Virginia’s Economy Still Precarious

Two sets of data reaffirming the extent to which Virginia’s two largest metropolitan regions remain dependent upon federal spending, especially military spending…

While the Hampton Roads economy  is outperforming the national economy at the moment, the future remains “murky,” according to Old Dominion University’s 13th annual State of the Region report. “We’re doing better than most everybody else nationally, but not as well as we would like,” said James Koch, an economist and former ODU president who edited the report.

Defense spending has acted as a stabilizer for the regional economy but the outlook for defense spending looks “hazardous” as the federal government confronts its chronic budget deficits. Despite efforts to diversify the regional economic base, Koch said, Hampton Roads has grown more reliant on defense spending, which accounted for 45.6 percent of regional economic activity last year, compared with 34.5 percent in 2000.

“I hesitate to be too critical, except to say that we haven’t been successful in diversifying, and we have to pay more and more attention to that,” Koch said. (Read the coverage in the Virginian-Pilot.)

Meanwhile, in Northern Virginia, the region’s commercial office market is stalling, with little prospect of gaining forward momentum, according to Jones Lang LaSalle’s Q3 office research. Northern Virginia, of course, faces many of the same problems as Hampton Roads, with its dependence upon Pentagon spending. The main difference is that a much larger share of the spending goes to private-sector contractors.

“Do not expect the usual suspects ― the federal government, contractors and law firms ― to get the Washington region market out of this slump,” JLL’s Managing Director Creighton Armstrong said in a statement. “Organic growth is going to have to come from another source.” (Virginia Business has the story here.)

At least Northern Virginia has the potential to reinvent itself. The region’s defense contractors employ a lot of tech-savvy people. As the firms shrink, throwing thousands out of work, we can predict that some laid-off employees will launch start-up enterprises.  Whether those start-ups can achieve critical mass rapidly enough to pick up the slack in the regional economy , however, is an open question.

While other Virginia regions may not be directly in the line of fire from downsized military budgets, we will feel the impact indirectly. If the NoVa and Hampton Roads economies tumble, so will state tax revenues, potentially triggering another state budget crisis. We live in precarious times.


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  1. DJRippert Avatar

    Is there ONE Virginia state politician that has even ONE idea as to what the state government should be doing about the precarious economy in the state?

  2. Virginia’s political leaders have their collective heads in the sand. As I recall, Gov. Bob managed to set aside $50 million (order of magnitude number) to help offset the impact of sequestration, if it occurs. (I can’t remember the name of fund off-hand.) That’s better than nothing but still laughably small.

  3. ha ha ha.. Here’s what Mr. Bob McD just tweeted:

    ” Bob McDonnell ‏@BobMcDonnell
    Signed executive directive & MOU today to advance conversion of Virginia’s state vehicle fleet to alternative fuels.

    All things considered:

    1. – Hampton Roads is not going to go away as one of the best deep-water ports the Navy relies on.

    Downsize – yes – disappear – no.

    2. – Washington and NoVa are not going to see the Pentagon or Fort Belvoir or Quantico closed and the work outsourced.

    downsized, yes.. hopefully even – as we DO have a trillion dollar deficit and it will have to be cut per the sequester or equivalent and that means DOD will have to share some of the pain.

    It’s hard to believe that a 3.5% cut in DOD is characterized as “devastating” by the very same people who say we ought to zero-budget Medicare and MedicAid.

    1. DJRippert Avatar


      A tiny fraction of all wage earners pay the majority of all taxes.

      You don’t need to lose many of those jobs before you have a very serious fiscal issue.

  4. DJRippert Avatar

    Meanwhile, the thoroughly corrupt Obama Administration is offering to cover the legal costs of defense contractors which refrain from issuing lay-off notices based on sequestration.

    “Richard Ginman, the Defense Department’s director of defense procurement and acquisition policy, wrote an industry group on Sept. 28 that “any action to adjust funding levels would likely occur, if it occurred at all, several months after sequestration.” The same day, the Office of Management and Budget said the government will cover legal and compensation costs if contractors are held liable in court for not giving enough notice.”.

    Great. The federal government is a bazillion dollars in debt and planning to provide legal aid to Lockheed Martin when (not if) sequestration results in an employment meltdown among defense contractors.

    All of this to avoid having to tell the truth under the WARN Act just before the election.

