THE
BEAR'S LAIR Sayonara,
Washington By Martin Hutchinson
My apologies, first, for the hiatus in
columns last week - I was moving from Vienna, VA,
a suburb of Washington, DC to Poughkeepsie, a
semi-suburb 73 miles (117 kilometers) from New
York City. Many have clearly regarded this as an
eccentric choice, and much of the motivation stems
from things like hating the Washington summer more
than the Poughkeepsie winter that are personal to
each of us. Nevertheless, there is also a
philosophical background for the move, in that I
believe the rapid growth of the Washington area to
be profoundly unhealthy.
Washington's
unhealthiness has been highlighted during the
Great Recession, for example by the housing
market. Other regions of the country suffered a
severe real estate price decline
in 2006-09, except for a few
places such as Houston that had not previously
enjoyed a boom. The Washington area enjoyed an
extraordinary 150% price gain in 2000-06 according
to the S&P Case-Shiller data, third after the
Miami and Los Angeles areas and more than Phoenix,
San Francisco or Las Vegas. Unlike those other
regions, however, its price decline in 2006-09 was
considerably less, 33% compared to 47% in Miami,
56% in Las Vegas and 42% in Los Angeles. Then
after 2009, the recovery in Washington was
considerably stronger than in other areas, with
prices now up 10% from the bottom and still
continuing to rise while house prices in most
other areas decline.
The explanation, of
course, is that Washington is not on the same
economic cycle as the rest of the country. There
was some pretense in the late 1990s that northern
Virginia had developed a substantial tech sector,
but the reality was that most of the sector was
either evanescent (like AOL), or highly dependent
upon government contracting or, like
MicroStrategy, both. The reality is that when
government expands, Washington does well, and vice
versa.
You can see this in its local real
estate market also. There is very little housing
dating from the 1920s, a major real estate boom
era around most East Coast cities, but a period of
well-run, economical government. Conversely, there
is a vast amount of housing, generally rather
small and unattractive with very mean rooms,
dating from the New Deal and wartime 1930s and
1940s. The 1960s, genesis of the two houses we
lived in around Vienna, produced the Great Society
and another housing boom of rather larger houses,
most of them shoddily built. Then the 1980s was
another period of recession, when Washington house
prices were far below those around New York and
little building took place. Finally the Bush
years, stretching into the Obama years, saw a
massive building boom and the apotheosis of the
Washington area McMansion - huge, shoddily built
and packed tightly together on the suddenly
expensive land.
Whereas the modest and
unattractive 1940s housing was inhabited mostly by
government bureaucrats when first built, as were
the larger 1960s offerings and some of the more
reasonable sized modern housing stock, the true
market for McMansions was not those working in
government, let alone private sector
entrepreneurs, but the parasites, the swarm of
lobbyists (whose numbers doubled under the
supposedly limited-government Bush) and lawyers
who have come to dominate the big money around
Washington. Like Detroit in 1900-1915, Washington
in recent years has been a boomtown, and the
creaking infrastructure and monstrous traffic
delays are the result of this.
The other
special feature of Washington life is the nature
of its inhabitants. They have far higher academic
qualifications than the rest of mankind, even
those lucky residents of the up-market suburbs
around New York and San Francisco. Fairfax County,
Virginia has 55% college graduates, compared with
41% in Westchester County, New York and 51% in
Marin County, California. Fairfax residents would
argue that this factor justifies them in having
the nation's highest average household income -
$107,000, compared with a mere $79,000 in
Westchester and $90,000 in Marin.
Washington area residents will argue that
their greater qualifications justify their higher
earnings, but from inspection the percentage of
college graduates is not sufficiently higher in
Fairfax than in the very affluent Marin County for
any such premium to be justified. Furthermore,
there is no living cost differential that would
justify the income differential; indeed rather the
opposite as the average owner-occupied residence
in Marin is valued at $514,600 compared to
$233,000 in Fairfax. Fairfax County real estate is
overpriced - this was another reason for leaving
the place - but is nothing like as lunatic
economically as the fancier bits of California -
or indeed southeast England.
As I have
remarked before in these columns the Washington
area is a kind of anti-Hollywood. Whereas
Hollywood is full of people with room-temperature
IQs but attractive looks and winsome
personalities, the Washington area is full of
PhD-credentialed trolls. Thus not only are the
academic qualifications of Fairfax County not
sufficiently superior to those of Marin County to
justify their higher earnings, but Washington-area
people are often seriously lacking in other
qualifications that make for a commercially
successful existence, such as looks, charm,
salesmanship and workaholism. Plenty of insurance,
real estate and used car salesmen lack substantial
academic qualifications, but are nevertheless
sufficiently well endowed in other respects to
make very large amounts of money indeed, whatever
their defects would be as GS-15s.
