Borrow and Spend: Hogan’s Recipe for Economic Heart Disease in Maryland

674
Larry Hogan's borrow and spend policies are making our state sick.

It has always been difficult to convince people to worry about a danger that one does not see or feel, but can nonetheless be fatal. The economic equivalent to cholesterol is excessive debt. Like the marketers who advertise great tasting foods like ice cream, steak, and butter, it is hard to get most people to eat their spinach. The recent stock market correction is an early indicator of a longer-term problem with our economy.

Many people have taken at least one biology course in either high school or college. They may know something about lipids and plaque in blood being bad. I suspect that many fewer people have taken one or more economic courses. It has been referred to as the dismal science,” and is best understood if one has a good math background. 

Earlier in my life, I was counseling one of my daughters on what major to consider as an undergraduate. She was very good in the social sciences and had interests in mathematics and computer science. As a vice president of the RAND Corp. at the time, I was working with a number of world-class economists and had learned to appreciate their methods and insights on a number of public policy issues. No one can go wrong in knowing more about this field. 

Both state and national Republican politicians have made a major case against the evils of debt and social spending, especially since 1994 (i.e. especially when the Democrats hold the governorship or the presidency). Once they take control of all branches of government, however, they reveal their real values of borrow and spend. The recent decrease in the federal tax revenues and the new federal budget of increased spending are a one-two punch of dangerous national debt growth. Desperately needed multi-trillion dollar investments in infrastructure have not even been addressed.

Today, politicians have been conditioned to believe that raising taxes to cover our needed public investments is the “third rail of death.” This does not change the fact that our national infrastructure and education systems are in a state of chronic under-funded crisis. In 2016, the average US citizen paid a 31.7% tax burden (i.e. in the bottom third and below the developed country average of 36%). On the other hand, the U.S. had a debt to GDP ratio of 127% (5th highest). To put this on a more personal basis, the average U.S. citizen owes $61,539 per person on the national debt, while the average person in any other developed country only owes $50,245 per person.

Since 2015, the George Mason University Mercatus Center, a libertarian economic think tank housed inside the university, has been publishing an annual report on all 50 states’ fiscal conditions [E. Norcross and O. Gonzalez, 2017] [https://www.mercatus.org/statefiscalrankings]. The 2015 report was based on 2013 data, and the 2017 report is based on 2015 data. Maryland voters need to look closely at what the Hogan tax reductions have done for the state economy.

Under Republican leadership, Maryland has dropped from 37th place to 46th place over the two years in the Mercatus Center analysis. We are just two states above Illinois and New Jersey, which have continued to hold the bottom positions at 49 and 50. One may say this is due to local economic conditions; however, Virginia has moved up from 21st place to 18th place under a Democratic governor’s leadership.

According to the Mercatus analysis, the bottom five states all exhibit “massive debt obligations” and major “unfunded liabilities …in the form of unfunded pensions and health care benefits… constituting a significant risk to taxpayers in both the short and the long term.” Some other Republican-led states that have taken big reductions in their fiscal conditions are Kansas (-8 places), Iowa (-10 places), and Alaska (-16 places).

The Mercatus analysis also reports that, as of the 2015 state fiscal report, Maryland had a total primary debt per capita of $2,921 versus a national average of $1,804. We have an unfunded pension liability of $20.11 billion and other post-employment benefits liability of $9.36 billion. These lead to our long-term per capita liability of $6,554 versus a national average of $4,272. These long-term debt obligations are not popular discussion topics in the governor’s office, but will have to be paid eventually by our children. Transportation, health, and education costs are going to increasingly fall to the individual states. This will require more state revenue, not less.  We cannot continue to mortgage the future by increased borrowing. 

Since it is now clear that the Republican Party is not a party of fiscal responsibility, it falls to the Democratic candidates in the 2018 elections to stand as the only adults in the room. It is not sexy to preach fiscal responsibility. It is like telling people to stop eating ice cream and to eat more spinach. This is what Democrats must be selling to the electorate in 2018, whichever way possible.

George Donohue is a Prof. Emeritus of Systems Engineering at George Mason University and the president of the South County Democratic Club. The opinions expressed are his own and not those of his University or of the South County Democratic Club. He can be contacted at donohuebvp@gmail.com.

Comments? Please see our Facebook post.

Donate
Help the Arundel Patriot continue to bring you excellent journalism.