A look ahead: 2017

Last year I did this in three parts, but to me that may be overkill this time around. Consider that 2017 is not an election year, so if anything we will not see much on that front until the latter stages of the year as the campaigns for 2018’s state elections ramp up. And because all but one of our local officials are first-term representatives in their respective offices, it’s likely they will wish to continue in office. Bear in mind, though, on the Senate side longtime House member Addie Eckardt will be 75 and Jim Mathias (who is in his second term as Senator after one-plus in the House) will be 67 by the time the next election comes around, so they are likely closer to the end of their lengthy political careers than to the beginning. And thanks to Wicomico County voters who passed the referendum this past November, 2017 will be the year we formally set up the elections which will net the county its first fully-elected Board of Education in late 2018.

Speaking of the local BOE, we still have an appointed board until that election and the two members whose terms expire this year are both Democrats who are term-limited. I suspect the local Democrats will try and send up names of people who will run for seats in 2018 to gain that incumbency advantage – as envisioned, though, these will be non-partisan elections. And the final say goes to the state Secretary of Appointments, who over the years hasn’t always been kind to those we preferred, either. Or, conversely, since the incumbents serve until their successors are appointed, we may see a long stalling technique, too. It will be interesting to see how that plays out, but I’ll bet those who are appointed will use that tenure as a springboard for eventual election.

Elsewhere in Wicomico County as 2016 comes to an end, it appears the city of Salisbury and Wicomico County are working out their issues rather well. The biggest sticking point remains fire service, and it’s relatively likely the city is going to see more of a reimbursement from the county when it comes to that – perhaps to the tune of up to $2 million a year. It’s possible there may be something to cut to make up for this, but as the county has increased its debt in the last few years to build several schools it leaves less room for spending cuts to make up the difference. If the city receives $2 million annually that would equate to about a 3 or 4 cent property tax increase for county residents. There’s also the chance that a tax differential or rebate may be on the table in order to reimburse city residents, as they pay the same tax rate as county residents. Wicomico is one of only three counties in the state that choose not to provide a tax differential to their municipalities.

But there is another factor to consider. Back in June the number of people working in Wicomico County set an all-time high of 52,010, eclipsing a mark that had stood for nearly a decade (July 2006.) That record lasted a month, as July came in at 53,668. While the number of jobs has finally reached where we were a decade ago, bear in mind the labor force is about 1,000 larger – so unemployment is in the 5.5% range rather than 4%. Even so, that extra number of people working – a number which year-over-year between 2015 and 2016 has fluctuated quite a bit but usually comes in at 1,000 or more additional workers in 2016 – means there’s more revenue to the county from income taxes so paying the city of Salisbury may not be such a heavy lift. The question for 2017 will be whether these economic conditions continue and whether Wicomico County will want to spend every “extra” dime on items which are unsustainable in rougher economic times.

That same question goes for the state, but the trend there has been for more spending. Democrats in the General Assembly added millions in mandated spending to the state budget and it’s a sure bet they will try again this year. Add to that the general belief that year 3 of a Maryland political cycle sees the most ambitious agenda put forth – it’s time for those incumbents to bring home the bacon and burnish their re-election chances the next year – and you can bet that paid sick leave will pass, Radical Green will have its day (perhaps with a fracking ban, which would devastate Western Maryland), and any Hogan veto will be promptly overridden. It’s certain that they will leave enough time in passing these controversial bills to do so. We’ve already seen battle lines drawn with the counter-proposal from Governor Hogan on paid sick leave and the social media-fueled drive to repeal the “Road Kill Bill” that Democrats passed over Governor Hogan’s veto in the spring of this year.

The wild card in state politics, though, comes from national politics. It’s not because we had the well-publicized answer to an extremely nosy press – if only they paid as much attention to some of Martin O’Malley’s foibles and scandals! – that Larry Hogan wasn’t going to support his (nominally at best) fellow Republican Donald Trump, but the idea that Donald Trump may actually do something to cut the size and scope of government. (Military contractors, particularly, have reason to worry.) And because Maryland’s economy is so dependent on the federal government, to a shocking and sickening degree, we know that if Trump begins to make cuts it will hurt Maryland the most. Given the typical bureaucrat CYA perspective, it explains perfectly why four of the five jurisdictions Trump did worst in – the only five which came in below his 35% statewide total – were the four counties closest to the District of Columbia (MoCo, PG, Charles, and Howard. Baltimore City was the fifth.) While I am entirely a skeptic on this, there seems to be the belief that Trump will take a meat cleaver to the budget and thousands of federal and contract workers will be cast aside because of it.

