D.C. region prospers in bad times

WASHINGTON – When the nation’s in pain, Washington often gains.

Whether it’s a buildup of Civil War troops, Depression-era bureaucrats or defense contractors after Sept. 11, the region has prospered in times of crisis. Today, the financial meltdown is delivering a jolt of its own.

Lawyers, lobbyists and public relations experts – many of whom live and work in Virginia and Maryland suburbs – are benefiting as companies from Wall Street to Motor City seek a piece of Washington’s $700 billion financial bailout, and try to influence any regulatory strings attached. Business is also percolating as President-elect Barack Obama prepares an economic stimulus package including infrastructure spending and tax breaks that could exceed $800 billion.

“There will be a mad rush to have influence on where that money should go,” said David Rubenstein, co-founder and managing director of the Carlyle Group, the Washington-based private-equity firm whose partners include former high-ranking U.S. and foreign government officials. Far from struggling, the Washington region could be on the verge of “boom times,” Rubenstein said.

At the very least, the expanding federal government – which has added more than 7,500 jobs in the Washington region over the past decade – is helping to insulate the area’s economy and its 4.5 million residents from the worst effects of the recession.

Annual military and homeland security spending has risen sharply since Sept. 11, leading to years of prosperity for the region’s consultants and contractors.

Now, as Uncle Sam mounts a multitrillion-dollar effort to rescue the country from its worst financial crisis since the Great Depression, some companies based outside the region are beefing up their Washington offices.

The region is not immune to the recession.

Retailers are struggling, tourism is flat, unemployment is on the rise, and municipal budgets are strained. Washington is facing a $127 million budget gap, while neighboring Virginia and Maryland face even steeper shortfalls.

Some well-known companies based in the region have been forced to lay off staff or ask workers to take early retirement.

However, the mood among many business leaders – especially those connected to federal lobbying and contracting – is upbeat compared with the rest of the country.

The Washington offices of companies seeking bailout money will be transformed into “mini headquarters,” said Stanley Collender, managing director at Qorvis Communications, a consulting firm.

“There’s a sense of unprecedented realignment” thanks to the turnover in the White House and Congress, said Beth Solomon, a recruiter who works for lawyers and lobbyists.

Washington and its suburbs gained 31,000 jobs over the 12-month period that ended in November, according to the Bureau of Labor Statistics. Losses in construction and retail jobs are being offset by gains in federal government positions as well as health and business services, according to senior fellow John McClain of George Mason University’s Center for Regional Analysis.

Those gains come as most major metropolitan areas shed thousands of jobs. McClain predicts positive job growth for the D.C. area in 2009, too.

With government workers and contractors accounting for roughly one-third of the job force, Washington tends to prosper in times of crisis.

During the Civil War, the modest city grew as the government swelled to administer the war and soldiers arrived to protect the capital. The federal work force expanded again during the Great Depression under President Franklin Roosevelt’s New Deal, and the Pentagon was constructed during World War II. The Department of Homeland Security was created after Sept. 11, leading to another burst of hiring, and the wars in Iraq and Afghanistan expanded the Pentagon’s budget.

The city is anticipating a population burst of at least 1 million for Inauguration Day, Jan. 20.

“This is our Olympics,” said Jim Dinegar, president and CEO of the Greater Washington Board of Trade.