Transcripts

D.C.: Middle-Class Paradise to Money-Making Machine?

MS. REBECCA SHEIR

00:00:11
Welcome to "Metro Connection." I'm Rebecca Sheir. And now that January is here you may have noticed a certain document making its way to your mailbox. If it hasn't arrived yet you should have it by the end of the month or early February at the latest. It's the W-2, that trusty wage and tax statement that lets us know first and foremost how much money we earned last year. And when it comes to earning money, overall, we here in Washington bear the distinction of doing pretty well.

MS. REBECCA SHEIR

00:00:37
After all, we have the lowest poverty rate of any metropolitan city in the country, about 8.5 percent. But, at the same time, we also have the highest rate of people who are considered to be the poorest of the poor. That is, who live at least 50 percent below the federal poverty level. So this week we're dedicating our show to the tricky topic of Wealth. And that word we've found tends to elicit all kinds of thoughts and opinions. Just this week we head up downtown D.C. to ask people their thoughts and opinions on wealth. More specifically, how much money they think you have to make to be considered wealthy in Washington. Here's what we got.

UNIDENTIFIED MAN #1

00:01:13
To be comfortable, about $80,000, $85,000.

UNIDENTIFIED MAN #2

00:01:16
Per year, probably about $250,000 because I spend that a year.

UNIDENTIFIED MAN #3

00:01:19
To be wealthy in Washington? $20,000 a month. $250,000 makes you pretty wealthy. But, you know, wealth's all relevant.

UNIDENTIFIED WOMAN #1

00:01:26
To be considered wealthy, I can't even begin to fathom because I'm not in that bracket at all.

UNIDENTIFIED MAN #4

00:01:31
$50,000. I think $50,000 would be good.

UNIDENTIFIED WOMAN #2

00:01:34
I'd say a million in D.C.

UNIDENTIFIED MAN #5

00:01:35
$195,000. That's more than I make.

UNIDENTIFIED WOMAN #3

00:01:40
Forty-plus a year. I mean, that's like better off.

UNIDENTIFIED WOMAN #4

00:01:44
Nothing. You can be wealthy in your heart.

SHEIR

00:01:48
Those were Washingtonians speaking with "Metro Connection's" Lauren Landau. So how much does it actually take to be considered wealthy in Washington? Well, as you just heard that's a tough one to answer, especially given Washington's ever-changing attitude toward wealth. Or so says this guy.

MR. STEVE PEARLSTEIN

00:02:03
I'm Steve Pearlstein. I've been a columnist and writer for the Washington Post since 1988 when I moved to Washington. I actually lived here also in the mid-1970s when I worked for members of Congress.

SHEIR

00:02:16
In the interim Pearlstein was working in his native New England. He came back in '88 to be the Post's deputy business editor. At which point, he and his wife pooled their respective funds from their respective house sales in Boston, and jointly purchased a home in an upscale part of Northwest D.C.

PEARLSTEIN

00:02:32
It was on Fulton Street in Wesley Heights, half a block off Foxhall Road.

SHEIR

00:02:36
A few months later, Pearlstein was sitting in his office when who should walk in but Bob Kaiser. Kaiser would soon become the Post's managing editor. And after discreetly closing the door, he strode up to Pearlstein's desk…

PEARLSTEIN

00:02:46
And threw down a copy of the paper, of the section that had these real estate listings, and one of the transactions was circled. And that was mine.

SHEIR

00:02:56
So right there, in black and white widely circulated newsprint, you could see…

PEARLSTEIN

00:03:02
How much we paid for the house...

SHEIR

00:03:03
Which was approximately…

PEARLSTEIN

00:03:04
$830,000.

SHEIR

00:03:06
And that, Pearlstein was told, simply was not cool.

PEARLSTEIN

00:03:11
Bob, perhaps a little disturbed, but also wanting to help me out since I was new to town and new to the Post, wanted me to know that this really wasn't the sort of thing that mid-level editors at the Washington Post did, which was to visibly spend so much money on a house.

SHEIR

00:03:30
Because, the way Kaiser put it…

PEARLSTEIN

00:03:31
It didn't reflect my proper station at the paper and in the community and it called too much attention to myself. It was too glitzy, and I shouldn't have done it.

SHEIR

00:03:41
See, Bob Kaiser was a Washington native, and his Washington viewed wealth in a very, very particular way. I recently met up with Steve Pearlstein at his current house, not too far from the Cleveland Park Metro, to discuss what he calls the middle-class paradise of post-World War II D.C., and how much that paradise has changed.

