Stop any 10 people on the street in Virginia and ask them, “Who has a higher standard of living — the inhabitants of Roanoke County or Loudoun County?” I would wage that all 10 of them (assuming you could find 10 who had actually heard of both counties) would say Loudoun County. Oh, sure, Roanoke is surrounded by beautiful mountains and all that, but the economy of the Roanoke Valley isn’t exactly setting the world on fire. By contrast, Northern Virginia is where the job creation is, the entrepreneurial success is, the material prosperity is. And Loudoun is at the epicenter of growth in Northern Virginia.
But let’s take a look at the numbers. According to the Bureau of Economic Analysis:
2005 Per Capita Income
Roanoke/Salem………….. $35,140
Loudoun/Leesburg………..$41,193
First impression confirmed. Loudoun County’s per capita income is 17 percent higher.
Now, do this: Go to the CNN cost of living calculator, and see what you have to earn in Loudoun County to get the same standard of living as Roanoke County. It’s $45, 695. In other words, adjusted for the cost of living, Roanokers are 10.9 percent better off than Loudounites! (The gap looks even worse if you take into account the highly progressive nature of the federal tax code that punishes regions, like Northern Virginia, with high nominal salaries and wages.)
That simple comparison leads me to the key insight of the second installation of “Economy 4.0: Measuring Prosperity“:
Thanks to the federal tax code, affluent Virginians are subject to high taxes on every extra dollar they earn. Strategies geared to increasing incomes are worthwhile, but they are pushing the rock up-hill. A more effective way to raise comparative living standards in Virginia may be to hold down living costs.
In “Measuring Prosperity,” I also discuss the implications of the “time famine” on living standards, the vulnerability of living standards to rising energy costs, and the impact of environmental degredation on the stock of Natural Capital.
Bottom line: Public policies that increase incomes are good. But public policies that increase incomes while simultaneously driving up living costs, consuming more energy and degrading the environment by perpetuating dysfunctional human settlement patterns are misguided and counter productive.
Can anyone say, “Fundamental Change?”
