Every four or eight years, the Northern Virginia region, which is filled to the brim with federal government employees and contractors, sees a new administration come in. And, with it, there’s always buzz about what it could mean for everything from the local economy to the social scene.
While political appointees will change, the impact on the economy and job opportunities will remain fairly static, according to Terry Clower, director of the Center for Regional Analysis at George Mason University’s Schar School of Policy and Government. And that’s a good thing, says Clower, because it demonstrates the unique economic resiliency of Northern Virginia.
“Really, from a regional economy point of view, a change in administration is pretty much a nonevent,” Clower says. “There are a handful of people that come in. Trump comes in, and you have Republicans. Biden comes in, and you are going to have Democrats. But those people will just trade out positions.”
“It doesn’t matter if it’s a Democrat-controlled Congress or Republican-controlled Congress or a split Congress. All parties spend money,” he says.
Federal workers should expect some modest shifts, Clower says. “What happens is, among the professional class of federal employee, they have had that ability to move from one agency to another, like maybe leave the Commerce Department and go to the Department of Health. But net-net, those folks stay in.”
Spending priorities could shift as well, he notes. For example, the Biden administration may not spend as much on Pentagon defense-related items and perhaps more on human services, Clower says.
He says that the region has seen a relatively long-term trend of contracting federal employment, especially with spending related to COVID. And what happens next with policy surrounding COVID could be the biggest unknown.
“One of the things we don’t know yet is who is going to manage the logistics of getting this vaccine out,” Clower says. “Is Pfizer going to do the logistics, or is the federal government going to step in and do the logistics?”
And how will the stock market—a broad indicator of the health of the economy—respond to the new administration?
“Let’s face it: The market wants you to freak out over something so you’ll be sure and trade a lot,” Clower says. “I think the market really likes the result of the election because it’s pretty solidly split government, which means that you are not going to get a big policy shift one way or another.”
Assuming that Republicans hold the Senate, we are going to have some version of gridlock, Clower explains. “For businesses, that means more certainty.”
For the regional economy itself, parts of the economy are still doing quite well, despite the pandemic. “There are a lot of people that haven’t had an income disruption. Their work allows them to adjust to work from home. Business and professional services employment, which is largest industry category in the DC metro area, is 25% of the region’s employment,” says Clower. “This is lawyers, accountants, engineers, software developers, etc. That employment has continued to grow throughout the pandemic. But look at the other part of that industry sector, from building services to security guards, waste management to janitorial. That is the segment that has been losing jobs. Because job loss is anything that has to do with offices and real estate. It’s the lower-wage section.”
The hospitality industry has taken the biggest hit in the area. “Many of these restaurant owners are entrepreneurs,” he says. “In some cases, the best thing that we can do for recovery is going to be to have the government, the Biden administration, get out of the way of these people and let them restart their business.”
Is there something that the Trump administration has created that the Biden administration may have to follow? The answer: taxes.
The Biden administration has proposed a corporate income tax rate of 28%, compared to the Trump administration tax rate of 21%; Biden has also proposed raising the income tax rate on capital gains for U.S. citizens making $1 million or more to 39.6% from Trump’s 37%. “The Trump tax cuts were very good for people that are upper-middle and upper income,” Clower says. “There is nothing that tells me that that will change in the politics of the moment. I know that Biden is wanting to raise taxes. But if the Senate is not split 50-50, that tax increase is dead in the water.”
One major economic development that will also stay the same regardless of party in power? The Amazon HQ2 announcement will continue to have an outsize effect on the regional economy, says Clower. “It’s created that image that we are something other than a government town. It was screaming from the loudest bullhorn in the country that we can do something besides federal government and contracting. That has been true for a long time here, but folks just didn’t know it.”
The Biden emergency action plan to save the economy
1. Use all available authorities, including the Defense Production Act, to turn the tide on this epidemic.
2. Launch a task force reporting directly to Joe Biden to make sure every dollar going out the door gets to the people who need it—fast. This means to act decisively to keep small businesses in business.
3. Bring the leaders of Congress together to build the next deal, including providing for additional checks to families should conditions require; forgiving a minimum of $10,000 per person of federal student loans, as proposed by Sen. Elizabeth Warren and colleagues; increasing monthly Social Security checks by $200 per month, as proposed by Sen. Ron Wyden and colleagues; providing emergency paid sick leave to everyone who needs it, with no one left out; ensuring that no one has to pay a dollar out of pocket for COVID-19 testing, treatment or an eventual vaccine; providing all necessary fiscal relief to states so their workers and communities get the help they need, especially those on the front lines like New York.
This story originally appeared in the January issue as part of a special Inauguration feature. For more stories like this, subscribe to our monthly magazine.