Friday, March 1, 2013

The Reality Hits Home

Today is the day that Governor Martin O'Malley and the leadership of the Maryland Democratic Party pretended would never come.

For years and years, the Democrats have been perpetuating the myth that that Maryland's economy was recession-proof. Leadership insisted, time and time again, that Maryland's unique economic features were enough to spare Marylanders (and by definition, Maryland's State and Local Governments) from the economic impact of the recession. Under that misguided logic, the myth was used to provide political cover to the legislative and executive branches for the continuation of reckless fiscal policies that kept increasing discretionary state spending while continuing to raise revenues in the form of regressive and historic tax increases on middle and working class Marylanders.

Democratic recklessness is neither new or a surprise. In 2008, I wrote about Governor O'Malley's spending policy:

To raise taxes and simultaneously increase spending is foolhearty, arrogant, and immoral in the best of circumstances. It is damn near criminal in a poor economy, as O'Malley and the General Assembly decided was a good idea during the Special Session and the 2008 General Assembly session. We have noted time and time again about O'Malley's irresponsibility when it comes to fiscal matters. And time and time again, we have been proved right.
Over the last few years, leading up to today, we've seen O'Malley and company increase taxes, increase regulation, and increase spending to such a point that it has let to ever increasing unemployment and our AAA bond rating being put at risk. But never fear, said our leaders. They have continued to do what they always have done: spent it like they stole it.

But today of course is a new day. Sequestration is the law of the land now.  The White House of course provided what they believe sequestration's impact on Maryland will be, complete with an Armageddon like tone.  And Governor O'Malley is finally coming to grips what it means to Maryland:

"These are job-killing cuts that are an economic threat to Maryland," said Governor O'Malley. "Too many moms and dads in our State will lose jobs, too many children will lose access to programs like Head Start, and too many of our most vulnerable Marylanders will lose assistance from the safety net we've worked so hard to protect. If Congress cannot come together with a balanced approach to avoid these automatic cuts, we will reverse much of the progress we've made in Maryland creating jobs and expanding opportunity for more families." 
Governor O'Malley says the Federal sequestration will hinder Maryland's ability to create jobs and slow job growth. 
The Maryland Board of Revenue Estimates suggests about 12,600 jobs could be lost in Maryland. A report from the Center of Regional Analysis at George Mason University suggests that direct, indirect, and induced job losses could approach 115,000, a much more severe estimate that would likely send Maryland into a recession.

What sequestration means to Maryland, however, goes far beyond what the federal impacts listed by the White House of even the job losses highlighted by the White House and O'Malley.

What sequestration does is show the entire basis of governance for the Maryland Democratic Party is built upon a house of cards. As we have said time and time again, Maryland's desire to continue to raise taxes and spending was based on upon the idea that flow of dollars and jobs based upon the Federal government was never ending. That with the number of federal employees, federal offices, and contractors who rely on federal government spending located in Maryland, that Maryland was sufficiently insulated from not only the recession, but also from the negative impacts of the existing fiscal policy. 5.6% of Maryland's workers are directly employed by the Federal government. That's before we even discuss contractors and support staff.

The idea that Maryland was immune to the consequences of over-regulation, over-taxation, and overspending is pervasive in Annapolis. And those with the power of the purse have done absolutely nothing to prepare for it. Despite the fact that the specter of sequestration has hung in the air since passage of the Budget Control Act of 2011 577 days ago, Maryland is woefully ill-prepared for it based on years of anti-business, anti-job creation policies and an refusal to accept the political and economic realities that the people of this state are overtaxed. Jay Hancock wrote on that day:

Maryland's massive reliance on federal dollars means that even small changes in the U.S. budget mean large consequences for the state that mostly surrounds the District of Columbia. The changes announced Monday are not small. 
Thanks to two wars, Census Bureau hiring and a big federal stimulus package, in recent years Washington has been spending almost a quarter of a billion dollars in Maryland every day.
That comes to $15,000 annually for every adult and child who lives in the state, according to figures gathered by the Maryland Department of Planning. Since 1990, Maryland has collected half a trillion dollars more in federal spending than it has paid in federal taxes according to the Economist magazine.
Things are about to become very real for both public officials and taxpayers alike. For public officials, there are any number of pressing concerns that they now have to deal with:
  • Loss of direct federal support for programs, thanks to a reliance on federal dollars to fund programs that would be better served with state and local funding;
  • Loss of income tax revenues, from the combination of federal furloughs and contractor layoffs
  • Loss of sales tax revenues, from decreased economic activity due to diminished wages;
  • Loss of business tax revenues, from the combination reduced contracting, lower economic activity.
The taxpayers of course will not have to deal with:
  • For those impacted, loss of income thanks to furloughs, layoffs, or job losses
  • A reduction in services that some taxpayers have relied upon.
Unfortunately for business and Marylanders alike, all of this would have been avoidable had Maryland taken proactive steps to reduce or exposure of risk to the sequestration effort by;
  • Reducing state spending;
  • Rejecting increases to taxes;
  • Rolling back government regulation;
  • Working toward creating a more hospitable economic climate.
Sequestration will create a lot of hardship for Maryland families. For those families and businesses directly impacted by it, there is not much coming out of Annapolis that could be done to stop it. However, the Governor and the General Assembly have amplified the impacts thanks to fiscal irresponsibility and recklessness. 

In order to compete in this new economic reality, Maryland has to do better than this...


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