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Va. escapes worst of recession but new fears ahead

Associated Press Modified: October 13, 2012 at 12:18 pm •  Published: October 13, 2012

LEESBURG, Va. (AP) — Amid scenic horse farms, vineyards, Civil War landmarks and quaint shops tucked in historic red-brick buildings, signs of prosperity are plainly visible. The anxiety about the economy, less so — but it's here.

Talk to the husband and wife who opened a used bookstore last year, and they reveal they first signed one six-month lease, then another, not wanting to lock into anything longer until they were sure they had a viable business.

Or the construction consultant who realized government budgets were shrinking and a full-fledged economic recovery was years away, so it was time to change careers.

Or the restaurant owner who wonders when the uncertainty will fade and people will start spending.

While Virginia escaped the worst of the recession — unemployment peaked at 7.3 percent — uneasiness about the future is in the air. For good reason: The state's fortunes are tied to the outcome of the deficit debate on Capitol Hill and its outcome could dramatically alter its economy. Unless Congress finds a way to avoid the tax increases and spending cuts that could send the nation barreling over the so-called fiscal cliff early next year, the state could face serious pain.

The cuts could impact federal workers, defense firms, the state's many military installations and beyond. Virginia is home to the Pentagon, the CIA, Naval Station Norfolk, Fort A.P. Hill, Langley Air Force Base, Marine Corps Base Quantico and more. By one account, more than 200,000 jobs could be vulnerable — more than those lost in the recession

"This would be a punch in the face for the whole state," says James Koch, an economist at Old Dominion University. "People here have looked at other states such as Florida, Ohio and Nevada and said, 'Oh, they have it worse.' Now the worm could turn a bit."

Against this tense backdrop, President Barack Obama and Mitt Romney are dueling over the size of government and defense cuts, pouring tens of millions of dollars into this crucial battleground, a state where military spending adds enormous sums to the local economy. The winner will claim Virginia's 13 critical electoral votes — and most likely, better odds for capturing the White House.



Four years ago, Obama broke a 44-year GOP grip on Virginia with a decisive 6.3 point win over John McCain.

The president cobbled together a coalition of minorities, young people and college-educated white voters (women more than men) in the affluent suburbs across the Potomac River from the nation's capital, a Democratic-leaning, fast-growing area. Here in Loudoun County, for instance, the population skyrocketed 84 percent in the decade ending in 2010.

Obama scored victories, too, in the Hampton Roads region, home to the world's largest U.S. Naval base in Norfolk, along with many active duty and retired military. It was a stunning defeat for McCain, a Navy veteran.

Changing demographics also made the state friendly territory for Obama. The Latino population in Virginia jumped 92 percent from 2000 to 2010. Minorities now account for 27 percent of eligible voters in this state that was home to the Confederate capital.

The constituencies that propelled the president to victory remain, but enthusiasm has waned and Democrats expect a much closer race this time. Polls show Obama with a slight edge or virtually tied with Romney.

"Things are probably more competitive, just as they are nationally," says Peter Brodnitz, a Democratic pollster working in the Senate campaign of former Gov. Tim Kaine. "I don't think it's a repeat of 2008 when the wind was blowing strongly in just one direction."

The state's economy, though, shouldn't be a drag on the president.

Among battleground states, Virginia has one of the lower unemployment rates: 5.9 percent in August. It also has fared better than many others in rebounding from the recession, gaining about two-thirds of 171,000 jobs lost, compared with a national recovery rate of about 45 percent, according to Scott Hoyt of Moody's Analytics.

These days, Virginia is in an enviable position: It ended its fiscal year in June with a $448 million surplus that triggers a 3 percent bonus for state employees.

It's a record the Republican nominee should be trumpeting, says Mark Rozell, a political scientist at George Mason University.

"Romney should be telling the story as a Republican success — that policies on the state level are responsible for the budget surplus and overall the better economic situation," he says. "That's the political message. Whether it has any economic merits is an entirely different matter. Most economists think it's a stretch to attribute better circumstances entirely or even mostly to state government policies."

Despite its sound finances, Virginia is a land of extremes, home to the very poor and very rich.

Five of the nation's top 10 wealthiest counties are in the northern part of the state, according to the 2011 American Community Survey. Among the key reasons: a heavy concentration of college graduates and two-income families, many with good-paying government or contractor jobs.

That diversity spawns two Virginia economies. One is urban-based, dependent on technology and government (including defense) and doing well; the other is more rural with timber, coal and agriculture and higher, even double-digit joblessness, according to Stephen Fuller, director of the Center for Regional Analysis at George Mason.

"It's a harder sell for Romney in more urbanized areas to suggest that he can manage the economy better because it already seems better," Fuller says, noting that in northern Virginia, housing prices are up and about 30,000 jobs have been added in the last year.

Romney, he adds, will have more appeal in conservative, moderate-income areas where "the population is disenchanted with the recovery. These are the people who feel government ought to get out of their lives."

Throughout the state, Romney also has been trying to convince women his economic policies would help them more than Obama's, part of a strategy to cut into the president's strength among female voters. Obama, who has emphasized women's health issues, held a 19-point lead among females in one Virginia poll.

Economic messages still matter despite the state's relatively low unemployment, Rozell says, because people hear the national dialogue and "share the same anxieties and concerns about their own futures."

That's true in Loudoun County. Though this is home to the nation's highest median household income (more than $119,000 a year in the 2011 survey), it's also not immune to struggle.



Molly Lovato and her husband, Paulo, both felt the recession's pinch. She lost her lease on her flower shop at Dulles International Airport; his landscape business lost many middle-income clients.

But, she says, "plenty of people suffered far worse than we did," and business decisions may have contributed to some of their troubles.

A local Obama volunteer, Lovato credits the president with steering the country away from financial disaster. "I think he kept us from sliding into a depression," she says. "I'm really dumbfounded by people who say 'Why didn't he fix this?' and it's 20 minutes later."

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