Killing the Golden Goose?

Killing the Golden Goose?

By John H. Hilton

Economists have warned us for years that government regulation of market forces, though at times necessary, often produces the unintended consequence of strangling the golden goose of prosperity, making the people poorer in the process. This notion is as elementary to the discipline of economics as two plus two equals four is to mathematics.

Thus, it is frustrating to see governments everywhere repeat the mistakes of overregulation and the ignorance of unintended consequences on a daily basis. So with a New Year and new government on the horizon, one should be hopeful and anticipatory amidst the proclamations of dramatically reducing the regulatory burden on American industry. This alone should restore the golden goose’s airways to proper breathing rhythms, should it not? In any conventional sense easing the impediments to production results in businesses producing more. Right?

And so the argument goes that lightening the size, scope and power of the government over the private economy will relieve the choke valve in our engine of prosperity to produce more for all- hence the golden goose metaphor. But what about certain situations or geographic areas where the golden goose, or engine of prosperity, is the government itself? In 2016 running against the out of touch bureaucratic colossus that is Washington, D.C. was a popular sell nearly everywhere in the United States. One notable exception was in Northern Virginia. Should that be surprising since the counties and cities that comprise Northern Virginia house so many of the employees that work for this very colossus, and so many businesses and contractors which owe their very existence to the federal government? In a word, no.

We must ask ourselves then; should reducing the size, scope and regulatory burden on the U.S. economy as a whole necessarily have a negative impact on our Northern Virginia economy? And is there considerably more to Northern Virginia business than simply the business of government? The answer to the first question is NO in my opinion, due to the fact that the incoming administration proposes increasing defense spending in the areas of technology and weaponry; just the kinds of investments which keep the massive numbers of defense and computer companies busy and profitable. Technology and defense account for a massive number of Northern Virginia firms and jobs, a fact which should render a general decline in federal regulations negligible.

The second question may be explained by the presence of the many large and successful companies employing Northern Virginians which have succeeded without any direct relationship to the government, such as INOVA Health Systems, GEICO, Capitol One, the many law firms, health care facilities, restaurants, hotels, educational institutions, financial firms, automobile dealerships, real estate and construction companies, accounting and consulting firms. So, which sector of our regional economy is the real engine of prosperity?

The answer is BOTH! A great deal of Northern Virginia business is and always will be dependent on the federal government. And a considerable portion of our business is not. A classic comparison might be a tale of two malls. Pentagon City Mall opened in 1989 across the street from the Pentagon, down the street from Crystal City and the Navy offices, and just off a metro station which allowed the whole DC area access to it. All of the government infrastructure and personnel were in place for the new mall and its stores to tap. Tyson’s Corner Center, on the other hand opened in 1968 before any of the defense and technology contractors except Honeywell were there. Thus, Tyson’s stood on its own, appealing to business and professional customers while Pentagon City has from the beginning received an injection of a captive audience of government customers. This is not to say that this mall is not excellent and has brilliantly expanded its consumer base.

Yes, Northern Virginia commerce reads like a tale of two sectors. The federal government will always be here, as will the contractors and employers which support the basic functions of government like defense and technology. It is relatively stable, and thus it is the other sector not directly related to government that we must endeavor to maintain. And in that spirit we should tie our fortunes to the principles of classical free market economics. Government should do only that which is needed to provide the environment for businesses to succeed and thrive on their own! This means building and maintaining the proper infrastructure (roads, schools, bridges, other transportation), and enacting sound fiscal policies with relatively low tax rates. And let the private sector create and maintain the prosperity. Government must understand when to govern and when to get out of the way! I do not believe our region to be an exception to this rule.

So I do subscribe to the notion that what is good for America is good for Northern Virginia. Our national fiscal and trade policies, regulatory policies, infrastructure support, technology and general positive business climate are vital to the economic health of the nation and her citizens. If the new government is successful in arresting our recent decline and ushering in a new era of peace and prosperity, our regional future should be equally bright.

John H. Hilton is a business writer and regular contributor to The Loudoun Tribune. A native northern Virginian, John is a veteran top-producing sales industry leader with expertise in insurance, real estate and financial services.