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this is quite the illuminating piece, eh?
What Sequester? Washington Booms as a New Gilded Age Takes Root
By ELIZABETH WILLIAMSON
Suburban Washington boasts some of the wealthiest counties in the nation and the houses to match. WSJ's Elizabeth Williamson tours Norton Manor, the lavish home of IT entrepreneur Frank Islam and his wife, Debbie Driesman. Photo: Lexey Swall.
POTOMAC, Md.—On a bright spring morning, Debbie Driesman and her interior decorator surveyed progress on Norton Manor, the 40,000 square-foot house she's building with her husband, information-technology entrepreneur Frank Islam. To make way for the French chateau-style manse, the family bought two houses on adjacent 4-acre lots and invited the local fire department to destroy them. For practice.
The manor, in suburban Washington, features a reflecting pool (just as the Capitol does), east and west wings (like the White House) andis configured for easy Secret Service coverage when VIP guests attend the couple's Democratic Party fundraisers.Decorator Skip Sroka scoured the globe for Norton Manor's marble fireplaces, hand-loomed carpets and several tons of gilded and Venetian chandeliers. The gardens are modeled, in part, after those of Henry VIII's Hampton Court palace.
"If there's something he can't have that he wants, you have to find a way," Ms. Driesman says of her exacting husband. "You can't just tell him 'no.' "
The sprawling compound is a product of Washington's Gilded Age—a time of lush business profits initially fueled by government outsourcing and war. Some demographers predicted the boom here would ebb as federal spending shrank amid troop withdrawals from the Middle East and efforts to trim the deficit.
Instead, the region has shown surprising resilience, thanks to an economy that has steadily broadened beyond the government. More than a generation of heavy federal spending, it turns out, has provided the seed money for a Washington economy that now operates globally—less tied to the vicissitudes of the capital's political rhythms.
The new moneyed brain trust is being led by professionals in defense, intelligence and data—many of whom excelled initially due to government ties. They've propelled the D.C. region as a leader in the cybersecurity and data sectors, as well as in more-specialized arenas including educational products and health-care data management.
In the first decade of the 21st Century, government spending was the major source of growth in metropolitan D.C., an area that includes the neighboring Maryland and Virginia suburbs. In 2010, federal spending, comprising mostly private-sector contracts, made up 40% of the local economy.
By 2012, that proportion had slipped by four percentage points. But the local economy has still grown faster than the nation as a whole and is projected to continue doing so at least through 2017, says economist Stephen Fuller, a George Mason University professor and an expert on the D.C. regional economy. Its nearly $450 billion economy puts the D.C. region in fourth place nationally, behind the more-populous regions of New York, Los Angeles and Chicago, and ahead of Houston.
(so much for 'big oil'....)
George Mason economists expect the area's annual GDP growth to accelerate by 2017 to 3.2% from 2.1% now, outpacing the rest of the country's 2.9% projected rate. The D.C. forecast takes into account the potential effect this year of the across-the-board budget cuts known as the sequester. The cuts have so far not had the dire impact on local jobs that the White House and a range of economists predicted, largely because government agencies and federal contractors trimmed nonlabor costs to avoid heavier layoffs after the sequester kicked in March 1.
If the sequester drags on beyond this year that may change, but with each year that passes, the local economy grows less dependent on the federal spending most affected by sequester cuts, Mr. Fuller says.
A Washington Manor
Norton Manor, a 40,000-square-foot house being built in suburban Washington, has an east and west wing, like the White House, and a reflecting pool, like the Capitol.
View Slideshow
Lexey Swall for The Wall Street Journal Ms. Driesman and Mr. Islam stood outside their nearly-completed house.
Meanwhile, it's not difficult to spot examples of today's abundance. After only a year in business, Aston Martin of Washington, D.C., based in the wealthy Virginia suburbs, is ranked seventh in sales in North America, having sold 100 of the $120,000-plus cars.
