The first Morning Jolt of the week features a look at the David Gergen-ization of Colin Powell, news that a pair of short strong-dollar advocates will take the now-worthless magic $1 trillion coin and start a perilous journey to cast it into Mount Doom, and this look at the fortunes floating through Washington . . .
The Fortunes Floating Through Washington
Over the weekend, the New York Times Magazine took a look at the 15-year economic boom in that “other” big city on the East Coast:
Washington wasn’t always the place where young professionals plunked down $3,000 a month to announce their arrival. When Abdo founded his business, in 1996, the United States was enjoying around 4 percent economic growth, but in Washington, dysfunction and Mayor Marion Barry Jr. reigned. The city government was locked in a mismanagement-driven fiscal crisis: traffic lights were malfunctioning; garbage trucks stopped picking up trash; District residents were advised to boil their own water; President Clinton and Congress placed the city into federal receivership. During the 1990s, while employment in Washington declined, Northern Virginia added 300,000 jobs, and the Maryland suburbs added about half that. “Washington was a national embarrassment,” Abdo said back inside the Range Rover. “There was all this aggressive panhandling, all these vacant burned-out buildings. But I knew the city could only go so low. It’s one of the least cyclical economies in the country, and it has this tremendous urban fabric.”
Abdo figured that federal employment would remain relatively stable, even in recessions. The continued opening of Metro stations would also allow for transit-driven development. And of course, there was that tremendous urban fabric — the brick row houses that make up the bulk of the housing in the city’s center, from Georgetown in the west to Anacostia in the southeast, and give it some of its genteel European feel. Abdo’s timing, it turned out, couldn’t have been better. Billions in federal spending, largely a result of two foreign wars, were pouring into the local economy by the early 2000s. Then came the housing bubble. But after it burst, a remarkable inversion occurred: as the country withered, Washington bloomed. Since 2007, the regional economy has expanded about three times as much as the overall country’s. By some measures, the Washington area has become the richest region in the country. It is now home to the three highest-income counties in the United States, and seven out of the Top 10.
The headline is, “Washington’s Economic Boom, Financed by You,” and declares:
As the size of the federal budget has ballooned over the past decade, more and more of that money has remained in the District. “We get about 15 cents of every procurement dollar spent by the federal government,” says Stephen Fuller, a professor of public policy at George Mason University and an expert on the region. “There’s great dependence there.” And with dependence comes fragility. About 40 percent of the regional economy, Fuller says, relies on federal spending.
But it’s not federal-government employees that are making the really big bucks, who can support really high-end restaurants and luxury chains and spas and ludicrously overpriced downtown luxury condos. No, for that, we need to look at the lobbying community — where the private sector gets together to influence public dollars.
Some numbers from the dawn of the Obama era:
Healthcare clients spent the most overall on lobbying at $544 million, which was roughly $60 million more than in 2008. But there were more lobbyists (3,405) on healthcare issues than on either energy (2,311) or financial legislation (2,654).
Lobbyists earned an average of $160,000 for healthcare-related work.
Energy clients paid $409 million for an average of $177,000 per lobbyist. Lobbyists for energy clients beat out financial lobbyists for top billing.
And this isn’t counting bonuses:
If a lobbyist can get the desired legislation passed through Congress that’s favorable to corporations, the lobbyist will get a bonus.
“This is how nonprofits can be competitive,” said Charles Quatt, founder of Quatt Associates, a management consulting firm. “The incentives make up for the other income a trade association executive might have gotten in the form of equity if he or she had taken a job at a publicly traded company instead.”
Bonuses at some of the biggest trade associations now average 35 percent of an executive’s base pay and can be 50 percent “or higher,” Quatt said.
Example: Business Roundtable President John Castellani’s base compensation was $689,584, and he received a bonus of $750,000 and deferred compensation totaling $4.1 million, including retirement and other benefits.
Billy Tauzin, before departing the Pharmaceutical Research and Manufacturers of America, had a base salary of $2.06 million, a bonus of $692,875, and total deferred and other compensation of $2.26 million.
U.S. Chamber of Commerce President Thomas Donohue received the largest bonus of the Top 25: $2.55 million. His base pay was $1.09 million, and his deferred compensation totaled $136,697.
The enormous sums floating through the higher end of Washington’s lobbying and public relations community, coupled with their regular contact with the press and lower-paid congressional staffers, is a formula for what David Brooks called “Status-Income Disequilibrium” — where some very influential people have less take-home pay than most of the folks they deal with, and some very wealthy folk yearn to have the influence of those press and staffers.
I liked this detail from the Times story:
“People will tell you it’s not about race, but it is,” said George Pelecanos, a Washington native, novelist and screenwriter who worked on “The Wire.” “It’s no longer a black city, and a lot is going to be lost because of that. But the flip side of that is, I try not to get too nostalgic about what Washington was.”
“What Washington was,” as in, it was once nicknamed the “Murder capital of the world.”