Tuesday, August 28, 2012

The(ir) Capital

Gene Healy is a vice president at the Cato Institute, author of The Cult of the Presidency, and a Washington Examiner columnist. Along the lines fellow D.C. resident Robert Tracinski earlier expressed, Healy holds a jaundiced view of our nation’s capital:
  • outside [the Beltway], you'll see a lot of boarded-up storefronts[, but not] headlines like "D.C. Leads List of Most Shopaholic Cities in America." 
  • [Or,] "Beltway Earnings Make U.S. Capital Richer Than Silicon Valley," as the Bloomberg News headline put it. [But] Silicon Valley "creates" wealth, while we—smart as we are— mostly shuffle it around. 
  • [Bloomberg says D.C. generates wealth via] massive defense contracts, "federal employees whose compensation averages more than $126,000," "the nation's greatest concentration of lawyers," and record-high lobbying expenditures. "Wall Street has moved to K Street," comments Barbara Lang, head of the DC Chamber of Commerce.
  • The District is "not exactly the nation's entrepreneurial capital," the Washington Post's Steven Pearlstein observes. "Other than goods and services sold to government, only 12% of the region's output is sold to people and businesses outside the region, a number that has fallen in recent years."
Healy draws on an article by New York Times D.C. bureau chief David Leonhardt, who wrote, “Washington may have the healthiest economy of any major metropolitan area in the country. You can actually see the prosperity.”

But Healy is put off by Leonhardt’s claiming D.C. prosperity is because the capital gobbled up "more stimulus dollars per capita than any state," showing that "a Keynesian response to an economic crisis really can make a difference." Healy harrumphs, “if everyone got more than their fair share of the fixed pie of federal boodle, then all the municipalities could be above average.”

Leonhardt also links the Captial’s prosperity to the fact that "education matters," noting D.C. boasts more college degrees than any other major metropolitan area in America. "If you wanted to imagine what the economy might look like if the country were much better educated, you can look at Washington."

Healy’s response, “it's one thing to use brainpower to build new products, and another thing entirely when it's employed to redistribute wealth that other smart people have created.”

Luigi Zingales, a University of Chicago professor talking to the Economist, went after the K Street lobbyists at the center of Washington D.C.’s crony capitalism prosperity. Though Zingales zings Bush-era lobbyist shenanigans, he is also telling us how today's Capital helps insiders suck up national wealth:
Companies with a lot of money abroad sponsored a bill in 2004/5 that allowed them to repatriate their profits at a low tax rate. Thus $1 produced $220 of tax savings. The Bush-approved drug and Medicare act was a huge bonanza for the drug industry.
So the Capital prospers. As for the rest of us?

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