    Obama’s Chicago roots are definitely showing here.

  5. re: ” A tiny fraction of all wage earners pay the majority of all taxes.”

    really? Are you counting sales, property, gas, FICA, etc ?

    re: “corrupt” – really? What exactly is corrupt about telling DOD contractors that sequestration likely will not happen in it’s entirety, in part because the GOP is having a hissy fit about DOD cuts?

    I’d say that NO MATTER what Obama does or does not do that folks like DJ and the right wing will label it “corrupt”.

    it’s all about direct attacks on the man – these days – from the right.

    not about the administration or policies of the administration – Nope – it’s about the man – that Muslim from Kenya… who hates America.

    1. DJRippert Avatar

      Why is the decision to invoke (or not invoke) the HARM provisions any concern to the Obama Administration?

      Does the Obama Administration provide guidance to banks about potential interest rate changes caused by the federal government’s fiscal policy (or lack thereof)?

      Why would the Obama Administration offer to indemnify the defense contractors with taxpayer money if the defense contractors misinterpret the HARM law?

      Does the Obama Administration indemnify other companies for their interpretation of federal statutes?

      Face it, LarryG – Obama doesn’t want those legally required notices to come out a few days before the election and he’s willing to spend your money and my money to make sure they don’t come out.

      If this were last year, or next year, there would be no talk of providing legal indemnification.

      The decision to indemnify the defense contractors is a policy of the Administration. What don’t you understand about that?

      However, the willingness of Barak Obama to commit taxpayer money to indemnify compliance in a law he supported is about the man. It’s about his honesty. Frankly, his honesty is looking pretty weak right now.

      He’s bribing defense contractors …
      He tried to cover up Benghazi …
      He’s lying about The Fast and Furious …

      He doesn’t seem like a Muslim from Kenya. He seems more like a certain Republican from California – Dick Nixon.

  6. DJRippert Avatar

    “re: ” A tiny fraction of all wage earners pay the majority of all taxes.”

    really? Are you counting sales, property, gas, FICA, etc ?”.

    Sales tax? Yeah, I’d say people with more money buy disproportionately more stuff.

    Property tax? Yeah, I’d say people with more money own more valuable homes and pay, on average, higher property taxes.

    Gas – maybe not.

    Social Security – caps at $110,000 or so. Therefore, yes – I’d say high wage earners pay (per capita) more in Social Security tax

    Medicare – Uncapped, so yes – I’d say that high wage earners pay more (per capita) in Medicare taxes.

    Larry – your liberal argument has your head on backwards.

    You want to defend the argument that most working Americans pay taxes even if they don’t pay federal income taxes. That may be true but it’s pretty irrelevant for Virginia.

    If hundreds of thousands of Virginians in the top quintile of wages lose their jobs, the impact will be outsized.

    Let me guess. I’d guess that one Virginian making $100,000 pays about 3X more in state and local taxes than a person making the median income of $60,000. And – the median income is brought up by the people making $100,000. So, when the $100,000 earners lose their jobs the median is no longer $60,000, it’s something less.

    It’s not about fairness, it’s about math.

    If you have better data – let me know.

    My bet is that the defense related jobs that will be lost are much better paying jobs than the average job in Virginia. These people pay more than the average level of taxes. Ergo, the loss of these jobs will be disproportionate.

    Again, not a fairness argument, a math argument,

  7. Actually I do agree with respect to math and fairness but what you’re going to find as the reason why people don’t pay Federal Income taxes for those that cannot itemize is two things – child tax / earned income tax credits and education tax credits.

    The child tax credits go away at about 42K for singles.

    For folks that CAN itemize, it’s going to be home mortgage and charitable deductions.

    But I also point out that these folks do pay significant FICA taxes relative to their income. And they do pay property taxes even if they rent.

    And I do agree about DOD jobs. They tend to pay well. And don’t forget the contractor jobs and the fact that many of the contractors hire those who have 20 years or so of military service that includes health care.

    You talk about fairness – the perception that we all need to pay a fair share and I agree.

    But you say “liberal” and I’ll point out to you that the earned income and child care tax credits are primarily GOP ideas.

    but the plain fact is that we spend a trillion more than we take in -in taxes – and I do not think we’re going to make much of a ding in that trillion by having those on the lower end pay their “fair share”.

