Bad times are boon for D.C.-area economy

updated 8:04 p.m. ET Jan. 11, 2009

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 comprised of 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.

J. O'connell / AP

Annual military and homeland security spending has risen sharply since Sept. 11, leading to years of prosperity for the region's consultants and contractors, including well-known defense companies such as Lockheed Martin Corp., of Bethesda, Md., and General Dynamics Corp., of Falls Church, Va.

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.

Local business leaders say the influx of influence-peddlers, combined with leadership changes in the White House and Congress, could provide a small lift to the region's commercial and residential real estate markets, which are hurting like everywhere else.

To be sure, the region is not immune to the recession.

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

Economy in Turmoil Jobless rate rises to 26-year high Out-of-work with no place to land, the legions of America's unemployed are growing. The nation's unemployment rate rose to 9.5 percent in June, a 26-year high. Factory orders rise more than expected in May Calif., other states face tough budget choices Pending home sales climb in May Manufacturing report boosts economic hope

Some well-known companies based in the region, including Sunrise Senior Living, XM Satellite Radio, the Carlyle Group and the Washington Post Co. 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.

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