Has Virginia’s Economy Officially Tanked?

Virginia tankInto the bit bucket.  Back in August, 2013 I wrote an article for this blog titled, “Is Virginia’s Economy Tanking?”.  The essence of the article was that Virginia’s Gross State Product (GSP) was growing by less than the increase in federal spending in Virginia.  Moreover, that trend had been holding true through the prosperous economic years prior to the so-called Great Recession.  I felt the shrinkage of non-federal GSP was a harbinger of bad things to come.  Everybody expected a slowdown in federal spending – especially defense spending.  That would hurt Virginia.

The fact that non-federal growth was negative during good economic years caused me to question the likelihood of Virginia recovering from the anticipated drop off in federal spending.  A recent report indicates that Virginia’s economic growth percentage in 2014 was exactly the same as Bluto Blutarsky’s grade point average – 0.0.  That put Virginia 48th out of 50 states for economic growth in 2014.  So much for being the “best state for business”.  Unfortunately, my ability to throw my shoulder out of joint patting myself on the back for the accuracy of my prediction was compromised when Jim Bacon had to delete a number of logon id’s in an effort to reduce spam comments.  Mine was one of the deletions (I have since re-registered with a new id).  When WordPress finds a logon deleted it apparently deletes all the posts that were written under that id.

So, is Virginia’s economy tanking?  No.  It has tanked.  In my opinion it will likely tank further in the coming years.  While sequestration has been implemented and the loss of federal jobs in Virginia is slowing, the pace of federal contracting cuts is expected to double in the 2015 fiscal year.  These lost jobs will cause a loss in demand for the goods and services purchased by the former contractors which will cause further job loss.

The Emperor’s clothes.  A prolonged period of no growth, low growth or perhaps shrinkage in Virginia’s economy will have consequences.  Fewer jobs could translate into a lower demand for housing and a fall in real estate taxes.  This would translate into less funding for schools and a decrease in the educational funds transferred from the “urban crescent” to other areas of Virginia.  The substantial tax increase passed during the McDonnell administration may prove unnecessary if traffic congestion ends up being solved by population loss rather than new transportation construction.  The overall political climate in Virginia could turn to the right if generally liberal federal workers and contractors depart for greener grass elsewhere.

Every day is red nose day in Richmond.  Virginia’s over-dependence on federal spending was known for decades.  Yet the Imperial Clown Show in Richmond took no effective action to diversify Virginia’s economy.  Public universities in population centers (like GMU, VCU and ODU) could have followed the University of Maryland’s effort to strengthen STEM programs.  The snarled traffic in Northern Virginia and Tidewater could have been addressed before it became a quality of life killer.  The tobacco funds could have been spent constructively instead of stolen and squandered.  The billions in company and industry specific tax breaks could have been forgone and the funds used to keep higher education affordable instead of being used to reward campaign contributors and political gift givers.  Today, our one term governor oscillates between declaring our economy to be “booming” and scrambling around Europe trying to drum up business.  Meanwhile, the empty suited politicians for life in the General Assembly stand slack jawed and glassy eyed watching the Commonwealth fail.

— D.J. Rippert

There are currently no comments highlighted.

12 responses to “Has Virginia’s Economy Officially Tanked?

  1. Don,

    I would like to bring something else to the table that ran in newspapers this weekend:

    http://www.delmarvanow.com/story/opinion/columnists/2015/06/11/ensuring-common-wealth/71083616/

    Governor Baliles points out that the “rural horseshoe” is dead last in educational attainment in the nation if it was a state, tied with Mississippi and West Virginia. The rest of the Commonwealth would be 2nd in the nation if it was a state.

    While sequestration has hit NoVa and Hampton Roads very hard, I think you’d agree that those areas also have enough intellectual capital, talent, and entrepreneurs that they will eventually bounce back. In fact, there are signs already showing that Hampton Roads may be coming back.

    The real disaster (or tragedy if you live there) has been the idiots in the General Assembly’s whose “rural policy” of [the should-be-destroyed Tobacco Commission and simply transferring money from the Urban Crescent to fund basic public services] has resulted in a state akin to Mississippi.

    I predict that the NoVa and Hampton Roads economies will rebound. I think Richmond and Charlottesville are doing ok now and will continue to do ok, not “great”, but not “bad” either.

    But until the Commonwealth finally decides to have a comprehensive policy for rural Virginia, that state GDP number is going to lag. Decades of bad decisions in the rural horseshoe have finally caught up with the state. Explosive Homeland Security spending (2001-2011) is gone from NoVa and can no longer be used to mask Virginia’s rural economic wasteland. I know we all doubt that the Clown Show can grapple with the challenge, but I suppose we should hope that they finally get their act together…..

    • Gerald Baliles is a genius. Best Virginia governor of my lifetime.

      If Terry McAuliffe had his head on straight he’d create a Secretary of Economic Development and appoint Baliles. If the General Assembly had their heads on straight they’d vote to make Baliles Secretary of Economic Development for life.

      Note how he assigns the responsibility for improving the education system right where it belongs – on the localities. “A rural area’s inability or unwillingness to improve its education level will ensure its demise.” FWIW – Gerald Baliles is a progressive Democrat from rural Virginia.

