• U.S.

Bubble on the Potomac

14 minute read

The passenger bar, about 12 blocks from the White House, is just beginning the first seating of the night in its Columbia Room, a semisecret speakeasy behind an unmarked door in the back. Speakeasies are very fashionable in Washington at the moment–bars within bars, inner sanctums set aside for the most discriminating palates. But the Columbia Room is a particularly hot ticket. If you’re lucky, you’ll get a reservation a few days in advance. For $67 a head, an expert bartender serves a three-course tasting of cocktails. He carves a thick slice of lemon rind, places his hands slightly above and 10 inches back from the cocktail glass and with a snapping motion sends a scattering of lemon drops across the icy surface of what one magazine calls “the best martini in America.”

The Passenger’s motto? “God save the district.” The sentiment is easy to understand, for these are good times in Washington and the seven counties that surround it. Even as the nation struggles, the capital has prospered, making it a magnet for young hipsters but leaving its residents with only a tentative understanding of how the rest of the country lives. “It’s nice,” goes the old joke about Miami, “because it’s so close to the United States.” Well, Washington is very nice these days.

Every week brings fresh evidence of continuing prosperity: a new restaurant, a new nightclub, another restored 19th century townhouse in a previously dodgy neighborhood selling for $1 million or more. Start-ups are hiring through Craigslist, and just opened lobbying firms have no trouble collaring clients. Storefronts that stood abandoned five years ago fill with pricey gourmet-food shops like Cowgirl Creamery, a cheesemonger that has opened its only store outside Northern California on F Street downtown. Its Mt. Tam cheese goes for more than $25 per pound. It’s organic.

Another Northern California import, a limousine service called Uber, launched in December after great success in San Francisco and New York City. “The growth here has been unique in our experience,” says Rachel Holt, who oversees Uber’s burgeoning D.C. operation. Uber is Web-based and cashless: customers call for limos with a smart-phone app and pay with a credit card on file. It’s also deluxe. Riders expect nothing lower on the limo food chain than a Town Car, with offerings going up to Mercedes and beyond. Holt says with some surprise that locals are using Uber as everyday conveyance for commuting and shopping. Uber exploits Washington’s unique combination of heavy use of social media, a young and often carless population and customers with fistfuls of disposable income. When the D.C. taxi commission made a move to shut down Uber earlier this year, Twitter erupted in indignation under the hashtag #Nevergoingback. Welcome to ber-Washington.

The Good Life

Other big cities, of course, have made it through the recession in one piece. But few eased through the crash as lightly as D.C., much less prospered so widely on the rebound. The local unemployment rate, at 5.5%, stands well below the national figure of 8.2%. The region’s foreclosure rates have always been significantly lower than those elsewhere, and now housing prices in D.C. and across the river in the Virginia suburbs of Arlington and Alexandria are close to their precrash peaks. The Association of Foreign Investors in Real Estate–in Washington, everyone has an association–ranks the region as one of the best investments in the world, right after London and New York City. The cost of office space in Washington rivals New York prices, averaging $50 a square foot.

How’s a country to make sense of a national capital whose day-to-day life is so much more upholstered than its own? Increasingly, it cannot. Recently Washington passed San Jose in Silicon Valley to become the richest metropolitan area in the U.S. Since the 1990s, says economist Stephen Fuller of George Mason University, the region has led the nation’s metropolitan areas in overall employment rate. The median household income in the metro area in 2010 was $84,523, according to calculations by Bloomberg News, nearly 70% over the national median household income of $50,046. Nine of the 15 richest counties in the country surround Washington, including Nos. 1, 3, 4 and 5. Per capita income in D.C. is more than twice that in Maine. All this explains why Gallup’s Well-Being Index rates D.C. as the most satisfied large metropolitan area in the U.S. The pollsters were especially impressed with the region’s low smoking rate (15%) and the 72% who visit the dentist annually for a checkup. Washingtonians are skinnier, exercise more, eat more vegetables and are more likely to have health insurance than the average American. They’re also more optimistic–about the economy and about the future in general.

The riches reflect a regional economy as resilient–and as strange–as any in the world. “We don’t make anything here,” Fuller says simply. Washington is one of the few metropolitan areas in the country that have no significant manufacturing sector, placing it alongside Atlantic City, N.J.; Myrtle Beach, S.C.; Cape Cod, Massachusetts; and Ocean City, N.J. “There isn’t any single major industry,” says Jim Dinegar, president of the Greater Washington Board of Trade. “We’re just very diverse.”

