The Rich Get Rich, the Poor Get Poorer

The Imperial City prospers as the nation languishes.

Source: Morgan Knull & Associates

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  1. DJRippert Avatar

    Just out of curiosity, which metropolitan areas have the highest educational populations?

    Looks like DC is third behind two smaller cities – Boulder, Co and Ann Arbor, MI.

    Is it possible that high education = high pay?

    Jim, I will submit your application for a Nobel Prize in economics for this Earth shattering revelation.

  2. Ask yourself: Did Washington become the national center of power and wealth redistribution because it had managed to attract lots of highly educated people? Or did Washington attract all those highly educated people because it had become the center of national power and wealth redistribution?

    Which way does the causality run? Hmmm, tough question. Do you really think it’s worth a Nobel Prize?

    1. DJRippert Avatar

      Dr. James A. Mann:

      Your application for a Nobel Prize has been rejected. It seems that you like to cherry pick your data. Over the last 12 months, Houston, Miami and Chicago have all exceeded Washington, DC in wage growth.

      However, there is good news. Your submitted research paper entitled, “How to avoid addressing slow wage growth in Richmond by insulting other cities” is a finalist for the Barak Obama class warfare award.

      1. It will be interesting to see what happens to wage growth in the Washington metro when federal government spending actually starts to slow. It will be interesting to see what happens to all those super-educated people!

  3. I’m pretty sure a bunch of highly educated people moved to NoVa on a lark and then the govt decided to go into debt to hire them before they moved somewhere else.

    1. DJRippert Avatar

      Yes, and they moved to Manhattan so the financial services industry decided to spontaneously generate Wall St. In related news, a bunch of well educated people moved to Los Angeles and the Entertainment Industry sprang, fully formed, out of the ground to meet them.

      What you and Bacon don’t understand about economics and economic development could fill a library.

      The real question isn’t why Washington is increasing the wealth of its populace by attracting well educated people to the government cluster. The real question is why the business and political elite in places like Richmond can’t find anything with which to build a cluster.

      1. You’re sounding pretty arrogant there, my friend. We’ll see how Washington fares when federal cutbacks cause a recession like that experienced by dozens of other American cities. Curious minds want to know: Have Washingtonians been fat and happy so long that they don’t know what it’s like to experience hardship? Are they so inculcated with “Washington rules” that they’ll be able to compete for any business other than federal contracts? Will Washington’s innovation machine be able to reinvent itself like Boston’s and Silicon Valley’s have in the past? Or will Don Rippert be the last guy standing because his business is one of the few that actually makes a product needed by someone outside the federal government?

        1. DJRippert Avatar

          This isn’t hard and I’ve been schooling you on it for years.

          The first question is whether any area or industry will prosper when the government cutbacks come.

          If government cutbacks come amid rapid economic expansion in numerous other sectors, smart people will leave DC just like the cam here when the government jobs expanded.

          However, if government cutbacks come as the private sector continues to languish then the smart people in DC will have nowhere to go. Given that, I assume they adapt and continue to experience wage growth over time.

          You live in a fantasy world where there are Washingtonians. The long time residents aren’t the ones getting the big wage increases. It’s the well educated newbies who came flooding in to grab the good jobs. The Thundering Herd. They will stampede out of town if there better jobs elsewhere. Hell, the blew out of Pittsburg, Cleveland, Detroit and downstate Virginia when the going got tough. Why would anybody expect them to stay in DC if the going gets tough here?

          That leaves the actual Washingtonians. The people who grew up here. The people who intend to stay. The people who have never seen their incomes spike because of government spending or lobbyists. They will adapt to a government downturn by doing other things.

        2. James, check out this article:

          Pandora, the online “radio” music station is gearing up for a fight against the recording industry over fees.

          Will this sort of fight be avoided if we cross the fiscal cliff and have an era of austerity? Certainly not.

          Technology will continue to trigger fights over intellectual property rights, fights that business will turn to Congress to resolve.

          Want to start to think about the implications of genetic engineering? Fights over cloning regulations?

          More examples of why lobbying will continue to heat up? Drilling in the Arctic and the fighting over natural resources among the Arctic rim nations.

          You seem to have this mistaken idea that Washington is fat and happy because of government spending. It’s not. It’s fat and happy because of lobbying. And that’s not going to stop, even under austerity.

          1. FreeDem, Sure, the federal government has to sort out all sorts of conflicts created by new technology, and, yes, that entails lobbyists. That can’t be wished away. But a lot of the lobbying is pure rent seeking — harnessing the power of government to gain commercial gain over competitors. Read Robert Reich’s “Supercapitalism.” The fact is, Uncle Sam spends more, regulates more, allocates more capital and plays an increasingly intrusive role in every aspect of the economy. That’s the big driver of the growth in lobbying.

