What a suppressed report says about Maryland's economy

Friday, October 8, 2010

AMID A PANICKY exchange of e-mails, Maryland officials removed a downbeat assessment of the state's economic fortunes that had been posted online in August. The review didn't jibe with the thrust of Gov. Martin O'Malley's reelection campaign, which has emphasized Maryland's success in adding jobs this year as it dug out of the recession. Hence the frantic attempt to airbrush history, which ended in Keystone Kops fashion with officials wondering if the offending analysis had been scrubbed from cyberspace for good. It hadn't. Now the episode features prominently in the campaign ads of Mr. O'Malley's Republican rival, Robert L. Ehrlich Jr., who is making hay of the fact that -- surprise! -- Maryland is suffering from economic travails along with the rest of the country.

As in campaigns elsewhere, the questions of joblessness and job creation have figured prominently in Maryland's gubernatorial race. Mr. O'Malley (D) has rightly pointed out that Maryland's jobless rate is significantly below the national average. But he was on thin ice by citing, and seeming to take credit for, the five consecutive months of job creation the state enjoyed this year. As economists have pointed out, the national economic recovery has been fragile and uncertain; woe to the candidate who links his fortunes to an indicator as volatile as the unemployment rate.

Still, Mr. Ehrlich has made too much of the slight uptick in Maryland's joblessness rate in August (to 7.3 percent from 7.1 percent in July) and the brief analysis purged from the state's Web site. (Posted briefly Aug. 20, it said Maryland's recovery had "stalled.") Despite hard times, Maryland has the 13th-lowest percentage of people out of work in the nation; many states with lower rates are sparsely populated places such as the Dakotas and Wyoming. And while joblessness everywhere was much lower in 2006, at the conclusion of Mr. Ehrlich's four-year term as governor, Maryland was actually lower in the national unemployment rankings -- in 16th place -- than it is now.

Mr. Ehrlich has argued that Mr. O'Malley's tax increase in late 2007, shortly before the recession hit, has undercut small business and crippled hiring. There is little evidence of that; although Maryland has a heavier tax burden than some neighbors, such as Virginia, its economy has performed roughly in line with the region's and remains healthier than the nation's as a whole. The state's strengths -- including its proximity to the federal employment engine, a well-educated population and generally good schools -- have given it something of a buffer during the downturn.

Mr. Ehrlich (who has his own record as a tax raiser) promises a "fundamental shift in attitude" that will bring the state a windfall of new jobs. His agenda includes lower taxes (though he won't say what spending he'd cut to pay for them), a streamlined unemployment insurance system, a focus on building the technology sector and a "complete regulatory review" aimed at greasing the wheels of state bureaucracy for small business and entrepreneurs. Mr. O'Malley has his own jobs agenda, not terribly different from Mr. Ehrlich's, that includes tax credits for job creation and small business, an emphasis on so-called green jobs and help for the biotechnology industry. Both reflect the governing philosophies of two middle-of-the-road candidates whose ability to create jobs depends largely on the vacillations of the region's, and the nation's, economy.

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