Tag: Washington DC

  • Height of Power: The Washington Fiefdom Looms Larger Than Ever

    For more than two centuries, it has been a wannabe among the great world capitals. But now, Washington is finally ready for its close-up.

    No longer a jumped-up Canberra or, worse, Sacramento, it seems about to emerge as Pyongyang on the Potomac, the undisputed center of national power and influence. As a new president takes over the White House, the United States’ capacity for centralization has arguably never been greater. But it’s neither Barack Obama’s charm nor his intentions that are driving the centrifocal process that’s concentrating authority in the capital city. It’s the unprecedented collapse of rival centers of power.

    This is most obvious in economic affairs, an area in which the nation’s great regions have previously enjoyed significant autonomy. But already the dukes of Wall Street and Detroit have submitted their papers to Washington for vassalage. Soon many other industries, from high-tech to agriculture and energy, will become subject to a Kremlin full of special czars. Even the most haughty boyar may have to genuflect to official orthodoxy on everything from social equity to sanctioned science.

    At the same time, the notion of decentralized political power – the linchpin of federalism – is unraveling. Today, once proudly independent – even defiant – states, counties and cities sit on the verge of insolvency. New York and California, two megastates, face record deficits. From California to the Carolinas, local potentates with no power to print their own money will be forced to kiss Washington’s ring.

    Americans may still possess what the 19th-century historian Frederick Jackson Turner described as “an antipathy to control,” but lately, they seem willing to submit themselves to an unprecedented dose of it. A financial collapse driven by unrestrained private excess – falling, ironically, on the supposedly anti-Washington Republicans’ watch – seems to have transformed federal government cooking into the new comfort food.

    To foreigners, this concentration of power might seem the quintessence of normalcy. As the sociologist E. Digby Baltzell wrote in 1964, elites have dominated and shaped the world’s great cosmopolitan centers – from Athens to Rome to Baghdad – throughout history. In modern times, capital cities such as London, Paris, Moscow, Berlin and Tokyo have not only ruled their countries but have also largely defined them. In all these countries (with the exception of Germany, which was divided during the Cold War), publishing, media, the arts and corporate and political power are all concentrated in the same place. Paris is the undisputed global face of France just as London is of Great Britain or Tokyo is of Japan.

    Although each had their merchant classes, these cities were strongly hierarchical, governed by those closest by blood or affiliation to the ruling family and populated largely by their servants. In contrast, Baltzell observed, U.S. cities such as New York have been “heterogeneous from top to bottom.” Their power came not from the government or the church but from trade, the production of goods and scientific innovations, as well as the peddling of ideas and culture.

    But Washington has always occupied a unique and somewhat incongruous niche among U.S. cities. It came into being not because of the economic logic of its location, but because it was a convenient compromise between North and South. It never developed into a center of commerce or manufacturing. Nor was it meant to be a fortress. Instead, it was designed for one specific purpose: to house the business of governance.

    Pierre Charles L’Enfant, the French-born classicist and civil engineer who developed the plan for the city, envisioned a majestic capital that would “leave to posterity a grand idea of the patriotic interest,” as he wrote in 1791. Yet for most of its history, Washington failed to measure up to the standards of European or Asian capitals. In January 1815, a South Carolina congressman described the capital to his wife as a “city which so many are willing to come to and all so anxious to leave.”

    This lowly status stemmed, to some extent, from what the historian James Sterling Young has defined as the “anti-power” ethos of early Americans. The revolutionary generation and its successors loathed the confluence of power and wealth that defined 19th-century London or Paris. A muddy outpost in the woods seemed more appropriate to republican ideals.

    Even as other American cities, such as New York and Baltimore, expanded rapidly, Washington grew slowly, at a rate well below the national average. Bold predictions that the city would boast a population of 160,000 by the 1830s fell far short. Instead, it had barely reached 45,000 people, including more than 6,000 slaves. It remained eerily bereft of all the things that make cities vital – thriving commerce, a busy port, decent eateries and distinguished shops. Visiting the city in 1842, Charles Dickens marveled at a city of “spacious avenues that begin in nothing and lead nowhere.”

    To some observers, such as Alexis de Tocqueville, Washington’s relative decrepitude reflected one of the glories of the young republic. The fact that the country had “no metropolis” that dominated it from the center struck the young noble, on his visit to America in the early 1830s, as “one of the first causes of the maintenance of Republican institutions.”

    Washington’s status improved only marginally in the next century, even as other brilliant centers of power, culture and commerce emerged on the Eastern Seaboard and then across the Midwest and West. The rapid rise of New York was challenged in quick succession by the even more sudden emergence of Chicago in the industrial Midwest and San Francisco on the Gold Rush coast of California. Washington was surely the nerve center of politics, but commerce, culture and the vast majority of the media chose to concentrate elsewhere.