At the Washington Humane Society's annual "Fashion for Paws" gala on April 13, attendees raised contributions of a minimum of $5,000 each to walk their dogs, dressed in tutus and tuxedos, down a runway. At Karma, a Georgetown salon owned by society cosmetologist Erwin Gomez, customers plunk down $350 for eyelash extensions, while the new Capella hotel down the street charges $22 for a martini.
Locals are soaking up the good life at the Ritz-Carlton, too, where restaurant bookings and special-events sales are surging. "My numbers are up considerably year after year," says Elizabeth Mullins, vice president and D.C. general manager at the hotel.
The Ritz sponsors "Knock Out Abuse," a females-only auction to support domestic abuse victims that is a symbol of the new D.C.'s charity bacchanalia. At recent auctions one woman contributed $6,000 to the charity to have dinner with former Redskins football star Clinton Portis, and others contributed hundreds of dollars each to climb a stage and strip the shirts off Maryland firemen.
Seven of the nation's 10 wealthiest counties are in the Washington, D.C., metropolitan region, compared with only two in the New York metropolitan area, and none in Silicon Valley. Census data from 2010 show median household income was $84,523 in the D.C. area, compared with $83,944 for Silicon Valley's wealthy San Jose region.
Mr. Fuller attributes those figures to the fact that the area has "become more business-based," a phenomenon he expects to reap benefits through the current decade: "The stuff we learned how to do for the federal government can be sold to other people—a different economy is going to emerge that in the long run may be a better-balanced economy than the one we have now."
In addition to the area's signature law and lobbying firms, financial services and technology businesses have also flourished, creating a new tier of the super wealthy.
Mr. Islam grew up on a farm in India, and worked for an array of government contractors as a computer-systems specialist before starting his own firm, QSS Group Inc., with help from a federal grant for minority-owned businesses. His main client: the U.S. government. He sold the company to Perot Systems Corp. in 2007 for $250 million and now funds promising technology startups—most of which have nothing to do with the federal government that helped give him his start. A committed philanthropist, he's also given money to a range of universities and think tanks.
His house project, meanwhile, has blossomed over the past four years, including the addition of a self-cleaning, 2,000-square-foot koi pond. Mr. Islam says he doesn't like to talk about how much the place cost, but allowed that it's $30 million over budget. "I am a living example of the American dream," he says.
(more like a prime example of the nightmare outcome of lib-dem politix, right up to the 'minority-owned' subsidies)
Washington was once a bookish, dowdy town that discouraged flamboyant displays of wealth. As former Secretary of State Henry Kissinger, and before him Napoleon put it, power, not wealth, was "the great aphrodisiac," and the coin of the realm. Through the 1980s, D.C. was known as a dangerous place to live, beset by crime, poverty and corruption.
The city, like other urban centers, still grapples with these problems. But crime rates have fallen; the region is losing its spotty reputation and has become a magnet for businesses. Corporations including Volkswagen of America and Hilton Hotels Corp. have moved to the region. Others have opened D.C. offices that rival their headquarters in size.
The explosion in government outsourcing has shoveled federal dollars from Capitol Hill to mirrored high-rises dotting the Beltway. The Carlyle Group, CG -1.12% a private-equity firm, was founded in 1987 at the dawn of the 30-year boom in government outsourcing. It started with buyouts of U.S. companies in areas its principals knew best: those dependent on government contracts and regulation, many in the defense and aerospace industries. Today those sectors make up less than 1% of Carlyle's $176 billion in assets, including investments from Middle Eastern food processing to Western media.
"The world has changed," says David Rubenstein, a former Carter administration policy wonk who co-founded the Washington-based firm. "Companies didn't want to remain dependent on the government, and diversified."
Many assume Carlyle's business is still dependent on the government. "People still say today, 'Wow, you must be really taking a hit,'" says Mr. Rubenstein.
