In new study of state economies, Md. brings up the middle

Originally published in the Daily Record

MPPI in the News Alexander Pyles | Daily Record Business Writer Jul 11, 2013

Depending on one’s party affiliation, Maryland is either an economic powerhouse or a national laggard with serious business-climate issues.

But a report released by the Urban-Brookings Tax Policy Center on Tuesday, which compiled multiple economic indicators for all 50 states, suggests the Free State is really just in the middle of the pack.

Maryland’s gross domestic product grew 2.4 percent between 2011 and 2012. While that’s just shy of the national average of 2.5 percent, it is similar to pre-recession rates, said Richard Clinch, director of economic research at the University of Baltimore’s Jacob France Institute.

“It’s not a terrible rate of growth,” Clinch said. “You typically want to see the expansionary periods in the threes. But not bad.”

Other statistics — including unemployment, which was 6.7 percent when Urban-Brookings conducted its analysis, and a 30.1 percent increase in average monthly new housing permits between May 2012 and May 2013 — also put Maryland near the national median.

The data, released in the first quarterly review of state economic conditions by Washington-based Urban-Brookings’ State & Local Finance Initiative, did not surprise economic and policy wonks in Maryland.

“Maryland is in the middle of the pack in just about everything,” Clinch said. “If you’re a Democrat, you say Maryland is the greatest state and everything is going well, and if you’re a Republican you say we’re doing everything wrong. Maryland is a middle-of-the-pack state, but we have above-average assets.”

Those assets should put the state ahead of the pack in terms of economic development, said Christopher B. Summers, founder and president of the Maryland Public Policy Institute. Tax policy prevents that, he said.

“Maryland has so many great attributes to it. It just continuously makes some very wrongheaded policy decisions because they can; because you have a one-party combination at the State House,” Summers said, referring to Democrats’ supermajority in the House of Delegates and Senate. “The big question that needs to be answered is, ‘What needs to happen in this state to make it a more robust state for entrepreneurship and innovation?’”

The U.S. Chamber of Commerce in May ranked Maryland No. 1 for entrepreneurship and innovation, piling on to a recent Entrepreneur Magazine ranking calling Maryland the best state in which to start a business. Tax incentives pushed by Gov. Martin O’Malley and General Assembly leaders have lent a hand to growth industries — such as cyber security and biotechnology — guiding the U.S. Chamber’s ranking.

But Summers said tax breaks for targeted industries can’t lift Maryland to the upper echelon of state economies. A more competitive tax policy is required, he said, to effect permanent and meaningful change.

Until then, some say the state economy might act something like a baseball team stocked with All Star talent, but unable to rise above third place in the division standings. The state has for years had the top-ranked public schools in the nation, and Maryland’s work force is among the most educated from sea to shining sea.

“It has so much promise and potential,” Summers said. “Yet the policies they keep implementing, it continues to make it unattractive and to push people out.”

“Maryland chooses to have a set of policies that puts itself in the middle of the pack, when it could be doing better in economic growth,” Clinch said. “But I don’t think we’re a state that has made horrifically foolish decisions. Maryland invests its money relatively wisely.

“Maryland has always done decently with great assets. The question is, ‘Why aren’t we doing great with great assets?’”