  4. What do you mean when you say “national center of power and wealth redistribution?”

    Certainly it’s been a center of “power” for some time.

    But the edge DC has over the rest of the nation goes all the way back to the late 1960s, which certainly had Vietnam and the Great Society, but the gap seems to have been steady until exploding in the 1980s and 1990s. Was that when we really started to ramp up wealth redistribution? Reagan-Bush-Clinton?

    Check out these other graphs:

    Doesn’t seem to be a factor of more regulations and regulators, although the trend in Homeland Security should concern any frequent air traveler.

    Doesn’t seem to be government spending.

    Not even those evil contractors, the private sector scabs that public employee unions always try to blame for everything.

    Lobbying seems to be a good correlation with the increase, although maybe not causation? The book “So Damn Much Money: The Triumph of Lobbying and the Corrosion of American Government” by Robert Kaiser was a real eye opening to me on just how much lobbying has exploded in the last few decades.

    If lobbying is an arms race in which each side is spending more and more for the same result, it’s easy to see how DC will continue to benefit. But what is causing that, chicken or egg? From WWI through WWII through the Great Society, government has been growing in influence. But it seems that a cultural shift within business may have been responsible for opening the doors to lobbying?

  5. Spending on the defense-intelligence-homeland security complex in the 2000s surely drove up incomes (and education levels) in the Washington metro. The rise of the lobbying industry is another factor. The relocation of almost every trade association, professional association and advocacy group in the entire country to D.C. is yet another factor.

    1. DJRippert Avatar

      And growth in spending on cancer causing cigarettes surely drove up incomes (and education levels) in Richmond.

    2. James, are you suggesting that the Bush era reversal in national security spending specifically helped Washington more so than other metropolitan areas? And, given your emphasis on austerity hurting DC, are you suggesting that our military industrial complex will be the hardest hit by spending cuts?

      1. Yes. I think it’s pretty clear that the post-9/11, Bush-era ramp up in defense, intelligence and homeland security spending was a huge boon to the Washington metropolitan economy, Northern Virginia in particular. A reversal of that spending — necessary, by the way, if we’re ever to get close to balancing the budget — will hurt NoVa disproportionately.

        Am I conflicted? Yes. I tend to support defense spending, and I want to see NoVa and Hampton Roads prosper. On the other hand, I fear that the nation is heading for a fiscal meltdown and that spending cuts have to be made across the board — no area is off limits — even if it hurts Virginia. We can make the cuts now, and adapt to them, or we can wait until what I call Boomergeddon when the whole thing falls apart and the pain is far worse.

  6. re: ” Doesn’t seem to be government spending.”

    I’m not sure what else spends money in the DC area.

    re: ” What you and Bacon don’t understand about economics”

    I guess we need a chart showing the wealth of NoVa in 2000 verses 2012.

    If my theory is correct, we pretty much doubled the Federal budget during that period of time so I’d expect to see an equivalent gain of wealth in the NoVa area.

    I do not claim to be an expert of any kind much less in economics but I can count government workers in the NoVa area as well as the exurbs.

    Even much of the private sector contractors are doing work for the govt.

    In particular – the Washington area has a plethora of DOD activities ranging from the Pentagon to Ft. Belvoir to Quantico to Andrews Air Force to Pawtuxet River, Navy Yard, David Taylor, etc, etc.

    Let’s go back over the numbers. The Feds take in about 2.1 trillion in revenues. But 800 billion of that is FICA taxes so that leaves about 1.3 trillion. DOD spends 900 billion but when you add in things like Homeland Security, the VA, and NASA satellites, CIA, etc – we spend more that 1.3 trillion on national defense alone.

    But you’d never know just how broke the Fed Govt is by looking at NoVa…. eh?

    Now DJ says ..that is “cluster economics”. I’m agog.

  7. DJRippert Avatar

    Free Dem:

    Jim and Larry struggle with the concept that government is an industry. It has employees, assets, income statements, balance sheets and everything else that a typical industry has.

    The center of this industry is in DC.

    Smart people leave places where local industry is shrinking and migrate to places where local industry is growing. Hence, the out migration from Detroit.

    So, as a succession of Presidents and Congresses (voted into power by people from places like Henrico County and Fredricksburg) grew the size of the local industry, smart people came.

    Some of the smart people worked for the local industry – government – and others went to work in unrelated industry clusters, like hospitality (anchored in the DC area by Marriott and Hilton International).

    That’s the part Jim and Larry never can get their heads around. Government is an industry that attracts smart people and then some of the smart people branch out and work in non-government areas. In the minds of Jim and Larry, economic growth in DC is only caused by government. Therefore, differential wage growth can only be explained by wealth redistribution (presumably mandated by government).

