Bacon's Rebellion

Democracy Thrives in Sunlight

Time For McDonnell to Call Cantor

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by

Peter Galuszka
in

By Peter Galuszka

Moody’s Investor’s Service has rained on Virginia Gov. Robert F.
McDonnell’s parade.

On the day the Republican governor was proudly announcing a $311 million budget surplus with the prospect of being even $40 million more in the black, the ratings service announced that Virginia could be one of five states to see its pristine AAA credit rating tarnished if Congress and President Obama don’t reach a budget deal and raise the federal debt limit by Aug. 3. The news came just as McDonnell was beaming about the surplus, some of which comes such schemes from deferring payments to the state pension system.

“I’m very unhappy. In fact, we’re furious” about the ratings problem, he said at a news conference. I guess I can understand why. Virginia has had the best possible credit since 1938. McDonnell has come on strong, rightly or wrongly, as a paragon of fiscal responsibility. This is his party credo and raison d’être. If he goes down in history as the governor on whose watch the state’s credit rating was downgraded, despite plenty of Democrats having been in the governor’s mansion over the years, well, it won’t look good.

Another issue is McDonnell’s stubborn refusal to acknowledge that, whether he likes it or not, Virginia is a major locus of federal jobs. The Old Dominion is chock-a-block with defense and intelligence installations, along with other units such as the Federal Aviation Administration, and so on. This is one of the reasons Moody’s served notice on such high-government-worker states as Maryland, South Carolina and Tennessee. If the feds lose their AAA credit rating, so, too, will the places where they employ a lot of people.

In his quest for jobs, McDonnell always puts special emphasis that the ones he’s helped create are “private,” as if that’s somehow more politically correct than having more public-sector jobs. Government work doesn’t fit with current GOP dogma. Apparently, federal workers are less desirable and certainly greedier than their private-sector counterparts.

Of course, that’s nonsense, and McDonnell ought of to know it. He grew up in Northern Virginia, a haven for the civil service, and was educated in defense-saturated Hampton Roads. Federal money has saved Virginia from having a much higher unemployment rate than it does.

If McDonnell is worried about what Moody’s might do, he does have a
remedy at hand, though. It’s simple. Call up his fellow Republican,
House Majority Leader Eric Cantor, and tell him to stop acting like a
spoiled kid and work for a bipartisan way out of the federal budget
mess. It’s a win-win thing they both should understand.

(Previously posted and printed in The Washington Post)

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11 responses to “Time For McDonnell to Call Cantor”

  1. TMT Avatar
    TMT

    Congress could do what the Liberal Party did in Canada during the 1990s. Taxes were raised and there were $6 of spending cuts for every dollar in tax increase.

  2. Groveton Avatar
    Groveton

    Ending this month’s debt ceiling debate will provide only temporary relief to Virginia. Moody’s might back off for a while but they will be back again when the next debt ceiling is reached. At some point, government spending must fall. Period. At that point, Virginia will have either added enough new private sector jobs or its bond rating will fall.

    So, McDonnell’s focus on private sector jobs is exactly right. Any focus on federal jobs is an exercise in eventual futility.

    The big question is whether the political elite in Virginia began the process of attracting more private sector jobs sufficiently early. I’d say clearly not. In fact, I contend that Virginia’s approach to job attraction and job creation is naive and half-assed. Real job creation requires an ongoing conversation among financiers, entrepreneurs, established businesses, politicians and the higher education community. This is not occurring in Virginia and has not been a focus of Virginia’s political elite. Too bad for all Virginians that we have been so poorly served by decades of political incompetence.

  3. Peter Galuszka Avatar
    Peter Galuszka

    Groveton,
    I response, I would say:

    (1) There will always be federal jobs and Virginia will always be among the first in line. All the Boomergeddon books in the world can’t change the fact that we’ll still need a military, spies and air traffic controllers.

    (2) You make fascinating points on the state’s job creation record. Maybe you could take your ideas a step further in a separate blog post. The current thinking (Kaine’s actually) landed us IKEA which had a great labor record in Europe but not in Danville.

    PG

  4. TMT Avatar
    TMT

    “This is not occurring in Virginia and has not been a focus of Virginia’s political AND BUSINESS elite.” Too many business leaders in Virginia are more than willing to go along with the political elite or allow trade associations to set the agenda. For example, until recently, the commerical landlords and their business tenants in the Dulles Corridor have been silent and probably, unknowing, about the impacts of the high tolls on the DTR on their businesses. The fact that someone said “expanding Metro will fix” traffic was more than good enough for them.