    It would take enormous misfortune – the Depression – to provide Washington with its first great growth spurt. As the business empires of New York, Chicago, Detroit and Cleveland buckled and the New Deal took control of the economy, power shifted decisively to the capital. This expansion of influence continued with the onset of World War II and then during the Cold War.

    The ensuing rise of the military and domestic bureaucracies transformed Washington from a small provincial city into a major metropolitan area. The greater economic shift from a predominantly manufacturing to a high-tech, information-centered economy also played to Washington’s strengths. In his groundbreaking 1973 book The Coming of Post-Industrial Society, the sociologist Daniel Bell predicted that the country’s prevailing “business civilization” would inevitably become dominated by the government bureaucracy. Corporations would eventually look to Washington’s lead for regulatory standards, to sponsor research and make critical science-related decisions.

    In the past half-century, this confluence of technology and bureaucracy has transformed Washington and its surrounding suburbs into the most dynamic large metropolitan economy in the Northeast. Between 1950 and 1996, the region’s population expanded by roughly 150 percent, three or more times faster than other cities along the Boston-Washington corridor.

    By the mid-1970s, Washington and its environs had also emerged as the richest region in the country. Since then, it has remained at or near the top of metropolitan areas in terms of both per capita income and level of education. Despite deplorable concentrations of poverty, particularly in the city proper, the region’s average household incomes remain the highest in the country – nearly 50 percent above the national average. The percentage of adults with a bachelor’s degree or higher, nearly 42 percent, surpasses even such brainy-seeming places as greater Boston, Seattle and Minneapolis.

    The contrast between Washington and most of the United States has gradually become more pronounced. In good times and in bad, lawyers, lobbyists and other government retainers have continued to enrich themselves even as the Midwest industrial-belt cities have cratered and most others struggled to survive. “The vision of generations of liberals,” admitted the New Republic in the mid-1970s, “has created a prosperous and preposterous city whose population is completely isolated from the people they represent and immune from the problems they are supposed to solve.”

    In today’s crisis, the Washington area remains somewhat aloof, with the second-lowest unemployment rate among major metropolitan areas of more than 1 million. (Only Oklahoma City, largely insulated from both the financial and housing bubbles, is doing better, although collapsing energy prices could threaten its prosperity.) The rate of job growth, although slower, is still among the highest in the country, and unemployment is below the national average.

    This disparity will grow in the coming years, as rival regions reel from the recession. Many once-powerful places are already losing their independence and allure. Wall Street, formerly the seat of privatized power, has been reduced to supplicant status. The fate of New York Mayor Michael Bloomberg’s “luxury city” will be determined not in deals with London, Dubai or Shanghai but by the U.S. Treasury. Similarly, the vast auto economy of the upper Midwest will take direction from congressional appropriations and whoever is named the new “car czar.”

    This loss of power in the provinces will broaden in scope during the coming months. Even proud Texas has lost its unique political influence. Its energy barons will now be forced to do the bidding of the lawmakers and regulators, instead of carrying them in their hip pockets.

    Even industries that are well plugged in to the new Obama regime – such as venture capital and alternative energy – are facing financial ruin from the downturn in both markets and energy prices. To win new funding and subsidies for their next bubble, they’ll increasingly rely not on their ballyhooed cleverness but on their pull with the White House, Congress and the new science apparat, under the green-oriented Energy Secretary Steven Chu and Obama’s neo-Malthusian pick for White House science adviser, physicist John Holdren.

    All this is bad news for much of America, but it should mean great business for many residents of greater Washington. Sudden interest in District pied-a-terres among investment bankers, venture capitalists, energy potentates and their hired help could do a lot to restore the battered condominium market. Office buildings in the District and surrounding environs can now expect a new rush of tenants, both from the private sector and the soon-to-be expanding federal bureaucracies.

    The transfer of cultural power to Washington will also accelerate. After all, Washington is more than ever where the action is. Media outlets have already been shifting out of New York and other cities – the Atlantic Monthly moved from Boston to Washington in recent years, and USA Today, National Public Radio and XM Radio are headquartered in or near the capital. A city that, according to one 19th-century account, had a cuisine consisting largely of “hog and hominy grits” now boasts world-class restaurants, draws top-line chefs to its food scene and will continue to develop into a serious epicurean center. The area already ranks third in film and television production, largely because of a thriving news and documentary business, as embodied in National Geographic, the Public Broadcasting Service and the Discovery Channel.