As a public servant, (??? a servant, my ass) Mr. Rubenstein analyzed U.S. economic trends. Now he's a billionaire philanthropist who has given tens of millions of dollars each year for historical and cultural institutions such as the Kennedy Center for the Performing Arts, which he chairs, and the Washington Monument, whose $15 million repair bill he's splitting with Congress. Mr. Rubenstein lent his $21 million Magna Carta to the National Archives; on President Barack Obama's Oval Office wall hangs one of Mr. Rubenstein's copies of the Emancipation Proclamation.
Many industries here still make their money the old-fashioned way—with the help of federal contracts. But they've also moved beyond pure government work, opening divisions that cater to private-sector clients, who benefit from the firms' federally acquired experience and talent in fields such as cybersecurity, data management and information systems.
As far as local talent goes, "no one else has such long and deep expertise," in those fields, says Julia Spicer, executive director of the Mid-Atlantic Venture Association, which matches high-growth companies with investors. Companies that operate in the Virginia and Maryland technology corridors near the capital not only have smart workers and capital from investors, "they're now growing businesses that have nothing to do with government contracting." But by dint of proximity, they still "are beneficiaries of the Washington ecosystem," she says.
Booz Allen Hamilton provides national-security, crisis management and other consulting services to both government and commercial clients. Government expertise and big contracts have turned firms such as Booz Allen into global commercial players, and some of those who work for them into millionaires.
Ms. Spicer, who worked in the telecom industry, says that after the 1984 breakup of AT&T, T -1.44% every would-be competitor in the newly deregulated marketplace set up shop here. Their motivation: to be close to the regulators who would set the industry's course. Executives from these companies advanced, or went on to build a number of telecoms and tech-related startups in the region.
Peter Garahan is a lifelong technology executive and a beneficiary of the trickle-down spoils. He was formerly chief operating officer of Amteva Technologies, a Richmond, Va., software company that made products key to the development of Internet telephony. The company was sold to Cisco Systems Inc. CSCO -1.05% in 1999 for $171 million.
Today Mr. Garahan, 66, is vice chairman and chief financial officer of Decisiv, a technology company that has created a computerized management system for the cross-country trucking business—one of the last industries whose operators still use handwritten logs and fax machines. There's nothing government-related about it. "I'm based in Washington, but I could be in Topeka," he says.
Mr. Garahan relaxes by tinkering with his cars. He houses nine sports and classic automobiles in his suburban Virginia "Garage Mahal," a 3,000-square-foot compound with lifts for the cars and an Irish pub for his fellow car guys. In one wing, his 1965 Mustang Fastback and 1975 Cadillac Eldorado convertible are stored aloft on racks, like shoes.
On a cloudless early spring Monday, 29 of Washington's entrepreneurial and professional elite raced Aston Martins and Ferraris along scorching asphalt at West Virginia's Summit Point raceway, a short jaunt from Loudoun County, Va., the wealthiest U.S. county by median household income, according to census data.
That day, Astons owned by an array of intelligence industry executives—who favor the car for its James Bond panache—dominated the field. The race was sponsored by Aston Martin of Washington, D.C., owned by six D.C. entrepreneurs whose day jobs span the fields of airport-security systems to private-wealth management.
"It's our friends who buy these," said Aston dealership co-owner William Shawn, who owns an international law firm in Washington. "My friend called me and said 'why should I choose an Aston over a Porsche?' I said 'Bob, when you have an Aston and you pull up to the Four Seasons valet, you stay up top and at the door. If you pull up in your Porsche, it goes downstairs.' "
yeah, a little more 'belt tightening' for The Rest of US should fix things up - since we wouldnt wanna cramp our 'leaders' style any more than necessary...
guess this 'austerity' thing is working, huh?
maybe they can cut more from the federal toilet paper budget.
