Into 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. RippertThere are currently no comments highlighted.