    I suspect you agree on that so the “fairness” issue is largely not going to do much in dealing with the deficit but yeah, we could, should whittle down those child tax credits a bit.

    And yes.. DOD is going to have to slim down.

    And Medicare? Yes – no question about it. The most egregious insult with Medicare is not the Part B provider part that enjoys a 105 billion dollar subsidy ( it’s share of the trillion deficit) – it’s the 116 billion subsidy for the Part C gap/supplemental insurance that makes up the 20% that Part B does not pay.

    That subsidy is available to people who have a million in assets and own two homes and a convoy of cars. Part C is by far the biggest travesty that should go away in my view.

    but do you really want to put single mothers with kids back on welfare?

    the reason the GOP like the child tax credits is that you don’t get them unless you work. What happens if you take them away?

  8. DJRippert Avatar

    “You talk about fairness … “.

    Actually, my point was that I did not consider fairness in my comments – only math.

  9. Okay.. then I’ll add fairness. If you talk just “math” then how about taking a look at the specifics of medicare – here:

    read it carefully and understand how much is the total (after subtracting out the FICA for part A and the premiums for Part B and D).

    you ought to see that Medicare even with draconian cuts ( which would really be hikes in the premiums and/or cuts in coverage – won’t fix the deficit.

    the total for Medicare is around 300 billion and the deficit is a trillion and DOD is 900 billion and when you add in homeland security and related – we spend about 1.3 trillion on National Defense.

    Even if you cut Medicare in half – you’d only save 150 billion out of a trillion deficit.

    So I’m glad you’re focused on the math because if you do focus on it, you’ll see that fixing the deficit will take a lot more than cutting the entitlements.

    1. DJRippert Avatar

      Larry – you are, once again, missing the point. If a lot of well paid defense jobs in Virginia vanish (almost immediately through sequestration or more slowly through budget cuts) the Commonwealth will be in a world of hurt.

      The surplus regions that provide a lot of cash to the deficit regions for things like schools may not be such surpluses anymore.

      It will be interesting to see what happens:

      1. Rewrite the education funding formulae so that NoVa and Tidewater continue to spew cash regardless of actual economics.

      2. Raise the absurdly low property taxes in much of Virginia so that the locals pay for their local schools

      3. Just let the schools get worse and worse

      Any bets?

  10. DJRippert Avatar

    As an aside, I am in London tonight and people are abuzz about a 40 minute anti-white diatribe that Barak Obama supposedly launched earlier today. It seems that Mr. Obama may not have known he was being filmed and recorded.

    Rumors like this are often overblown. So, I’ll wait until tomorrow when I get the chance to see what’s what.

    However, the possibility of a Howard Dean – like rant, albiet for a full 40 minutes, is causing quite the stir “across the pond”.

    Meanwhile, did robo-dofus Joe Biden really say (publicly) that the middle class has been buried for the last four years? Dear Lord, I wonder what the liberal press would have done to Mr. Biden if he were the Republican candidate for Vice President.

    Remind me again – what was Dan Quale’s sin? Oh yeah, he misspelled potato.

    A country without a free press is, by definition, a dictatorship.

  11. re: NoVa financial contributions vs huge donor status for Fed spending and jobs.

    You bang Obama over the deficit and then say cutting it is bad?

    this is the right wing again. It makes zero sense – much like these “hopeful” smoking-gun rumors. Ya’ll KILL ME.

    As I said earlier – this is against the MAN – not the administration.

    It’s attacks on the PERSON. It’s underhanded and at least half the country realizes it and knows that it’s dirty pool.

    When Romney/Ryan are asked if the Obama policies are so bad what they would do instead – what happens? And you worry about what Biden says?

    You better worry about what Romney/Ryan won’t say about what they would do even as they play dog whistle politics against the man himself.

    1. DJRippert Avatar

      I don’t say cutting the deficit is bad. I say that cutting the deficit through defense spending reductions will have a huge impact on Virginia’s finances.

      I also say that nightmares like the transportation chaos in NoVa and Tidewater will make it harder for the state to weather the cuts in federal spending.

      The Imperial Clown Show in Richmond had decades to get ready for the federal cuts. Instead, they tried to over-regulate abortion clinics, provide tax breaks for orbiting funeral urns and pass transportation bills that were immediately found unconstitutional.