The District of Contracting

Yet the diversity of the Washington economy is an illusion, for each of its business sectors is to some degree a creature of the region’s single great industry–the federal government. According to a 2007 report by the Tax Foundation, for every dollar in taxes Washington sends to the federal government, it receives five in return. Fuller says that over the past 30 years, the federal government has spent $860 billion in the D.C. region, two-thirds of that since 9/11.

Why the boom? The size of the nonmilitary, nonpostal federal workforce has stayed relatively stable since the 1960s. What has changed is not the government payroll but the number of government contractors. It’s estimated that, thanks to massive outsourcing over the past 20 years by the Clinton and Bush administrations, there are two government contractors for every worker directly employed by the government. Federal contracting is the region’s great growth industry. A government contractor can even hire contractors for help in getting more government contracts. You could call those guys government-contract contractors.

Which means government hasn’t shrunk; it’s just changed clothes (and pretty nice clothes they are). The contractors are famous for secrecy; many have job titles that are designed to bewilder. What is it, after all, that an analyst, a facilitator, a consultant, an adviser, a strategist actually does to earn his or her paycheck? Champions of the capital’s Shangri-la economy like to brag of Washington’s knowledge workers.

Peter Corbett isn’t so sure about the wisdom of D.C.’s version of the knowledge economy. Corbett heads a social-media marketing company, with corporate clients that have famous names. Most of his work involves nonprofit foundations that have flocked to Washington to be close to the fount of grants and tax breaks. He did a single project for the federal government and then swore it off for good. He describes his first meeting at the Pentagon. “There are 12 people sitting around the table,” he says. “I didn’t know eight of them. I said, ‘Who are you?’ They say, ‘I’m with Booz Allen.’ ‘I’m with Lockheed.’ ‘I’m with CACI.’ ‘But why are you here?’ ‘We’re consultants on your project.’ I said, ‘You are?’ They were charging the government $300 an hour, and I had no idea what they were doing, and neither did they. They were just there. So I just ignored them and did my project with my own people.”

Aside from its wealth, the single defining feature of ber-Washington is its youth. Most of the people who have moved to Washington since 2006 have been under 35; the region has the highest percentage of 25-to-34-year-olds in the U.S. “We’re a mecca for young people,” Fuller says. One recent arrival says word has gotten out to new graduates that Washington is where the work is. “It’s a place where a liberal-arts major can still get a job,” she says, “because you don’t need a particular skill.”

The Conveyor Belt

The young fill entire neighborhoods with an undergraduate air. On a warm night in Clarendon in northern Virginia or in the H Street NE corridor, with the crowded sidewalks and lines outside the door-to-door bars, you might think you’ve landed on fraternity row in Chapel Hill, N.C., or Charlottesville, Va. They’ve brought the college lifestyle with them–group houses, hookups, late-night cram sessions and lots of drinking. The local drugstores seem to devote more shelf space to condoms and pregnancy tests than diapers and formula. (Another big seller at pharmacies: Pedialyte, used as the ultimate hangover cure.)

No one doubts that the kids are changing the city. When Shana Glickfield, founder of a social-media firm, arrived in Washington in the early 2000s, one of her ears was triple-pierced. “I had to go up on [Capitol] Hill, and everybody said, You can’t do that, not if you’re going to the Hill!” she says. “Now I see Hill staffers with nose rings.” The 20-somethings have helped Washington shed its image as an uptight, work-first, party-later town. “Happy hour is the most important hour of the day,” says Emily Schultheis, a Web editor and recent arrival. “It’s how you meet people, how you get jobs, how you find roommates, how you get tips for stories and how you get in trouble.” Hill staffers devote Thursday nights to “wheels up” parties. “Congress goes out of session on Thursdays,” says Abra Belke, a lobbyist and blogger who calls herself Belle and writes the popular blog Capitol Hill Style. “Most of the bosses go home for the weekend. So you put your boss on the plane, wheels up, and then–freedom!”

ber-Washington has its own career pattern that is becoming as routinized as that of a 1950s organization man. A student graduates and goes to Washington for an internship, usually unpaid, which qualifies her for another internship, perhaps paid, until an entry-level job is offered, as it almost always will be. “Then you work for a few years,” Glickfield explains, “and then you go off and get the next degree, law or business, and then you come back for a better job.” Colleges and universities have figured this out and moved quickly to get a place on the conveyor belt. Big state schools and smaller liberal-arts colleges occupy office buildings in the city, where they run sophisticated internship programs designed to place their graduates (and soon-to-be graduates) in one of the country’s few hot job markets.