And in a situation where revenues are already coming up short of forecast, a recession in the state’s biggest jurisdictions, coupled with the mandated spending Democrats keep pushing through, will make it really, really difficult on Larry Hogan going into 2018. You will be able to judge who has the most ambition to be Governor by who carps the longest about these cuts.

While the Dow Jones stalled this week in an effort to breach the 20,000 mark by year’s end, the rise in the markets echoes consumer optimism – even as fourth quarter GDP forecasts turned a little bearish, consumers still feel a little better about the state of our economy. If we can get the 4% GDP growth Donald Trump promised we may see some of these fiscal crises take care of themselves.

Yet there was also a sentiment in 2016 that the world was going mad: consider all the terror attacks, the seemingly unusual number of and extended shock over high-profile celebrity deaths, and a general turning away from that which was considered moral and proper to that which fell under the realm of political correctness, wasn’t a “trigger” and didn’t violate the “safe spaces” of the Millennial “snowflakes.” (I can’t resist linking to this one I wrote for The Patriot Post.) At some point the pendulum swings back the other way, but in most cases that takes a life-changing event like 9/11 or Pearl Harbor. I’d prefer a much softer transition but a transition nonetheless.

As I see it, the key word for 2017 will be leadership: if the current elected officials and new President have it and use it wisely to the benefit of our county, state, and nation “so help me God” things will be okay. If not, well, we’ve seen that movie for about eight or ten years already and we will continue to slouch toward Gomorrah.

A look ahead: 2016 in Wicomico County

After doing this the last two years one would think I would be an expert at dissecting what will go on over the course of a year, but in this case my crystal ball is a little bit cloudy. Perhaps that’s because things are looking up for a change.

I went to the state Department of Labor, Licensing, and Regulation website and downloaded some figures which reflect great job creation news – particularly in the latter half of this year. Since June, Wicomico County employment figures are running between 1,300 and 1,800 jobs higher than the corresponding month of 2014. Conversely, in 2014 we never ran more than 753 jobs ahead of 2013 and by the end of last year we actually had fewer employed than the year prior. That downturn carried into this calendar year but by March we had turned the corner.

The growth in the latter half of the year was reminiscent of the boom period of 2004-06, when Wicomico County routinely gained 1,000 or more jobs in every month year-over-year.

So the question will be whether county revenues begin to increase. Unlike the boom of a decade ago, which was fueled by a rapid increase in property values that later translated into increased tax collections, this upturn doesn’t come with rapidly appreciating property values. And there are plenty of bills for the county to pay – two new schools with a third one now placed into the pipeline as well as new facilities for the Board of Elections, increased mandates for education spending and environmental cleanup from the state and federal governments, respectively, and a call from the city of Salisbury to assist them more with fire protection expenses through a more equitable revenue sharing. Certainly it appears that any new money has a number of hands reaching out for it.

Another question regards how well two relatively new leaders will work with each other. It’s fortunate that both County Executive Bob Culver and Salisbury Mayor Jake Day spent a little bit of time on the legislative side of things because it will help them understand the process the other has to go through to get things done. If there’s one thing we have learned from Culver, though, it’s that he’s a man of action who always seems to have a to-do list of improvements he’d like to see. It’s more autocratic than bureaucratic on the county side of the Government Office Building these days. Initial impressions of Day seem to be similar, although he’s made much less of an impact on taking office than Culver did insofar as personnel decisions are concerned.

But there are two key issues regarding education that will be out of Culver’s hands. One is the fate of the elected school board, which is now up to the Maryland General Assembly. The other is the new superintendent that will take over the county schools sometime in 2016. The Board of Education begins the selection process after the holidays – by the way, the county Republican Central Committee will be called upon to retain or replace two GOP members of that body this summer.

Getting around may become a little more difficult next fall as well, as the state will begin replacing 11 bridge decks on the U.S. 13 bypass. It’s a project that’s not supposed to impact summer traffic in 2017 but won’t be complete until 2018.

In comparison to previous years there doesn’t seem to be anything particularly contentious on the horizon – with the possible exception of the proposed large-scale chicken farms Radical Green is already up in arms against – which probably means we’re going to have an interesting year. If we can keep up the pace of job creation, though, eventually the local economy will get back to where it was a decade ago and prosperity takes care of a lot of problems.

Tomorrow I shift my focus to the state as a whole.

Scraping the bottom

Earlier this week the Tax Foundation released its annual State Business Tax Climate Index. Despite Governor Hogan’s insistence on improving business climate and efforts to adopt some of the Augustine Commission’s reforms, Maryland once again has the dubious distinction of being a bottom-10 state.