What Sequester? Washington Booms as a New Gilded Age Takes Root
- Updated May 31, 2013, 10:35 p.m. ET
By ELIZABETH WILLIAMSON
Suburban Washington boasts some of the wealthiest counties in the nation and the houses to match. WSJ's Elizabeth Williamson tours Norton Manor, the lavish home of IT entrepreneur Frank Islam and his wife, Debbie Driesman. Photo: Lexey Swall.
POTOMAC, Md.—On a bright spring morning, Debbie Driesman and her interior decorator surveyed progress on Norton Manor, the 40,000 square-foot house she's building with her husband, information-technology entrepreneur Frank Islam. To make way for the French chateau-style manse, the family bought two houses on adjacent 4-acre lots and invited the local fire department to destroy them. For practice.
The manor, in suburban Washington, features a reflecting pool (just as the Capitol does), east and west wings (like the White House) andis configured for easy Secret Service coverage when VIP guests attend the couple's Democratic Party fundraisers.Decorator Skip Sroka scoured the globe for Norton Manor's marble fireplaces, hand-loomed carpets and several tons of gilded and Venetian chandeliers. The gardens are modeled, in part, after those of Henry VIII's Hampton Court palace.
"If there's something he can't have that he wants, you have to find a way," Ms. Driesman says of her exacting husband. "You can't just tell him 'no.' "
The sprawling compound is a product of Washington's Gilded Age—a time of lush business profits initially fueled by government outsourcing and war. Some demographers predicted the boom here would ebb as federal spending shrank amid troop withdrawals from the Middle East and efforts to trim the deficit.
Instead, the region has shown surprising resilience, thanks to an economy that has steadily broadened beyond the government. More than a generation of heavy federal spending, it turns out, has provided the seed money for a Washington economy that now operates globally—less tied to the vicissitudes of the capital's political rhythms.
The new moneyed brain trust is being led by professionals in defense, intelligence and data—many of whom excelled initially due to government ties. They've propelled the D.C. region as a leader in the cybersecurity and data sectors, as well as in more-specialized arenas including educational products and health-care data management.
In the first decade of the 21st Century, government spending was the major source of growth in metropolitan D.C., an area that includes the neighboring Maryland and Virginia suburbs. In 2010, federal spending, comprising mostly private-sector contracts, made up 40% of the local economy.
By 2012, that proportion had slipped by four percentage points. But the local economy has still grown faster than the nation as a whole and is projected to continue doing so at least through 2017, says economist Stephen Fuller, a George Mason University professor and an expert on the D.C. regional economy. Its nearly $450 billion economy puts the D.C. region in fourth place nationally, behind the more-populous regions of New York, Los Angeles and Chicago, and ahead of Houston.
(so much for 'big oil'....)
George Mason economists expect the area's annual GDP growth to accelerate by 2017 to 3.2% from 2.1% now, outpacing the rest of the country's 2.9% projected rate. The D.C. forecast takes into account the potential effect this year of the across-the-board budget cuts known as the sequester. The cuts have so far not had the dire impact on local jobs that the White House and a range of economists predicted, largely because government agencies and federal contractors trimmed nonlabor costs to avoid heavier layoffs after the sequester kicked in March 1.
If the sequester drags on beyond this year that may change, but with each year that passes, the local economy grows less dependent on the federal spending most affected by sequester cuts, Mr. Fuller says.
A Washington Manor
Norton Manor, a 40,000-square-foot house being built in suburban Washington, has an east and west wing, like the White House, and a reflecting pool, like the Capitol.
View Slideshow
Lexey Swall for The Wall Street Journal Ms. Driesman and Mr. Islam stood outside their nearly-completed house.
Meanwhile, it's not difficult to spot examples of today's abundance. After only a year in business, Aston Martin of Washington, D.C., based in the wealthy Virginia suburbs, is ranked seventh in sales in North America, having sold 100 of the $120,000-plus cars.
