Happy Days are Here Again (If You Live in Washington's Bubble)

While the national seasonally-adjusted unemployment rate is 1.5 percentage points higher than during President George Bush’s last full month in office, life is surprisingly good for folks living near the Beltway. On an unadjusted basis and as of February 2011, the unemployment rate of the Washington D.C. metropolitan area was 3.6 percentage points lower than the national average. The gap between Washington’s local unemployment and the national rate is higher than it ever was during the Bush administration.

National Minus D.C. Metro Unemployment Rates (Not Seasonally Adjusted), Source: U.S. Bureau of Labor Statistics

According to The Economist, the Washington D.C. metro area accounted for 6% of the nation’s job growth over the past year, in an area that holds just 2% of the country’s population. In the one-year period ending January 2011, the S&P/Case-Schiller Index of home prices fell nationally by 3% for 20 large cities, whereas it rose 3.6% for the D.C. metro region. In 2009, the region’s GDP grew at +2.2%, compared with the overall United States’ -1.7%.

Much of this growth is due to the expansion of federal government. In fact, since Obama became president, federal employees have made up a steadily increasing percentage of total nonfarm employment in the D.C. metro region.

Federal Employees as % of D.C. Metro Nonfarm Labor (Not Seasonally Adjusted), Source: U.S. Bureau of Labor Statistics

The absolute number of federal employees in the metro area has also increased rapidly from Bush Administration levels.

D.C. Metro Federal Employees (Not Seasonally Adjusted), Source: U.S. Bureau of Labor Statistics

To finance much of this government growth, the Obama administration has run massive budget deficits totaling as much as 10% of the United States’ GDP.

U.S. Budget Deficit as a Percentage of GDP, Source: U.S. Office of Management and Budget

The Obama administration has rapidly expanded the national debt in order to fund these deficits. One of the consequences of these massive annual increases in federal debt is Standard & Poor’s recent downgrade of America’s debt outlook from stable to negative.

Annual Increase in U.S. Gross Federal Debt, Source: U.S. Office of Management and Budget

Unfortunately, the President’s response to this crisis resorts to the old Democratic saw of class warfare, thereby distracting the public as the government raids the public treasury.

Even after the recent budget compromise, the United States government will still likely grow faster than Chinese GDP in 2011. As the President expands the ranks of Washington’s bureaucratic elite, other Americans still suffer from a persistently high unemployment rate.

When the United States government is growing faster than the explosive Chinese economy, something is very wrong.

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