(What’s Left of) Our Economy: An Obama Trade Winner…That Isn’t

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D.C., Fairfax County, fast track, federal spending, Obama, TPA, TPP, Trade, Trade Promotion Authority, Trans-Pacific Partnership, Virginia, Washington, {What's Left of) Our Economy

If you still doubt that President Obama doesn’t know nearly enough about trade’s impact on the U.S. economy to merit a fast track blank check from Congress, ask yourself why he decided to promote the virtues of new agreements at a roundtable yesterday in Fairfax County, Virginia.

It’s clear why some combination of the host Fairfax Chamber of Commerce and White House aides pitched the appearance. They viewed it as a chance to spotlight all the high-tech, knowledge-industry companies throughout the affluent county that they’re sure will benefit from the trade expansion spurred by deals like the president’s prospective Trans-Pacific Partnership (TPP). But the administration is ignoring a screamingly obvious reality: Fairfax and Washington, D.C.-area municipalities like it are good bets to prosper long-term whether new trade deals are signed or not – less because they’re so intrinsically dynamic, but because they’re so heavily dependent on federal government spending and jobs for their well-being. Indeed, Fairfax openly admits the link.

According to Fairfax’ own statistics, just under 21 percent of its workers are employed by government at all levels – federal, state, and county. The comparable share for the nation as a whole is 16.16 percent. But these Fairfax numbers tell only part of the story. For they omit all the county residents employed at its innumerable so-called private sector companies that survive (and thrive) almost solely on federal contracts – and all the business and tax revenues they in turn generate for Fairfax’ other companies and budget.

Federal spending was especially helpful to Fairfax during the recession. According to the National Association of Counties, it never experienced one. But Fairfax’ reliance on Washington’s tax dollars was also evident from its concern about the federal spending slowdown agreed to by the White House and Congress.  George Mason University economists estimated that in 2013 the sequestration cost Fairfax more than eight percent of its economic output and more than 13 percent of its jobs – losses far greater than those suffered nation-wide.

Many conservatives will surely interpret the White House’s agreement at the least to spotlight Fairfax as a sign of the president’s alleged determination to addict the entire U.S. economy to federal spending. As I see it, yesterday’s Fairfax session points to an even more disturbing conclusion: that after more than five years living in the capitol’s political and media bubble, Mr. Obama now assumes that the Beltway norm is now the national norm.

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Im-Politic: Likely Hillary Challenger Should First Understand His Own State

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2016 elections, Democrats, federal government, federal spending, free markets, Hillary Clinton, Im-Politic, Martin O'Malley, Maryland, private sector, recession, recovery

I’m all in favor of more competition for the upcoming Democratic presidential nomination, but I’m afraid that at this point, former Maryland Governor Martin O’Malley just doesn’t pass the laugh test. It’s not because O’Malley’s name recognition hasn’t yet moved even the smallest needle, though that’s clearly a big obstacle. Nor is it because I’m a Maryland resident, and am unable to list any O’Malley accomplishments other than non-stop tax increases. It’s mainly because O’Malley seems clueless about his own state economy’s heavy dependence on federal largesse – which doesn’t justify much confidence that he can address the nation’s main economic problems effectively.

O’Malley’s apparent delusions were on full display this morning on CBS News’ Face the Nation. Asked by host Bob Schieffer why he “would be a better president than Hillary Clinton,” O’Malley responded that while in office in Annapolis, “I guided our state through this recession and I did so with results that actually mattered. The highest median income in the country, a middle class that is upwardly mobile….”

Here, however, is what O’Malley didn’t mention: Like Virginia, Maryland weathered the recessionary storm relatively well because its location right next to the District of Columbia means that it benefits disproportionately from federal spending and employment levels. These of course are entirely different from the free market forces that have always been the main determinants of the nation’s economic performance and prospects.

In 2007, the year the last recession started (officially at its very end), combined federal government civilian and military spending as a share of Maryland’s economy was 11.50 percent. For the nation as a whole, the figure was 3.63 percent. (All figures are in current dollars.) The downturn ended in mid-2009, and it’s well known that ramped up federal spending moderated the slump. Its share of national gross domestic product rose to four percent from full-year 2007 to full-year 2009 – a 10.19 percent increase, even as the economy shrank by 0.51 percent.

Maryland’s economy fared much better in these years – growing by 4.49 percent. But that’s largely because its government-heavy economy became even more government heavy, with the federal share rising to 12.18 percent.

Once the recession ended, however, Maryland’s reliance on Washington kept growing, as federal spending as a share of its economy hit 12.79 percent by 2013 (the latest available data). Its economy expanded by 12.47 percent. Interestingly, the national economy grew much faster – by 16.56 percent, even as the federal spending share declined to 3.77 percent.

Campaign 2016 is still young, and O’Malley may indeed have brilliant ideas to restore the national economy (and especially its private sector) to genuine health, as opposed to its current easy money-induced buzz. But if he’s going to get any deserved traction, that’s a case he still needs credibly to make.