PEARLSTEIN

00:04:00
You know, it was much more. It was a small, sleepy southern town focused totally on the government. And there were people who had brought some money to Washington or inherited some money. There really wasn't a lot of money being made in Washington. But the ethic was that you were here to do public service. And this ethic about public service was not only shared by people who worked for the government. It was shared by people who worked in trade associations, law firms, journalism. And you weren't supposed to think about what you were doing as being part of a career to make money. It was a career to gain influence, to gain stature, to gain respect, perhaps. Those were sort of the right ambitions. The wrong ambition was to have a big fancy house in Wesley Heights.

SHEIR

00:04:56
I want to talk about then the transition from this view of working toward public service, not flaunting your wealth. When did that attitude start to change in Washington, in your view?

PEARLSTEIN

00:05:06
Well, it all started changing in the '80s and '90s. And you have to go almost segment by segment. We've talked about the law firms. And what happened in the law business was that as the law business became more nationalized, and as other law firms from other cities started to open up Washington offices, there was a great deal of competition for the talent that was here. And bidding wars started up. And so all of a sudden, in order to lure a partner away from Covington or Shaw-Pittman, you had to pay more. So we got into a little bit of an arms race with the law business.

PEARLSTEIN

00:05:45
Then the law business also changed for reasons having to do with corporate clients all over the country. And so it became much more of a star system. And let's talk about the government contracting business. In the early days there were government contractors, but they were nowhere near as many or as big as they are today. What developed in the 1980s under the Reagan administration was this anti-government attitude that the private sector could do it better. And this outsourcing of what were more mundane and routine government functions started to begin.

PEARLSTEIN

00:06:22
These companies, people realized, could be real honey pots. And all of a sudden the companies, rather than the primary purpose of the companies as to be a long term contractor for certain agencies, the point of the game was to make money buying and selling them. And so Wall Street came in as part of this system. And people could and did make big money and still do. So those are two big areas, but a third area is real estate.

PEARLSTEIN

00:06:55
As Washington and the government got bigger and more complex, they needed more people in Washington. And so what had been a sleepy southern town with plenty of land, well, all of a sudden land became worth more, because there were more people that needed to live and work here. And so real estate development, which had always been the source of some local wealth, now it became a much bigger business. And a lot of institutional money came from the outside to be invested in Washington real estate. In addition -- just think about it. Everyone who lived here and owned a house got to ride the real estate wave.

PEARLSTEIN

00:07:35
So Bob Kaiser, the managing editor who came to complain to me, bought a house around Dupont Circle in the mid-1970s for less than $60,000, which he would have considered an appropriate amount, had just retired after 50 years at the Washington Post. A distinguished career. He's moving with his wife to New York. And he sold his house for, you know, something in excess of $2 million.

SHEIR

00:08:03
Well, you write that as Washingtonians began to make more and spend more, philanthropy sort of became a larger thing. What role have philanthropists played through the years and how would you compare back then to now?

PEARLSTEIN

00:08:14
You know, by the 1970s there was the Cafritz Foundation and there was the Eugene Meyer Foundation. Those were really the only big foundations. Washington was not a philanthropic town. And the reason was A, there wasn't a lot of big money here, and B, people were giving every day at the office. In a sense, they all thought they were in public service. To the degree that Washington became much more commercial, much more like everyplace else, to the degree that the public service ethic receded, and to the degree that there was then serious money in Washington, Washington began to develop a very strong philanthropic tradition here. And now there are many, many people making a lot of money and giving it away.

SHEIR

00:08:59
As sort of the attitude toward wealth in Washington has changed, more and more philanthropists have sprouted up. Is that then a positive offshoot of this idea of making more and spending more in Washington?

PEARLSTEIN

00:09:09
Making more, spending more and giving more away, all three. They all go as a package. And that's a positive sign. Again, I think it is the replacement for the same instinct people had 50 years ago, the public service ethic. But this was not a conscious decision on the part of Washington to get rich. There was no meeting of a cabal at the Metropolitan Club in which they decided, "Hey, you know, we can really cash in here, guys." The mores, ethics and incentives of the rest of the country got to Washington eventually.

PEARLSTEIN

00:09:46
The law business changed, the financialization of American business -- that's happened everywhere. It happened here as well. The different ethic toward wealth and whether you should show it or not. So all of this stuff sort of played itself out in Washington, but it's not so much that Washington changed, as the country changed, and Washington then changed with it.

SHEIR

00:10:17
That was Steven Pearlstein, a Pulitzer-winning business columnist with the Washington Post. And we want to know, do you think Washington, D.C. has transformed from a sleepy southern town to more of a money machine? You can send an email to metro@wamu.org.
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