At the Washington Humane Society's annual "Fashion for Paws" gala on April 13, attendees raised contributions of a minimum of $5,000 each to walk their dogs, dressed in tutus and tuxedos, down a runway. At Karma, a Georgetown salon owned by society cosmetologist Erwin Gomez, customers plunk down $350 for eyelash extensions, while the new Capella hotel down the street charges $22 for a martini.
Locals are soaking up the good life at the Ritz-Carlton, too, where restaurant bookings and special-events sales are surging. "My numbers are up considerably year after year," says Elizabeth Mullins, vice president and D.C. general manager at the hotel.
The Ritz sponsors "Knock Out Abuse," a females-only auction to support domestic abuse victims that is a symbol of the new D.C.'s charity bacchanalia. At recent auctions one woman contributed $6,000 to the charity to have dinner with former Redskins football star Clinton Portis, and others contributed hundreds of dollars each to climb a stage and strip the shirts off Maryland firemen.
Seven of the nation's 10 wealthiest counties are in the Washington, D.C., metropolitan region, compared with only two in the New York metropolitan area, and none in Silicon Valley. Census data from 2010 show median household income was $84,523 in the D.C. area, compared with $83,944 for Silicon Valley's wealthy San Jose region.
Mr. Fuller attributes those figures to the fact that the area has "become more business-based," a phenomenon he expects to reap benefits through the current decade: "The stuff we learned how to do for the federal government can be sold to other people—a different economy is going to emerge that in the long run may be a better-balanced economy than the one we have now."
In addition to the area's signature law and lobbying firms, financial services and technology businesses have also flourished, creating a new tier of the super wealthy.
Mr. Islam grew up on a farm in India, and worked for an array of government contractors as a computer-systems specialist before starting his own firm, QSS Group Inc., with help from a federal grant for minority-owned businesses. His main client: the U.S. government. He sold the company to Perot Systems Corp. in 2007 for $250 million and now funds promising technology startups—most of which have nothing to do with the federal government that helped give him his start. A committed philanthropist, he's also given money to a range of universities and think tanks.
His house project, meanwhile, has blossomed over the past four years, including the addition of a self-cleaning, 2,000-square-foot koi pond. Mr. Islam says he doesn't like to talk about how much the place cost, but allowed that it's $30 million over budget. "I am a living example of the American dream," he says.
(more like a prime example of the nightmare outcome of lib-dem politix, right up to the 'minority-owned' subsidies)
Washington was once a bookish, dowdy town that discouraged flamboyant displays of wealth. As former Secretary of State Henry Kissinger, and before him Napoleon put it, power, not wealth, was "the great aphrodisiac," and the coin of the realm. Through the 1980s, D.C. was known as a dangerous place to live, beset by crime, poverty and corruption.
The city, like other urban centers, still grapples with these problems. But crime rates have fallen; the region is losing its spotty reputation and has become a magnet for businesses. Corporations including Volkswagen of America and Hilton Hotels Corp. have moved to the region. Others have opened D.C. offices that rival their headquarters in size.
The explosion in government outsourcing has shoveled federal dollars from Capitol Hill to mirrored high-rises dotting the Beltway. The Carlyle Group, CG -1.12% a private-equity firm, was founded in 1987 at the dawn of the 30-year boom in government outsourcing. It started with buyouts of U.S. companies in areas its principals knew best: those dependent on government contracts and regulation, many in the defense and aerospace industries. Today those sectors make up less than 1% of Carlyle's $176 billion in assets, including investments from Middle Eastern food processing to Western media.
"The world has changed," says David Rubenstein, a former Carter administration policy wonk who co-founded the Washington-based firm. "Companies didn't want to remain dependent on the government, and diversified."
Many assume Carlyle's business is still dependent on the government. "People still say today, 'Wow, you must be really taking a hit,'" says Mr. Rubenstein.
