Politics

The One Percenters’ Fortress City

By From the June 2012 issue

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In the dystopian blockbuster movie The Hunger Games, a restless and resentful population in the nation of Panem is controlled by the wealthy and powerful who reside in the fortress city of Capitol.

Is that all that different from today’s United States, where wealth and power seem increasingly to gravitate toward the Beltway and its suburbs? Money magazine recently looked at the 3,033 counties in the U.S. based on income and found that the top one-half of 1 percent is dominated by Washington, D.C. Of the 15 counties with the highest median household incomes, an astonishing 10 are in the Washington area and have an average income almost double that of the nation as a whole. Four of the remaining five surround New York City, and are populated by many Wall Streeters who benefited from TARP and other federal bailouts.

“[T]imes are booming for Washington’s governing class,” noted Politico, the well-read chronicler of Beltway mores, in 2010. “The massive expansion of government under Obama has basically guaranteed a robust job market for policy professionals, regulators and contractors for years to come.” That year, a poll conducted by Penn Schoen Berland for Politico found that 45 percent of Washington elites thought the country and economy were headed in the right direction, compared to 25 percent of the general population in the rest of the country. A full 74 percent of Washington elites said the recession had hurt them less than most Americans.

Mark Penn, the former pollster for President Clinton who conducted the poll, concluded that “the disconnect between D.C. elites and the general public is stoking the growth of more direct popular movements like MoveOn and [the] Tea Party.” He says one thing both right and left agree on is that a pampered “ruling class” of bureaucrats, Beltway Bandit contractors, consultants, and lawyers seem to have their noses permanently in the federal trough.

How has it come to this? Through a relentless ratchet effect, government has remorselessly grown, no matter which party is in power, to a point where the federal government now spends about $4 billion more a day than it takes in. And residents of the D.C. area prosper most from that deficit spending. The Cato Institute says that in 2008, the average compensation in pay and benefits for federal civilian workers was $119,900 annually, compared to the private industry annual average of $59,900. In 1980, when Ronald Reagan was elected president, only 3 percent of Washington residents had incomes of $200,000 or more in today’s dollars. Today, more than 13 percent, or almost one in seven, do.

A Virginia woman recently wrote to the Washington Post to complain about this discrepancy:

If you drive through Northern Virginia, you will find nearly entire neighborhoods of $500,000 to $900,000 homes owned by government workers or contractors. Then you can drive five streets over and find $200,000 to $400,000 homes owned by those who pay the salaries for those government employees. It’s a fascinating distribution of wealth. Most government employees and contractors could not earn more than $60,000 on the free market. Their only chance to make that kind of money comes from having an employer that not only never has to make a profit but can forcibly take money through taxation.

Dan Mitchell, a senior fellow at Cato, wrote on the institute’s blog that the income numbers tilt strongly toward the New York and Washington areas: “As far as I can tell, the only untarnished jurisdiction in the top 15 is Douglas County, Colorado. And given that these are the folks who are implementing a good school choice plan, it seems that we have a group of productive people who also believe in doing the right thing.”

As Angelo Codevilla has warned in the Spectator’s pages, the danger of this nation’s new Ruling Class is that it will cement an unholy alliance between big business rent-seekers and Washington power mongers to the detriment of ordinary Americans.

The archetype of this alliance in the Obama administration would appear to be Treasury Secretary Tim Geithner. As Kevin Williamson of National Review sardonically notes, Geithner “came up through the ranks as part of the bipartisan Robert Rubin–Hank Paulson–Citigroup–Goldman Sachs cabal.” Once he was kicked upstairs to Treasury after failing to anticipate the 2008 financial collapse while chairman of the New York Fed, Williamson writes:

Geithner’s main job became shoveling tens of billions of federal dollars into Citigroup, in an ingeniously structured investment that allowed the government to buy a 27 percent share in the bank, for which it paid more than the entire market value of the bank. If you can’t figure out why you’d pay 100-plus percent of a bank’s value for 27 percent of it, then you just don’t understand high finance or high politics.

IT SHOULDN'T SURPRISE ANYONE that discussion about “the 1 percent” of Americans with the most wealth dominates the campaign season, while Washington’s wealthy rarely seem to enter the conversation. But they should be central to any discussion. To join the top 1 percent of D.C. earners, a household must have an annual income of $527,000, a far higher amount than in the rest of the country.

The Occupy movement enjoyed sit-ins almost everywhere over the last year. The one place its adherents didn’t spend much time squatting was Washington, D.C., in part because the federal government made clear it wouldn’t be as spineless in dealing with them as, say, New York’s Mayor Michael Bloomberg.

But based on who really has the ill-gotten gains in this country, an intellectually honest Occupy movement would have focused its attention inside the Beltway. That it didn’t explains not only why the Tea Party will outlast the Occupy movement, but why it has been a much more coherent and perceptive force.

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About the Author

John H. Fund is a senior editor of The American Spectator and author of the Stealing Elections (Encounter Books).