As national politics makes it impossible to expand government explicitly, these interns–often underpaid, usually overworked and frequently subsidized by their parents–have become vital to keeping government going. At the same time, they contribute to a feature of ber-Washington that too often goes unremarked: the capital has one of the most lopsided distributions of wealth of any major metropolitan area in the U.S. Along with a higher per capita income than any state and one of the nation’s lowest rates of unemployment, Washington has a poverty rate of nearly 20%, above the national average of 15%; a public-school system that is often called the worst in the nation; and a crime rate that remains higher than in any other rich community. In the district, whites enjoy a per capita income nearly three times that of African Americans.

You can often see the maldistribution of Washington’s riches block by block–even on the same block, row house by row house–as young, well-to-do high achievers move into neighborhoods that real estate agents label hot, buying up properties, planting flower boxes and tending little squares of lawn behind wrought-iron fences, next to an abandoned building or a vacant lot or a home where a fatherless family is just scraping by. Most ber-Washingtonians say they like the urban grit. The crime and decay amid the plenty, says local activist Danny Harris, “are the price you pay if you want to live in an urban environment.” The disequilibrium especially bothers Harris, he says, when it signals a civic detachment among his fellow young strivers. “You can have people who know every nuance of our policy toward Burma,” he says, “but they don’t know the name of the public school down the block.”

Greener than Thou

Socially and culturally, life in ber-Washington can seem as insular as its economy, and the insularity has consequences for the rest of the country. ber-Washingtonians, for instance, are intensely concerned about the environment. The local economy bristles with company names like GreenBrilliance and SkyBuilt Power. But the unreal character of that economy makes it easy for Washingtonians to overestimate the ability or the desire of their fellow Americans to live as they do. In ber-Washington, the private automobile is looked on as at best a necessary nuisance and at worst a morally suspect source of sprawl and climate change. Many Washingtonians are eager to tell you they don’t own one, preferring a highly subsidized commute on the Metro system’s carpeted (if often unreliable) subway cars. Even Uber, the limo service, has been hailed on blogs as a green innovation, notwithstanding its emanations of conspicuous consumption. Bike-share racks have sprung up downtown and in the close-in suburbs to take advantage of the newly painted bike lanes that have squeezed grand thoroughfares like 14th Street down to two lanes. Local authorities have reserved hundreds of parking spaces exclusively for Zipcars, which customers rent for an hour or a day in place of buying a car of their own. The Zipcar motto: “Cars with a conscience.”

No doubt the conscience thrives as much in Youngstown, Ohio, as it does in Washington, but you don’t see many locals there trading their minivans for Zipcars or rent-a-bikes. Fracking for natural gas is regulated from Washington, where it is viewed with suspicion; in Pennsylvania and North Dakota, it is a source of potential riches and a better life. The sight of an oil platform may lift the heart of a worker struggling on the Gulf Coast; ber-Washingtonians have a different impression. In D.C., if in few other places, half a billion dollars lost to a solar company like Solyndra can seem to be the price of being conscientious. At the same time, life in Washington is so comfortable that it is easy for those living there to imagine that the rest of the country is doing just fine too. Aren’t restaurants in your hometown packed at 10 p.m. on a Monday? No? Really?

No End in Sight

How long can such a culture of complacency last, even one as heavily subsidized by a country as rich as the U.S., in the face of awesome government debt?

It is a soft spring evening. The office buildings downtown are emptying out, and the bars are filling up for happy hour. Uber cars are out in force, Town Cars and Benzes rolling down 14th, up Ninth, under the overspreading oaks of Logan Circle and back down Vermont, past the Churchkey, where 555 kinds of beer are on offer. Its list gives each beer’s alcohol content and country of origin, the hops used to brew it and the temperature at which it will be served. The menu offers nibbles from the other America, served with the requisite irony: disco fries, a staple of the Jersey Shore, and a deep-fried macaroni-and-cheese stick familiar to fans of Midwestern state fairs. There’s also pricey charcuterie for those who don’t get the joke. Seven blocks east and a few blocks south, at the edge of the Penn Quarter neighborhood, six diners take their places at Minibar. In a city quickly becoming famous for tony restaurants, they are the luckiest feeders of the night: Minibar takes reservations a minimum of a month in advance for six seats from supplicants who must call precisely at 10 a.m., usually for several days in a row, sometimes for weeks. The meal they savor has 25 to 30 courses. The cost: $150.

The optimism of ber-Washingtonians so far survives the unspoken worry about a coming age of austerity, in which government spending cuts would end the high life that Washingtonians have come to expect. They are right to be optimistic. The two most plausible deficit-reduction proposals–one by President Obama, the other by the Republican-controlled House Budget Committee–each calls for the government in 2021 to spend a trillion dollars more than it spends today.

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