Virginia’s love-hate relationship with federal spending
Northrop Grumman is headed to Virginia. It is the 61st largest company in the United States and it is a huge defense contractor.
According to the Washington Post:
RICHMOND — At a news conference last week at Northrop Grumman’s Rosslyn offices, where a panoramic view of Washington loomed outside a floor-to-ceiling wall of glass, Virginia Gov. Robert F. McDonnell ticked off the reasons he thinks the giant defense contractor chose to locate its new corporate headquarters in the commonwealth.
He cited the state’s low corporate tax rate, its business-friendly regulations and right-to-work laws that prohibit requiring employees to join unions.
One factor the Republican didn’t mention: The massive flow of federal spending that provides the core of Northrop’s business and has made it the nation’s 61st-largest company.
McDonnell has been a leading voice in railing against rising federal spending. But lost amid the calls for Washington to freeze or reduce spending is this twist: Although most economists agree that mounting federal debt could be dangerous to the national economy, Virginia has thrived on Washington’s decade-long spending spree, according to analyses done by professors at Virginia colleges.
Ten cents of every federal procurement dollar spent anywhere on Earth is spent in Virginia. More than 15,000 Virginia companies hold federal contracts, a number that has almost tripled since 2001. Total federal spending — from salaries to outsourced contracts — has more than doubled, to $118 billion, since 2000, as homeland security and defense spending skyrocketed in response to the 2001 terrorist attacks and the wars in Iraq and Afghanistan. By 2008, it accounted for about 30 percent of Virginia’s entire economy.
Federal dollars have filtered through the rest of the economy, too, helping to build the high-tech Dulles corridor and funding new homes and cars for federal workers and contractors and meals at local restaurants. The billions have helped fuel the economic boom cycles of the past decade and have cushioned the blow of the recent recession, particularly in Northern Virginia, where the unemployment rate has stayed stubbornly below 6 percent, less than the state and national rates.
“We have a rich uncle, I like to remind people — Uncle Sam,” said Stephen Fuller, director of the Center for Regional Analysis at George Mason University.
Maybe Cuccinelli shouldn’t be trying so hard to piss off the feds. It sounds like Virginia is riding the old gravy train. To have less than 6% unemployment in this economy is enviable. To be getting 10 cents of every federal procurement dollar spent anywhere on earth is quite an accomplishment.
Much as McDonnell probably won’t like sharing the limelight, much of Virginia’s pro-business reputation was developed and nurtured by people like Mark Warner. Under the Kaine administration, Virginia was voted the number one state to do business in. McDonnell is savvy and should continue the tradition of attracting and maintaining businesses and a robust economy. He just needs to rein in his attorney general since much of that business originates with federal contracting.