    Over time, those of us in the provinces may grow to resent all this, seeing in Washington’s ascendancy something obtrusive, oppressive and contrary to the national ethos. But don’t expect Washingtonians to care much. They’ll be too busy running the country, when not chortling all the way to the bank.

    This article originally appeared at the Washington Post.

    Joel Kotkin is executive editor of NewGeography.com and is a presidential fellow in urban futures at Chapman University. He is author of The City: A Global History and is finishing a book on the American future.

  • Washington Wins…Everyone Else (except maybe Chicago) Loses

    What could prove to be the worst economic decline since 1929 may also have the unintended consequence of creating a booming real estate market for the Washington, D.C. metropolitan area over the next few years. Ironically this has been brought on not, as one might expect, by Democrats – traditionally the party of Washington – but by the often fervently anti-DC Republicans.

    This process was set in motion by the Bush Administration’s $700 billion financial bailout. This has caused a potential geographic shift in power from Wall Street to Pennsylvania Avenue. By concentrating decision-making power and institutional ownership in the Nation’s Capital, the Administration has essentially drained power away from financial institutions historically headquartered in New York City. The local real estate market impacts of this shift in the locus of private-sector financial power will only be accelerated by the impact in that real estate market by the changing of the guard in Washington following the November 4th election.

    To start with, the $700 billion federal bail-out of Wall Street being spearheaded by the Treasury Secretary is certain to involve a spate of new Treasury Department hirings, bringing in the employees needed to manage this herculean task. And, while that in and of itself does not a real estate boom make, there is a remarkable confluence of other factors to be considered as well.

    For example, the November 4th election results are projected to generate 40,000 real estate transactions in the metro Washington marketplace over the next nine weeks, as those currently in power leave the Nation’s Capital and those elected to power move in. That is 40,000 transactions that otherwise would not be occurring in the prevailing economic climate. Any time you introduce a large number of buyers into the marketplace competing for product that might not be entirely fungible in terms of geography (in-town versus out of town; D.C. vs. suburban Maryland vs. Northern Virginia) or housing typologies (pied-a-tier versus exurban McMansion, for example), you drive prices up. Add to the equation that not everyone voted out of power actually ever leaves the D.C. area – this is after all the center of the universe for many law firms and lobbyists, as well as both major political parties – and there is the potential for increased demand for and a constrained supply of houses.

    Add to this residential real estate boom a coincident commercial development boom. Consider that the federal government will become a major owner of some of the country’s most important financial institutions with, at the very least, monitoring and oversight responsibilities (if not also investment policy input). Under this scenario it is easy to imagine a whole new industry being born almost overnight in the District of Columbia, with private interests seeking debt and equity financing not by meeting with Wall Street investment bankers but by meeting with their investment bankers’ new regulator at 1500 Pennsylvania Avenue in Washington, D.C. (the headquarters for the U.S. Treasury Department).

    This is not nearly as far-fetched a notion as it may first appear. Forty years ago most Washington, D.C. law firms and lobbyists were focused primarily on what today are viewed as pretty stodgy federal agencies: The Interstate Commerce Commission; the Federal Trade Commission; the Food and Drug Administration; the Interstate Highway Commission. Lobbying became more sophisticated, impacting to a much greater degree federal policies related to taxation, banking, and capital markets, as well as emerging policy areas like healthcare, energy, and the environment, causing the private-sector workforce feeding off of the federal presence in Washington, D.C. to grow exponentially.

    The District of Columbia has the third-largest downtown in the U.S., ranking only behind New York and Chicago. More than 10 million square feet of commercial office space was added to the District between 1996 and 2005, with another 10 million having been brought on-line or underway since then. Additionally, geographic areas that in the 1960s were entirely rural farmland – such as Tysons Corner, VA, and Gaithersburg, Maryland – have grown so fast that they are today unrecognizable. For example, Tysons Corner has over 46 million square feet of office and retail space, and a daytime population of over 100,000. The Washington metropolitan area is the eight largest market in the country – and comprises the fifth largest market when combined with the Baltimore metro area – with a 2007 population of over 5.3 million people, yet almost nothing is manufactured here. It makes one wonder exactly how many people are required to properly rearrange the deck chairs on the Titanic.