    Now some in the business world are starting to look at all of the numbers and that is rightfully scaring them. Excessively high tolls will make the commercial real estate in the corridor less valuable than with more moderate tolls. What about cost overruns on the construction of the Silver Line? Better late than never.

    One positive development seems to be the change in leadership at the Fairfax Chamber of Commerce.

  5. James Bacon Avatar
    James Bacon

    Peter said, “McDonnell always puts special emphasis that the ones he’s helped create are ‘private,’ as if that’s somehow more politically correct than having more public-sector jobs.”

    There’s nothing “politically correct” about private-sector jobs, but I would say the emphasis on private-sector jobs is “economically correct.” In our political/economic system, private sector jobs are preferable because they pay more in taxes.

    Income taxes paid by employees are the same, regardless of whether they are employed by the state or the private sector. But private employers pay a host of taxes — property taxes, BPOL taxes, corporate income taxes — that government bodies do not pay. Any idiot of a governor can go out and impact employment by hiring a bunch of government workers. But it’s not as easy creating the conditions for the private-sector to create jobs…. as President Obama has discovered.

    I would agree with Groveton that Virginia’s approach to economic development is mired in the 1980s. But McDonnell is right to put the emphasis on private-sector jobs.

  6. Peter Galuszka Avatar
    Peter Galuszka

    Jim,
    There is nothing wrong with public sector jobs. FDR used them to help get us out of the depression. WWII really helped.

    The problem with viewpoints such as yours is that you are confused. We need to improve our economy. THEN we can deal with deficits. Can’t do both at the same time,
    PG

  7. TMT Avatar
    TMT

    We, of course, need public sector jobs. But in a global market, we need to think of our public sector as America’s overhead. Every dollar in the public sector is not in the private sector. Either it has come from taxes or is debt that will need to be paid by future taxes. Just as a business must figure out how much overhead it can afford and how much it needs to operate, so too must federal, state and local government begin to figure out how much overhead the nation, the state and the locality can afford.

    What makes it worse, IMO, is that the cost of the overhead is generally passed along to those Americans without the necessary education or market skills currently in demand. Who is going to get the raise, the bonus or the stock option? And people near the bottom have it even worse, since we are largely ignoring illegal immigration which brings in mainly unskilled workers who compete against our citizens who have lesser educations or the wrong skill set.

  8. Groveton Avatar
    Groveton

    Peter wrote:

    (1) There will always be federal jobs and Virginia will always be among the first in line. All the Boomergeddon books in the world can’t change the fact that we’ll still need a military, spies and air traffic controllers.”.

    True but somewhat unimportant. I believe the question is the trend of federal spending and employment. I believe that federal spending and related employment has been the growth engine of Virginia throughout the post 9/11 period. The question is whether that growth continues, “flattens out” or reverses. Nobody suspects that the government will stop employing Virginians at scale. It’s just a question of “at what scale”.

    I believe that federal spending and related employment is destined to decrease over the next ten years. I believe that the growth that Virginia saw over the last 10 years will be rolled back and more. Perhaps of greater consequence, the federal spending and related employment creates surplus taxpayers. The jobs are pretty darn good and the public and private employees who hold those jobs pay more in taxes than they consume in government services. A job at a fast food restaurant is not equivalent to a GS-16 when it comes to state level economics.

    Virginia is on the verge of losing a considerable number of federal jobs and non-government jobs funded by the federal government. This will happen regardless of the current debt ceiling talks. The only antidote is increased private sector employment to compensate in the drop-off in public sector employment. Barring that, expect to see rising unemployment in Virginia and financial turmoil across the state.

  9. Hydra Avatar
    Hydra

    I have this vision of an elegant Washington restaurant. At the window starving American s are peering in. Tables to the left and right are occupied by representatives dining on truffles and escargot, oblivious to activity at the center .

    There sits a grossly obese Uncle Sam gagging on a morsel of debt foie gras . Behind him is a skinny Barack Obama desperately trying to get his arms around the problem and administer a Heimlich maneuver.

  10. Darrell Avatar
    Darrell

    Still haven’t figured it out?

    We Are All Overhead.

  11. Groveton Avatar
    Groveton

    “Behind him is a skinny Barack Obama desperately trying to get his arms around the problem and administer a Heimlich maneuver.”.

    Perhaps a more muscular Mitt Romney would have the physical strength to dislodge the choking debt. Certainly the emaciated Barack Obama of your parable simply lacks the power necessary to do so.

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