determine what a pollutant is or is not and Congress is free to revoke that authority or override it but to blame it on the EPA is silly and ignores the reality of the laws that Congress has authority over.

    • Not a whimper about paying for health insurance with pre-tax income?

      You’re nuts! That’s a fundamental part of what’s wrong with the health system. Many systemic problems flow from that. Fixing that problem is mandatory if we’re to fix our health care system. But Obamacare doesn’t fix it! Obamacare keeps that atrocity in place and heaps on more layers of aggravation.

      Bacon’s No. 1 Rule for Public Policy: Before you pass new laws to fix what’s broke, un-do the old laws that broke it in the first place!

    • If employer-paid health insurance is taxable income (which it could be), why isn’t government-paid health insurance taxable income as well? That would level the playing field.

      • why can’t people who pay for their own – deduct it without having to itemize and why when they do – do they lose the first 7.5% of the AGI?

        not sure what you mean by ‘govt paid”… what do you mean?

        do you mean the insurance that the govt provides to it’s employees like Civilians and Military or do you mean Medicare and MedicAid or what?

        I can see some justification for not taxing health care but why isn’t the playing field level?

        and there is another problem with employer-provided. If you decline it – you don’t get the money to go shop for your own.

        why?

        See these are ALL THINGs that the GOP – COULD HAVE DONE – at the same time they were screwing around passing Medicare Part D.

        they could have done several things that would have effectively preempted any solid justification for ObamaCare.

        so the GOP is a bunch of feckless zeros on a number of fronts these days to include health care. All talk -no go.

  4. I like Bacon’s Law a lot but I don’t think I’ve read much about it here before. Are their prior blogs where you identified the tax-free compensation as fundamental and advocated it’s repeal?

    How many GOP have expressed similar sentiments?

    You woulda thought that when the GOP voted (symbolically) to get rid of ObamaCare that 1. they had a real REPLACE agenda and 2. it included getting rid of tax free health insurance.

    I get confused trying to keep up with the anti-ObamaCare crowd in terms of what they advocated for before ObamaCare came along much less after….

    A question for you – do people who buy from the exchanges get to treat those expenditures as tax-free so you actually get a credit back at tax time for the tax-free part?

  5. Isn’t that the main city from Elder Scrolls IV: Oblivion?

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