Washington is thus a region whose
inhabitants are paid more than their
qualifications are worth, do particularly well in
recessions, and often lack the qualities that make
them attractive to others. It is thus not
surprising that they have little empathy with the
travails of those outside Washington whose lives
are entangled in the maelstrom of this very
serious and damaging recession.
Far from
maintaining sound monetary and fiscal policies,
which would enable ordinary businesses to recover
their footing and begin to grow again, they pursue
a chimera of negative real interest rates and
gigantic budget deficits that produces high
bureaucrat employment, a surface health in
financial markets, and long-term unemployment for
everyone else.
Far from realizing that in
a globalized world market, less skilled and older
workers are especially vulnerable, they
persistently refuse to enforce immigration laws,
producing a large illegal immigrant population
that can satisfy Fairfax County's insatiable
demand for maids and gardeners, while driving down
wages and job opportunities for low-skill labor to
Third World levels.
Far from attempting to
relieve burdens on small business and allow them
to produce the jobs that are needed, they produce
a series of health, environmental and labor
regulation schemes that impose massive additional
costs on the businesses that produce the country's
wealth.
These impositions are not
particularly generated by one or other political
faction; they are the result of Washington's
cocooning from the rest of its countrymen.
Washington insiders like Newt Gingrich, who has
lived within the Beltway for thirty years, cross
party lines to support these economically damaging
schemes. Conversely a few ''blue dog'' Democrats
whose ties remain outside Washington oppose them,
like Joe Manchin (D-W Va) who while campaigning
for his West Virginia Senate seat took a hunting
rifle to a copy of his own party's cockamamie
environmental legislation.
It is not
surprising that outsiders find US politics
dysfunctional; it is dominated by a pampered
super-class of lobbyists, lawyers, most
politicians and senior bureaucrats, all of which
are not only protected from the economic forces
that afflict the rest of the economy but actually
benefit, both relatively and in absolute terms,
from hard times in the US economy as a whole and
the ''stimulus'' schemes for which they provide an
excuse. The same effect can be seen in Brussels.
When I knew it in the 1970s it was a very pleasant
modestly wealthy capital of a small country with
good restaurants, a fine banking system and
legendarily affluent ''Belgian dentists” who were
the major investing force behind the early
Eurobond market. Needless to say, Brussels is
today richer per capita, but its wealthy now are
not dentists but bureaucrats, lawyers and
lobbyists, sleek, pampered and utterly cut off
from the people for whom they invent damaging
regulations. The idea, pioneered by the
Founding Fathers, of a capital city inhabited only
by statesmen and bureaucrats, without any other
significant economic base, is a very dangerous
one. While government is small, it produces the
quirky charm of nineteenth century Washington or
1949-99 Bonn - lacking as they did most big-city
amenities, they were universally detested by their
inhabitants, who left them on weekends whenever
possible. However as government grows, it becomes
itself a sufficiently large employer to finance a
major city - with amenities like the Kennedy
Center and the Washington Metro that can easily be
paid for by beyond-Beltway taxpayers who gain no
benefit from them. Eventually they become
bureaucrat Xanadus, like Brasilia, Napyidaw
(Burma) or Astana (Kazakhstan), in which
government, freed from significant outside
pressure, can indulge its fantasies at the expense
of a people kept safely remote.
My new
abode, New York's Dutchess County, is only half as
rich as Fairfax County, with commensurately lower
house prices (yippee!) and only half the
proportion of university graduates. While it has a
couple of large businesses and several colleges,
most of its richest inhabitants are successful
used car dealers and realtors, whose depredations
extend only to their customers. I look forward
eagerly to its modest amenities.
Martin Hutchinson is the author
of Great Conservatives (Academica Press,
2005) - details can be found on the website
www.greatconservatives.com - and co-author with
Professor Kevin Dowd of Alchemists of Loss
(Wiley, 2010). Both are now available on
Amazon.com, Great Conservatives only in a
Kindle edition, Alchemists of Loss in both
Kindle and print editions.
(Republished with permission from
PrudentBear.com. Copyright 2005-11 David W Tice
& Associates.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