      As for Obama – the man. The man is dishonest to his bone marrow. He will tell any lie, say any thing to get elected and re-elected. Therefore, your points about his proposed policies for the second term are moot. His “policies” aren’t telling you what he’s going to do, they are telling you what he thinks you want to hear. Once re-elected, he won’t give a rat’s ass about what he said he’d do.

      Which is why character counts for something in a president.

      He’s lying about Libya …
      He’s lying about Fast and Furious …
      He’s lying about welfare reform …
      He’s lying about his intent to cut non-defense spending …
      He’s lying about the defense lay-off notifications …

      If you had ever lived in Chicago you’d recognize the pattern of a Chicago politician.

    2. DJRippert Avatar

      “And you worry about what Biden says?”.

      Fair point. It’s certainly a fact that the libtard left never dwelled on a Republican Vice Presidential nominee.

  12. DJRippert Avatar

    LarryG –

    You might want to take a teensy, weensy peak at the newly uncovered video of Obama’s campaign speech from the 2008 election.

    As the speech continues, Obama makes repeated and all-but-explicit appeals to racial solidarity, referring to “our” people and “our neighborhoods,” as distinct from the white majority. At one point, he suggests that black people were excluded from rebuilding contracts after the storm: “We should have had our young people trained to rebuild the homes down in the Gulf. We don’t need Halliburton doing it. We can have the people who were displaced doing that work. Our God is big enough to do that.”

    This theme — that black Americans suffer while others profit — is a national problem, Obama continues: “We need additional federal public transportation dollars flowing to the highest need communities. We don’t need to build more highways out in the suburbs,” where, the implication is, the rich white people live. Instead, Obama says, federal money should flow to “our neighborhoods”: “We should be investing in minority-owned businesses, in our neighborhoods, so people don’t have to travel from miles away.”

    Our neighborhoods, LarryG?

    There’s racism at work in this election all right LarryG – and it’s sticks to Obama like red on an apple (didn’t want to use white on rice – that would be racist). Uh oh, Native Americans. Like yellow on a banana. Damn! Like blue on a blueberry!

  13. I saw the video. I’m not impressed with the trumped up right wing narrative.

    He’s advocating for the black community – as almost any politician who was after black votes might do – even a white politician!

    I did not hear one word about bad, bad “whites”. You and your fellow right wing filled that in on your own so you could then call it racism.

    that’s despicable… but seems to be par for the course now.

    you are attacking the man here.. not his policies.. the way you are doing it is racist because you are choosing to make it racist.

    this coming from a guy who decries Virginia’s Massive Resistance heritage.


    do you think the black people in Va talked with each other about how they were be treated by the govt – guy?

    would you call that “racist talk”?

    1. Larry, said, “I did not hear one word about bad, bad ‘whites’. You and your fellow right wing filled that in on your own so you could then call it racism.”

      Larry, can’t you hear the left-wing “dog whistle”? Can you understand the code words? Or are conservatives the only people who communicate racist thoughts by means of dog whistles and code words?

  14. There were no code words in Obama’s speech Jim because he was talking about something that was real – the fact that the approach to New Orleans disaster was different than other similar scope disasters and this is on top of a history of different treatment going back to Massive Resistance and Birmingham and Charlotte.

    The right has attacked Obama as a Muslim, a person not born here, a series of attacks on his person.

    In his speech,he was talking about a policy not a person. The right is talking about a person not policies – when it talks about whether they have a birth certificate or are a Muslim, or a “socialist”, a food-stamp guy, etc.

    This has gone on ever since he was elected and it emanates day in and day out from the right wing echo chamber and this is just another example of it.

    You cannot say “but THIS TIME it’s true” when all the rest of the times the same people were saying it. When you side with them this time – are you siding with them for all these previous times also?

    I’ve said it before and will say it again – in terms of POLICIES, his administration has some issues – well deserved but that’s different than attacking the man as a Muslim or a Racist or not American.

    Just as back during Massive Resistance and the lunch counters and fire hoses and attack dogs – you pick the side you align with; either you reject any/all forms of it or you equivocate. You make your own statement.

    there is a continuing attack on his person – and this is just more of the same – IMHO of course.

  15. Here’s another good example, courtesy of Waldo:

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