Economy’s looking good in Washington, DC; still stinks everywhere else

by Ryan Streeter on February 6, 2012. Follow Ryan on Twitter.

Gallup’s economic confidence index shows just how different Washington, DC, is from the rest of the country.

As a gauge of how Americans feel about the economy and whether it’s improving, the index is of course an imperfect tool. People may not feel good about things even as objective conditions improve. On the other hand, we know that consumer confidence is linked to the performance of the economy.

So take the index’s importance for what it’s worth. But also take note of just how strangely different Washington, DC, is from the rest of the country. While I personally believe Washington-bashing by political candidates is overdone and that many people who live in the nation’s capital are motivated by a strong sense of public service, there is no denying that life inside the beltway is different – and too often for the worse. This index is a good example.

Washington is the only place in the country since 2008 to register a positive score on the index. It did that last year. And even though its score flipped negative this year, it did so barely. Since the financial crisis began, back when everyone was pessimistic, Washington has come roaring back – alone.

It registers a -4 score on the index this year. North Dakota is in a distant 2nd place, with a score of -26. Every other state ranges between North Dakota’s score and -49 (West Virginia).

But most telling is how Washington has changed since 2008. Here’s a screen shot from the Gallup page. The first four columns, from left to right, are 2008 through 2011. The right-hand column is the change between 2010 and 2011. Note how things in D.C. were bad back in 2008 and then improved amazingly in 2009, while everyone else’s improvement was much more modest.

While we should resist making too much of the chart, it’s also pretty clear that the headquarters of TARP, the auto bailout, Fannie & Freddie, and a host of special interests are doing just fine in this era of outsized deficit spending.

As someone who lives in the midwest but recently sold a house in the D.C. area, I can attest that the nation’s capital is sealed off from the rest of the economy in a very real way. Suffice it to say that I’m glad I’m not selling a house out here in Indiana, but that selling one in D.C. worked out just fine.

I remain convinced – on grounds dating back to Scottish moral sentiment theory and confirmed by more recent behavioral psychology – that place affects our capacity to sympathize with others. Not in the same way with everyone or with the same effect. But it does. Even with data on the rest of the country and plenty of conversations with people from all over the place, a policymaker or analyst in the nation’s capital will have a hard time understanding just how anxious the country is if he or she stays largely inside the beltway.

And that makes me a little nervous considering:

    • Most of the nation’s regulators live in the Washington metro area.
    • Although they read reports of life elsewhere and receive calls from voters in the home district, most staffers advising lawmakers stay rooted in the District.
    • Most think tankers advising policymakers live in the Washington metro area.