As a public servant, (??? a servant, my ass) Mr. Rubenstein analyzed U.S. economic trends. Now he's a billionaire philanthropist who has given tens of millions of dollars each year for historical and cultural institutions such as the Kennedy Center for the Performing Arts, which he chairs, and the Washington Monument, whose $15 million repair bill he's splitting with Congress. Mr. Rubenstein lent his $21 million Magna Carta to the National Archives; on President Barack Obama's Oval Office wall hangs one of Mr. Rubenstein's copies of the Emancipation Proclamation.
Many industries here still make their money the old-fashioned way—with the help of federal contracts. But they've also moved beyond pure government work, opening divisions that cater to private-sector clients, who benefit from the firms' federally acquired experience and talent in fields such as cybersecurity, data management and information systems.
As far as local talent goes, "no one else has such long and deep expertise," in those fields, says Julia Spicer, executive director of the Mid-Atlantic Venture Association, which matches high-growth companies with investors. Companies that operate in the Virginia and Maryland technology corridors near the capital not only have smart workers and capital from investors, "they're now growing businesses that have nothing to do with government contracting." But by dint of proximity, they still "are beneficiaries of the Washington ecosystem," she says.
Booz Allen Hamilton provides national-security, crisis management and other consulting services to both government and commercial clients. Government expertise and big contracts have turned firms such as Booz Allen into global commercial players, and some of those who work for them into millionaires.
“Seven of the nation's 10 wealthiest counties are located in the Washington, D.C., metropolitan region.”
Executive vice president Mark Gerencser joined the company after college 31 years ago. Mr. Gerencser, a car enthusiast who owns an Aston Martin, a new Tesla, a vintage Mercedes-Benz 560 SL and a custom Harley-Davidson HOG -1.57% Fat Boy, says he plans to hone his driving skills and hunt pheasants with his Vizsla pointer after his retirement next year. He is 52.Ms. Spicer, who worked in the telecom industry, says that after the 1984 breakup of AT&T, T -1.44% every would-be competitor in the newly deregulated marketplace set up shop here. Their motivation: to be close to the regulators who would set the industry's course. Executives from these companies advanced, or went on to build a number of telecoms and tech-related startups in the region.
Peter Garahan is a lifelong technology executive and a beneficiary of the trickle-down spoils. He was formerly chief operating officer of Amteva Technologies, a Richmond, Va., software company that made products key to the development of Internet telephony. The company was sold to Cisco Systems Inc. CSCO -1.05% in 1999 for $171 million.
Today Mr. Garahan, 66, is vice chairman and chief financial officer of Decisiv, a technology company that has created a computerized management system for the cross-country trucking business—one of the last industries whose operators still use handwritten logs and fax machines. There's nothing government-related about it. "I'm based in Washington, but I could be in Topeka," he says.
Mr. Garahan relaxes by tinkering with his cars. He houses nine sports and classic automobiles in his suburban Virginia "Garage Mahal," a 3,000-square-foot compound with lifts for the cars and an Irish pub for his fellow car guys. In one wing, his 1965 Mustang Fastback and 1975 Cadillac Eldorado convertible are stored aloft on racks, like shoes.
On a cloudless early spring Monday, 29 of Washington's entrepreneurial and professional elite raced Aston Martins and Ferraris along scorching asphalt at West Virginia's Summit Point raceway, a short jaunt from Loudoun County, Va., the wealthiest U.S. county by median household income, according to census data.
That day, Astons owned by an array of intelligence industry executives—who favor the car for its James Bond panache—dominated the field. The race was sponsored by Aston Martin of Washington, D.C., owned by six D.C. entrepreneurs whose day jobs span the fields of airport-security systems to private-wealth management.
"It's our friends who buy these," said Aston dealership co-owner William Shawn, who owns an international law firm in Washington. "My friend called me and said 'why should I choose an Aston over a Porsche?' I said 'Bob, when you have an Aston and you pull up to the Four Seasons valet, you stay up top and at the door. If you pull up in your Porsche, it goes downstairs.' "
guess this 'austerity' thing is working, huh?
maybe they can cut more from the federal toilet paper budget.
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