    Here’s my corollary:

    Richmond is the headquarters for Phillip Morris. PM makes cigarettes and cigarettes kill people. Wages are rising in Richmond.

    Therefore, Richmond, the Death City, prospers as other areas languish.

    As for the influence of lobbyists – you couldn’t be more right. This was a major thesis or Robert Reich’s book, Supercapitalism.

    And, where in Virginia government do you think the rise of lobbyists fuels economic growth? Why, Richmond. Home of a state government that doesn’t even try to put campaign limits on political contributions.

    So, let me amend my thesis. Richmond, the Death and Lobbying City, prospers as other areas languish.

    See, this is easy. Pick any correlated trends and then invent causality.

  8. “struggle”?

    yes.. the “balance sheet” says 16 trillion in debt and we’re adding a trillion a year to it.

    And we are told that “sequestration” – cutting 100 billion a year for 10 years will “devastate” NoVa.

    so.. will NoVa be “devastated” if the Feds cut 100 billion ?

    that should take care of the ” some folks think that NoVa is funded ONLY by govt.”.

    Maybe there IS some level of non-govt economy in NoVa. I’d certainly be more persuaded with some numbers than DJ’s schtick.

    I strongly suspect though that NoVa without the govt would be more like Roanoke than Manhattan.

  9. >>>”But a lot of the lobbying is pure rent seeking — harnessing the power of government to gain commercial gain over competitors. Read Robert Reich’s “Supercapitalism.” The fact is, Uncle Sam spends more, regulates more, allocates more capital and plays an increasingly intrusive role in every aspect of the economy. That’s the big driver of the growth in lobbying.”

    James, you’re still making the magical jump from “big government” to “wealthy Washington.”

    It’s not government spending that’s made Washington wealthy, spending as a percent of GDP is not correlated with Washington’s increase in wealth. It’s not regulators, the non-Homeland Security regulation state was pretty flat during the time in which Washington was already taking off, and the Homeland Security over-reaching is too late to explain the rise in wealth back in the 1980s.

    Everything you dislike, everything that I also dislike, the big spending, the overbearing regulations, are certainly part of a national problem holding America back, but there’s no evidence that they are the cause of Washington’s rise to wealth and prominence!

    It’s lobbying. And your narrative on lobbying, that big government has driven the growth of lobbying, is questionable. The history of the lobbying industry doesn’t support that! Lobbying has always been around, the word itself dates back to the late 1800s, but there’s a significant gap in the rise of the modern welfare state and the rise of lobbying in Washington.

    There’s something else going on. Someone with free time and a background in both political science and American history might try to argue that the rise of the “Great Stagnation” diverted private businesses from focusing on new markets, new products, and new ideas and instead look at rent-seeking as a way to protect the bottom line. But I’m too busy.

  10. reed fawell Avatar
    reed fawell

    If the Washington DC Metro Area illustrates the fruits and achievements derived from higher education in this country, I am not sure that such high education brings Solutions to our Problems. Indeed, it may well be a major part of those many and rising Problems.

  11. Washington – I’ll believe in a reduction of employment/wealth in DC when I see it. We’ll never have an across-the-board cutbacks – already we’re seeing the Republicans saying that the defense budget can’t be cut. And if you don’t have an across-the-board approach, you’re going to have winners and losers, and if your industry doesn’t want to be a loser, you’d better lobby hard. Lobbying will be even more important if there are significant cutbacks. Imagine if we tried to eliminate the ag subsidies, or wanted to allow Medicare to negotiate with the pharma companies, or wanted to eliminate a significant number of military bases – you’d really see the lobbyists out in force. Same thing if the tax code is rejiggered – eliminate the mortgage interest deduction, life insurance taxes, capital gains – we’d see lobbyists and money from lobbyists like never before – the Koch brothers would move their headquarters to Ashburn VA.

    BTW – It’s official – the latest Republican buzzword is “redistribution” as in redistribution of wealth as in socialism as in communism. I sure wish someone would make put the official Republican dictionary online. Apologies to Jim for being absurd.

  12. I found this to be informing:

    The Fiscal Cliff, In Three And A Half Graphics

    turns out – only 30 billion is involved for DOD. Think about that. With a budget of 900 billion…we’re talking about 3 1/2% and it is characterized as “devastating’ for DOD and Virginia.

    So the GOP guys who have been blathering on for the last 4 years that we have a spending problem and not a revenue problem are apoplectic over 3.5% worth of cuts?

    and remember – we are one TRILLION in deficit – and the GOP says we cannot cut 30 billion.

    re: the “official” GOP dictionary – is one single setence: ” do whatever is necessary to get that Kenyan socialist out of the White House”.

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