THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, May 1, 1995 TAG: 9504290225
SECTION: BUSINESS WEEKLY PAGE: 04 EDITION: FINAL
TYPE: Opinion
SOURCE: Ted Evanoff
LENGTH: Medium: 84 lines
No doubt we'll all hear more talk about deficits and government spending when Congress reconvenes. What'll probably be lost in the too-much-government rhetoric is a telling fact. By one measure, government spending has dropped.
Government purchases for everything from defense to interstate highways, adjusted for inflation, represented 17.3 percent of 1994's gross domestic product. Not since 1930 has government's share of GDP, the nation's total output of goods and services, been so low, says Wall Street economist H. Erich Heinemann.
Washington obviously isn't lean to the point of austerity. But Heinemann's observation raises an interesting thought. If politicians are to trim taxes and the deficit, and government buying already has reached a level not seen since Herbert Hoover was president, where do you cut?
Reducing government is a popular notion, but it's odd how the anti-government rhetoric rings in Tidewater. Every day on the Peninsula and the southside, nearly three-quarters of a million people head for work. It's no secret where many go. This is a government town.
You can see the ships and the bases, the city halls and the courthouses, the schools and the fire stations. Counting military personnel and civilians, one of every three people who head for work go to a government job.
Government - local, state, national - directly employs more than 225,000 people in Hampton Roads. Of that total, more than 100,000 serve in the armed forces. Another 48,000 are federal civilian employees, says Virginia's Employment Commission. The U.S. payroll for these 148,000-plus military and federal personnel surpasses $6 billion, the U.S. Bureau of Economic Analysis reports.
As you might expect, $6 billion is a vital piece of the local economy. It represents 22 percent of the $27 billion in annual personal income reported by all Tidewater residents. This makes the U.S. payroll far and away the single largest slice of the local economy.
What's startling to realize is there's a second stream of cash, a seemingly invisible river of money floating Tidewater's economy.
It's larger than Ford's annual payroll at the pickup truck assembly plant. It's larger than the combined annual income of everyone working in Lynnhaven Mall. It's larger than the annual payroll for Newport News Shipbuilding's 19,000 employees.
In fact, if you took every dime in wages paid in a year by the shipyard and the truck plant, and tossed in the annual payroll of every manufacturer in Tidewater (there are 1,020 factories), as well as the payroll of every retail store on the southside and the Peninsula (there are 7,400 stores), you'd have about 193,000 people earning $4.1 billion a year.
That sum is less than the cash in the second stream. That's right. The second stream exceeds the combined income of 193,000 manufacturing and retail employees in Hampton Roads.
This stream of cash originates with the government. Bureaucrats call it transfer payment, a term for assistance provided to people who qualify for a variety of social programs run by local, state and federal government agencies.
More than $4.6 billion in transfer payment income pours into Hampton Roads every year. It is Tidewater's largest source of personal income after the federal payroll.
Transfer payments, which total almost $1 trillion nationwide, include welfare and Social Security, veteran's benefits and Medicare, unemployment compensation and food stamps, government pensions and Medicaid.
Records show Social Security claims the biggest chunk, accounting for slightly more than half the nation's transfer payments. Next comes medical payments, including Medicare and Medicaid, at about 25 percent. Aid to Families with Dependent Children, known commonly as welfare, and food stamps together take 5 percent.
When it comes to transfer payments, Hampton Roads isn't unique. Here and nationwide, transfer payments represent about 17 percent of total personal income.
While the region isn't unique, it is vulnerable. Put transfer payments alongside the U.S. payroll and what you have is a region in which 40 percent of the income is derived directly from the taxpayer.
How do you reduce taxes and the federal deficit? Do you cut handouts like Social Security? Do you spend less on various government departments, bring the government's share of GDP lower?
Either alternative has consequences. And either can pinch the economy of Hampton Roads. by CNB