    Finally, add to the foregoing scenarios the very real prospect for a major expansion of our federal government under the incoming Obama Administration and an energized and slightly larger Democratic majority in the House and Senate. There is the distinct possibility (if not, in reality, the promise) of a New Deal Era federal program to re-build the nation’s infrastructure both to meet long overlooked needs but, more-importantly, to also create a vast number of new public sector-financed jobs . The stage is set for what could be the greatest Washington, D.C. real estate boom since the New Deal (the residential population exceeding 500,000 for the first time in the 1930s) or the Second World War (in 1950 Washington, D.C. reached its peak population of over 800,000 residents, although today that number is just under 600,000). The last boom transformed a sleepy southern town into a major northern metropolis; the next could turn greater Washington into first-rank conurbation on the scale of New York, Los Angeles, and Chicago.

    Under less ominous circumstances this might all be considered the natural order of things. And from a purely personal perspective, I guess it wouldn’t be so bad to see my home appreciation return to the double-digit annual escalations to which Washingtonians have become accustomed.

    But then there are questions of whether this is good for the country. Most metropolitan areas are suffering (some, like Miami, Las Vegas, and Phoenix are hemorrhaging) while only perhaps Chicago – the geographic power base of President-Elect Obama – seems well-positioned to gather in the spoils of the new political order. Meanwhile DHL’s recently announced layoffs in Wilmington, Ohio, may impact an estimated one-third of the employable residents in that community. By way of this stark contrast, there’s something truly unseemly in the notion that the very place fundamentally responsible for many of our current economic woes should benefit from being both the cause and the cure of the economic maladies plaguing the country.

    Peter Smirniotopoulos, Vice President – Development of UniDev, LLC, is based in the company’s headquarters in Bethesda, Maryland, and works throughout the U.S. He is on the faculty of the Masters in Science in Real Estate program at Johns Hopkins University. The views expressed herein are solely his own.

  • Commuting Suicide — the District of Columbia wants to be a residential suburb

    The Washington Post’s recent article about how the District government is making plans to make the city “less-welcoming to suburban cars” is one more example of suicidal behavior that the city is known for.

    Unfortunately, other cities are thinking similarly. In the plan, “City officials say that the moves are part of a policy of putting the needs of its residents and businesses before those of suburban commuters and that they are trying to create a walkable, bikeable, transit-oriented metropolis.” Apparently Washington has decided to become a bedroom suburb. Newsflash: even those don’t exist anymore – much less in the center of a metropolitan region of over five million.

    It is hard to believe that the District could consciously make the city less welcoming to vehicles than it already is – with potholes on every block and roads like I-295 right out of the 1930s with design features for the tin lizzie, or New York Avenue that says “Welcome to your Nation’s Capitol” with neglect apparent on every block. Maybe because they cannot fix those things they decided to turn it into a virtue at least among some segments of the society.

    You would think the District would have noticed that more of their own citizens get to work by car than by transit and about 45 percent of those riding transit are on the roads they want to make worse. This is just an extension of the District’s perennial search for revenue with a tortured way to get to a commuter tax that has been around for decades.

    All it would take is a few minutes on the back of an envelope to recognize how important commuters are to the city. First answer would be a simple thought experiment – would the city be better off with no suburban commuters or with what they have now? Someone in the District government could do a small calculation of the amount of office building space, with the attendant real estate taxes they generate, the restaurants, shops and services, the parking garages and the revenue they earn, the taxes they pay, and the District workers they support, to recognize that the benefits to the City per thousand commuters far exceeds the costs. Without the suburbs even its beloved Metro wouldn’t exist.

    More importantly, it shows that the District once again has failed to recognize its responsibility as the nation’s capitol. Those responsibilities are really not that terribly different from other center cities. This is part of a looming public policy conflict of national proportions. As cities adopt the new mantra of “metro mobility” – which is code for an attack on autos and an assumption that transit needs can be met by walking, biking and mass transit – they only address trips under five miles. This completely neglects the responsibility that every city and metropolitan region in the country has, much less the nation’s capitol, to meet the needs of interstate commerce – whether through access to ports or to major rail or highway routes.

    This is not optional. An area cannot opt out of that obligation. If all areas of the Baltimore-Washington metropolitan area operated that way, rather than a great region comprised of dozens of counties it would be a series of hamlets adjacent to each other with the obvious decline in market power and productivity that entails.

    The great challenge to the nation in the next few years will be providing access to those workers needed to replace the aging baby boom generation. We will need to expand the commuter market-sheds around our cities not contract them. Congressman Moran got it right, providing a sense of scale when he told reporter Eric M. Weiss, “U.S. Rep. James P. Moran Jr. (D-Va.) said … the city should be careful not to chase people away. Like the District, Old Town Alexandria would be a nicer place without all the cars, he said. But there is an economic component to be considered, he said, and people in cars represent customers for restaurants and shops.”

    He also said be careful what you wish for… For a city that lost 180,000 people over the last 30 years the District should listen to wiser heads.