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The direction of Virginia’s economy still depends on the federal government
The direction of Virginia’s economy still depends on the federal government
Robert Powell, III// March 2, 2018//
Virginia Business presents its sixth annual Big Book at a time of economic and political change.
In December, a Republican-controlled Congress passed the most sweeping federal tax reform bill in 30 years, a move widely applauded by the nation’s business community.
Just one month before, however, Virginia Republicans were defeated in races for governor, lieutenant governor and attorney general and nearly lost their majority in the House of Delegates. The Democratic wave of victories was seen as a reaction to the 2016 election of President Donald Trump.
The events suggest two possible scenarios for the upcoming mid-term elections this fall:
Under one scenario, tax reform infuses new confidence in the U.S. economy, giving congressional Republicans momentum going into the elections.
Under the second scenario, growing opposition to Trump’s impulsive leadership leads to a political wave like the one seen in Virginia, resulting in Democratic majorities in both houses of Congress.
The direction of the federal government in either case will have a big impact on Virginia’s economy. Federal spending accounts for 30 percent of the Old Dominion’s gross domestic product (GDP).
In its “2017 State of the Commonwealth Report,” released in November, the Center for Economic Analysis and Policy at Old Dominion University noted that Virginia’s real GDP growth in 2016 was 0.6 percent, at a time when the U.S. economy was expanding at 1.6 percent.
The center predicted that Virginia’s 2017 GDP would clock in at 1.8 percent, still expected to be below the national average. In figures released in late January by the U.S. Bureau of Economic Analysis, Virginia’s third-quarter GDP was 2.3 percent.
ODU economists blame Virginia’s sluggish performance on lower federal government spending. In fiscal year 2015, Virginia was the top state in annual federal spending per capita ($17,502), annual per capita spending on federal contracts ($5,819) and annual per-capita defense spending ($6,324). Virginia also had annual total federal salaries and wages of more than $20 billion.
In his State of the Union address in January, Trump called on Congress to end defense spending limits, known as sequestration, set in the 2011 Budget Control Act. The two-year spending bill passed by Congress in February raises spending caps and provides an additional $165 billion to the Pentagon.
The Big Book section includes two stories looking at how the actions of the federal government already are impacting Virginia businesses.
One story examines the effects of tax reform on banks, manufacturers, contractors, real estate companies and accounting firms.
The second story looks at the potential fallout from the Trump administration’s plan to end Temporary Protected Status for 190,0000 to 200,000 Salvadorans living in the U.S. The Washington, D.C., area is home to one of the largest concentrations of Salvadorans
in the U.S. where they work in a variety of industries.
The Big Book also marks a significant milestone for one of the oldest law firms in Virginia, Roanoke-based Woods Rogers. The company, which employs 78 attorneys in offices in Roanoke, Charlottesville, Lynchburg and Richmond, is celebrating its 125th anniversary this year.
As it has for the past five years, the Big Book includes charts and lists examining wide swaths of the commonwealth’s economy.
The charts and lists include:
A tech play Major technology companies are expanding in Virginia. by Paula C. Squires
Generous couples Alumni’s gifts make a big difference at Virginia schools. by Robert Powell
Major milestones Prominent firms in Virginia expand, name new leaders. by Robert Powell