    • Northern Virginia will be hurting for a number of years absent a war or another big terrorist attack that opens the spigot to the trough. We have very many bright people, but we are generally internally wired to deal with, and serve the federal government. We don’t have the same type of disrupters that they have in California, Texas, Massachusetts, Utah, etc.

      While this is anecdotal, I worked with a number of good tech businesses in the last decade that were looking to take DARPA-related concepts and bring them to the private market. Those that are still operating are focused on the government market. On the other hand, I’m working with a couple tech companies from France and Australia, both of which are selling advanced radio products to the private sector.

      There is a huge challenge that could be tackled and, if done successfully, would create a number of monster companies. The challenge is to manage the traffic network dynamically. The laboratory is Tysons. But it won’t happen because there are no government contracts available. A disrupter would figure out the technology and present a solution.

      My wife’s solution to retire to NC looks better all the time.

  2. totally agree …

    and this is stunning:

    ” the “rural horseshoe” is dead last in educational attainment in the nation if it was a state, tied with Mississippi and West Virginia. The rest of the Commonwealth would be 2nd in the nation if it was a state.”

    You can’t do economic development if you don’t have an educated workforce capable of performing 21st century work and we’re not just talking about 4yr college. We’re talking about VocEd and community colleges for certifications in market occupations…

    Who to blame? well.. it seems to be the preferred politics these days.. but the truth is too many of us don’t really support the elected in taking these directions.. instead we want them to mess around with abortion, refusing Medicaid expansion, wasting tobacco money on crony capitalism, flying squirrel stadiums and tax breaks for who knows what?

    21st century education for rural Virginia as well as urban cores should be a priority.

    • A Democratic state senator friend of mine told me that, in a number of areas in RoVA, parents discourage their kids from going to college or tech school because they know they will then move away. It’s going to take a lot more than government spending.

  3. Lot of good information and analysis in this post, but I am puzzled by one thing. Why is Virginia’s unemployment rate 4.8 percent if things are so bad?

    • Lots of possibilities:

      1. More part time work.
      2. People giving up looking for jobs and no longer counted as unemployed.
      3. Job growth in lower wage brackets accompanied by job shrinkage in higher wage jobs.

      Alternately, the impact of an employment turnaround might only be reflected in arrears on Gross State Product. If that’s the case then Virginia should be out of the basement when the economic growth numbers for 2015 are released in Spring, 2016.

      I remain skeptical. Virginia was not generating economic growth in the non-federal sector during the boom years prior to the last recession. What has suddenly happened to turn that non-federal shrinkage into non-federal growth.

      We’ll see next year I guess.

    • In fairness, I am also not completely confident in the annual state by state economic data. That data seems more derived than calculated.

    • A lot of people with good incomes and wealth have moved out of NoVA especially when they retire. -Not everyone of course. In migration to Fairfax County is negative and if it weren’t for people moving here from other countries, it would be negative. And most of those moving in are taking lower paid service industry jobs. So sayeth Fairfax County itself. There is a lot of money in the County, but the County no longer has a lot of money.

  4. I’d be curious to know Gov Baliles take on the education funding crisis in NoVA (eg; Fairfax Co).

    • The problem is Fairfax County is the LCI fails to account adequately for the higher operations costs, the number of non-English-speaking students, and the lack of a requirement for local governments to impose at least a minimum local real estate tax for public schools. I know the FCPS school board has been talking about filing a legal challenge to the formula. There is a court case in Indiana that held that state’s formula over-supplied rural districts at the expense of fast-growing suburban ones.

  5. Virginia is not unique with respect to urban areas funding rural needs – primarily education .. in Va – also roads and public safety. These are valid purposes in my view.

    But what the basic implicit and explicit promise of the Country and it’s States – is – equal opportunity – and that starts with education.

    And you’ll find it heavily embodied in the Virginia Constitution.

    ” Section 15. Qualities necessary to preservation of free government.

    ” That free government rests, as does all progress, upon the broadest possible diffusion of knowledge, and that the Commonwealth should avail itself of those talents which nature has sown so liberally among its people by assuring the opportunity for their fullest development by an effective system of education throughout the Commonwealth.”

    ARTICLE VIII
    Education

    lays out in chapter and verse – in detail … how the STATE – will ASSURE – that each child in the state – regardless of their economic or geographic circumstances will receive – equal access to an education.

    this is not something that Fairfax decides for Tazewell or Henrico decides for Scott County. This is fundamentally a State function.

    the folks who say this is “not fair” to the counties in my view -sound a little like anti-Federalists who believe, not only in State’s Rights – but even beyond that to County/City rights – almost feudal…

    and seriously hypocritical in places like NoVa whose economy is based on spending taxpayers money a lot of it coming from rural.

    Not just in Virginia and not just the LCI .. the rub is the CONCEPT of the state using whatever monetary and taxing means available to it to assure equal access – to education for all .

    so what is the actual complaint?

    is it the CONCEPT of equal access to education or is it how it is implemented?

    it “sounds’ like the complaint is implementation – but it walks and talks like it’s the concept.

    the urban areas will fund the rural – that’s the concept. find an implementation you like but don’t tear down the one in place and walk away.

    and again – I do not support helicoptering money so the counties can lower their tax rates.. it’s got to ADD TO … you want rural kids educated to global standards or you basically admit we’re going to give them welfare for the rest of their lives.

Leave a Reply