By Peter Galuszka

Will Virginia end up killing the goose that has laid its golden egg?

With apologies to Aesop, it is the most pressing economic question the Old Dominion faces. The golden egg, of course, is the federal government whose jobs continually prop up the state work rolls and help the flow of state and local taxes.

Chock-a-block with military bases from Virginia Beach to the Pentagon,   the CIA, civil servants galore and the headquarters of the Federal Aviation Administration, Virginia ranks No. 3 after the District of Columbia and Alaska in the percentage of workers who get their paychecks from government. That’s just direct employment. The state also is the No. 2 defense contractor after California. Newport News Shipbuilding, the only shipyard capable of building nuclear-powered surface vessels, is a big Navy contractor, employing 19,000 workers,  the most of any company in the state. Northern Virginia is dotted with information technology firms feeding off the federal government that helped give us such useful things as the Internet.

Taken together, federal jobs have helped the state weather the worst recession since the 1930s. Federal work is the biggest factor in helping the state maintain an unemployment rate of 6.1 percent, far better than its southern sisters and among the top ten lowest in the U.S.

There’s one big problem with this miraculous goose and its golden egg, however. Some folks want to kill it in the name of fiscal austerity, which is Tea Party-driven fad of the moment. Pushed by the Tea Party, the state’s top Republicans such as U.S. Rep. Eric Cantor are on a cutting spree. They love the attention they got playing a perilous game of chicken over adopting federal budget ceilings that resulted partly in the U.S. losing  its pristine credit rating from a major ratings agency.

Gov. Robert F. McDonnell also wants to get on board with federal job cuts. He’s already sliced the state budget by increasing school class sizes and stopping payments to hospitals, nursing homes and assistants who help sick people on Medicaid. By also deferring payments to the state pension fund, McDonnell has claimed a budget surplus in horrific times, setting himself up for a possible run as a Republican vice presidential candidate in 2012. The new chairman of the Republican Governor’s Association is now lecturing President Barack Obama to follow his tight-wad example.

“The Governor does believe we must cut spending in Washington, D.C. and we need to do it in a significant and serious manner,” McDonnell spokesman J. Martin Tucker told me, adding that McDonnell knows that such cuts could “have a significant impact” on the state. To ease the pain, McDonnell is proposing putting $30 million from his upcoming budget “surplus” into a special fund that could be used to replace some of the lost state tax revenue if federal jobs take hits. Another step is to expand the role of “Jobs Guy” Lt. Gov. Bill Bolling and his employment commission to create even more jobs to make up for federal cuts.

There are a few problems with the approach. For one, $30 million is chicken feed to replace a golden egg. It’s pin money in an $80 billion budget and a $545 million surplus — a point even McDonnell acknowledges. Secondly, there are serious questions about how successful McDonnell has actually been in creating jobs.

The McDonnell Administration claims it has created 45,600 net new jobs since it took office in 2010. The state Democratic Party has claimed that the actual number of jobs the state — 3.6 million or so — is the same as it was when the recession supposedly ended in June 2009. Brian Coy, Democratic Party spokesman, has said that the number of Virginians with a job was 3.8 million. In June of this year, it was 3.9 million, but when population growth in the state is factored, the percentage of its working population employed, 64.3 percent, is about the same when McDonnell took office. Also problematic is the fact that the state lost 14,600 jobs in June, according to the U.S. Dept. of Labor, and 47,800 jobs in July, according to the Virginia Employment Commission.

Such data trip wires make McDonnell’s job growth claims more modest than he wants you to believe. Even if the administration’s claims are true that it saw an overall increase of 53,784 jobs since it took office, that’s far shy of the nearly 1 million jobs directly related to government work in the state. It doesn’t include the labor forces of private contractors under government contract that could be cut, especially in defense.

Even “Jobs Guy” Bill Bolling’s magic can’t come anywhere close to replacing numbers like those. The bitter truth is that if the budget hawks get their way, Virginia is in for a much rougher time, and will be a much tougher place to live in, than any politician is willing to admit.

First published in Style Weekly

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5 responses to “Killing Virginia’s Golden Goose”

  1. Never fear – not a single one of the current crop of Republican wannabies would dare touch DOD funding…

    not going to happen….

    we have a better chance of DOD being cut if Obama gets a second term than if a Republican wins…

    geeze.. I’ve been SUCH A FOOL!

    NOW I KNOW why Groveton really wants to get rid of Obama!


  2. Peter, I think you’ll find that most of the Virginia Republicans in the General Assembly are big defenders of defense spending. If they had their way, Virginia wouldn’t suffer meaningful job losses from defense spending cuts.

    Their real vulnerability is this: How do you balance the budget without cutting defense spending? The Rs don’t want to admit that it can’t be done.

  3. I sure as all *^#@ would rather be living in Virginia with defense cuts than in California. McDonnell and the General Assembly’s fiscal discipline is a lot more comforting than the insanity in California.

  4. Peter does a nice job of outlining the problem Virginia faces.

    Defense cuts are coming, no matter who is elected president. They may be less under a Republican but they will happen.

    Our horrible state legislature has simultaneously hoarded all power in the state (through a tight adherence to Dillon’s Rule) and failed to prepare the state for cuts which are obvious and imminent. Their failure in this regard is but the latest chapter in a history of failure.

    Needless to say, “rent seekers” such as myself have plans to profit from the incompetence of the General Assembly. When the cuts come, skilled technology labor will become relatively cheap in Northern Virginia. Some will leave for greener pastures but others will have reasons to stay. I will be mopping up that discount talent while driving on uncongested roads and laughing at the empty $5/Mi HOT lanes that came from the brain trust in Richmond.

  5. Here’s my question. For Individual Income Taxes – the revenue that they generate …. what PERCENT should be spent on the military and homeland security?

    right now – 100% of our individual income taxes go to pay for the military and we are spending an additional 800 billion on the Chinese credit card for entitlements.

    or is it the other way around? we are spending all of our income taxes on entitlements and charging the DOD/HS to the Chinese credit card?

    or are we spending 1/2 our income taxes on entitlements and 1/2 on DOD/HS and charging the rest on the Chinese credit card?

    and hey… don’t forget that even with the downgrade that our debt is dirt cheap… you’d think they’d be charging us out the wazoo but instead they begging for more rock-bottom interest rate securities.

    Now,.. the Republicans will tell you that the problem is that we already pay too much in income taxes and if we cut them further – it will result in MORE tax revenues …..and if we cut them enough.. we won’t have to pay any taxes and the entitlements and DOD/HS will all be fully paid for.

    I love supply-side economics… ๐Ÿ˜‰

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