Triple the Sequester

President Obama isn’t the only one with a road show warning of the coming sequester’s dire, a-two-percent-cut-means-Hoovervilles consequences. Governors O’Malley (D-Maryland) and McDonnell (R-Virginia) have hit the airwaves and op-ed pages with laments over the impending collapse of their economies. I suppose governors are supposed to be beggars; and to the extent that federal funds are our federalism’s lifeblood, Messrs. O’Malley and McDonnell qualify as “federalists.” That said, their conduct is disgusting.

Listed below are the nation’s top twelve counties in terms of median household income (Census Bureau data; national average in 2011: $50,502), along with the unemployment rate for the Virginia and Maryland counties in the group as reported by the Bureau of Labor Statistics (national average at the time: 7.9%). Virginia counties appear in pink; Maryland counties in green. All are clustered around the nation’s capital:

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Eight out of twelve. Not bad.

Everyone knows where this stupendous wealth, unfathomable in most of the country, comes from: federal jobs; federal contractors; federal rent-seekers (armies of lawyers, lobbyists, and consultants); and federal transfers. Our fabulous fiscal federalism follows a general pattern: states with lots of high-income earners (Connecticut, Delaware, California, Connecticut, New Jersey) transfer funds to those without. The only outliers are Virginia and Maryland: they’re among the richest states and among the largest net recipients of federal largesse, with a net transfer ratio that places them in the company of South Dakota and Mississippi. We (“we” because I live and prosper in Fairfax County) create wealth by sucking it out of the rest of the country, to the tune of tens of billions per year.

On the upside, the system creates an appreciable degree of financial stability. We should not sequester funds so soon after a crisis and in a faltering economy, we hear from Krugman, Klein & Company. However, fiscal crises and job losses happen in the newspapers, not here. At four percent “unemployment” jobs go begging, and every time you drive down Route 1 (“the armpit of Fairfax County,” as it’s affectionately known) there’s a new Mercedes dealership. We also have a Beemer shop, for the janitors.

On the downside, you can’t win a golf tournament here. Maryland and Virginia lead the nation not only in federal transfers for defense work but also in federal retirement pay. Every time you tee up you run into a 42-year-old retiree in top physical condition who divides his week between consulting (5 hours) and the Army-Navy Club (40 hours). Nice work, if you can get it.

It would be wrong to call this a European social model. It’s the model European countries would love to have but can’t. We have a vast hinterland to exploit; they don’t.

You—you out there—can’t do anything about it. The system is entrenched, and rival centers of wealth and power have long been coopted. (Citibank and NYU pay our emissaries seven-figure salaries for doing nothing, just to stay in our good graces.) Perhaps, though, there is still time to ask our governors and their constituents a question Bill Voegeli has urged upon supporters of the welfare state: How much is enough? What federally financed and leveraged median income would you consider acceptable? Evidently, twice the national average doesn’t do it; would three? Four? If a 1.3 or 1.5 federal balance-of-payment ratio doesn’t do it for you, would 2.0 be acceptable?

We’re not begrudging you your place as the biggest pigs at the federal teat. Just give us a number, and then stop squealing.

Michael S. Greve

Michael S. Greve is a professor at George Mason University School of Law. From 2000 to August, 2012, Professor Greve was the John G. Searle Scholar at the American Enterprise Institute, where he remains a visiting scholar. His most recent book is The Upside-Down Constitution (Harvard University Press, 2012).

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Comments

  1. Brett Champion says

    The reason that DC area counties rank so high on the list probably has as much to do with how the money from the federal government is dispersed as it does with how much it disperses in the area. If you look at the list of wealthy counties by per capita income instead of by median household income, the top 10 contains just two DC suburbs: Arlington County and Alexandria city (which are, geographically speaking, flyspecks in the DC area and probably should be considered as one entity for the purposes of the list). Fairfax County is only 20 on the per capita income list while Loudon County doesn’t even make the top 25.

    What this indicates is that income in the DC area is much more evenly dispersed than it is in what are nominally wealthier areas, like New York, Boston, and San Francisco. In other words, DC has a lower Gini coefficient than most other wealthy US metropolitan areas. That situation is why DC has a healthier economy than other wealthy US metropolitan areas. Lower Gini coefficients translate into higher levels of per capita disposable income. And in a modern economy, economic growth is primarily based on disposable income.

  2. Denver says

    Brett,

    Take a drive down Minnesota Ave. Look around. Look around again.

    Now tell me, where in the US you can go to see such wealth disparity is such a short distance?

    D.C., NOVA and Southern Maryland are a boil on the butt of America. It needs to be lanced, badly.

  3. Jeff R. says

    I happened to catch part of a show called “Maryland Morning” on my local NPR radio station (WYPR) today on my way to work. They had at least three different guests on who were federal or state workers collaborating to throw quite a pity party for themselves and their coworkers.

    Between this and the threats of long lines at the airport, no meat or poultry at the grocery stores, the public is being subject to a combination of aggressive panhandling and extortion by our own public servants. It’s maddening and nauseating at the same time.

  4. David says

    One interesting thing to note is that the average unemployment is MUCH higher in MD than in VA: e.g. the rate in Montgomery (5.0%) is fifty percent higher than the rate in (demographically similar) Arlington (3.3%).

    If ever there were a stark contrast between the “Blue-State Model” (Maryland) and a more-or-less bipartisan, semi-Red State Model (Virginia), this would be it.

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