Yes, that sickening orange color tags us as a state to avoid insofar as business taxes are concerned. In truth, we’ve only dropped one spot from the 2015 index so while we could have made a few minor improvements other states are improving at a faster pace. (Maryland seems to tread water – over the last four years we have oscillated between #40 and #41.) Moreover, we still lag behind all of our neighbors with Delaware again leading the region. The First State maintained its #14 ranking.

There is one important caveat to Maryland’s decline which could push them out of the bottom 10 next year. Late last month Governor Hogan announced a significant cut in the unemployment insurance tax, which is one of the factors (albeit the least-weighted) the Tax Foundation uses to determine its rank order. But other states are trying to push the envelope more quickly by reducing corporate and individual tax rates, something Maryland has talked about but not acted upon. (The Tax Foundation’s weighting process is explained on page 16 of their full report.)

While reducing regulations doesn’t always require legislative approval, the tax nut is a harder one to crack. The requirement to balance the budget means that revenue no longer extracted from corporations and small businesses alike can’t be used for profligate spending. At a time when government getting an increase that’s less than expected brings screams about draconian cuts from the left side of the aisle, heads truly explode when less real money is allocated. Even if you get 97 cents when you used to get a dollar, liberals act as if you just shot their unicorn with a scary-looking AR-15.

There’s a reason I bring up 97 cents as a particular figure. According to the state’s FY2016 budget, the corporate income tax accounts for 3% of the revenue; thus, eliminating it entirely would mean a corresponding budget cut. (We’ll leave aside the obvious competitive benefit to the state, which would eventually attract more business and increase revenue via other means such as income and sales taxes.) While it’s true that having a poor corporate tax ranking doesn’t completely eliminate the good – Delaware’s #50 ranking in corporate taxes only drags its overall rank to #14 – eliminating the tax would make it plain that Maryland is indeed “open for business.”

Eliminating the tax would also eliminate what’s become an annual debate about combined reporting. Proponents of its adoption, mainly Democrats, claim large businesses are not paying their fair share because they use the accounting trick of claiming their income arises from low-tax states. They may make actual profit in Maryland but don’t report it because they have operations in other. more tax-friendly states. The most recent iteration of the idea came last year, with the tradeoff that would have eliminated filing fees for small (less than 10 employee) businesses. In that respect it was a money-loser for the state; however, the research showed in better economic times the effect would be beneficial to state coffers.

Interestingly, Salisbury has a new mayor that epitomizes the opposite end of the chicken-and-egg approach: last week in the Salisbury Independent, Jake Day was quoted as noting:

“Economic development isn’t what it used to be,” he said. “It includes more activities. It’s now about culture. About quality of life issues. The arts and people. Parks, bike trails, bike lanes. And if you don’t get those right, don’t even talk about workforce development and industry and business development efforts, because you have to have those things to attract anyone.”

This portion of Delmarva boasts a lot of natural beauty along its rivers and coastlines, a well-regarded university, and a proportionate share of arts and culture. Perhaps the traditional bricks-and-mortar manufacturing or legacy service industries won’t come to Salisbury, but it’s been obvious over the last ten years that the beauty, academics, and culture isn’t exactly making this a hotbed of economic activity either. There needs to be a more balanced approach to development because it takes a fair amount of money to create and maintain parks, bike trails, and bike lanes – particularly if the money is granted from the state as it often is. We may be competitors to certain other urban areas around the state, but development somewhere else in the state or even another state, depending on the grant source, is paying the lion’s share for the bike lanes to be installed here. (In some cases, local gifts have helped.) Funding will also be required to maintain parks and develop new ones like Pirate’s Wharf along the Wicomico River.

There are thousands who have moved here over the decades as adults, and for the most part they came here for one of two reasons: they came to school or they came for a job. And if they came for school, there’s no guarantee they will stay if jobs or entrepreneurial opportunities aren’t available.

Simply put, Maryland has a long way to go in overcoming the poor reputation they have for growing and attracting businesses. It’s a lot easier for those on the Western Shore to prosper when there’s a ready-made source of confiscated wealth in close proximity. (If all those people had to find honest work Maryland would be just like West Virginia, with high unemployment. Because it’s well away from that honey pot of confiscated largess, the lower Eastern Shore already is in that same high-joblessness boat.)

I learned the other day that the Augustine Commission determined 1/4 of Maryland’s GDP comes from the federal government. If we can rightsize the federal government over the coming decades, Maryland will be negatively affected in what would be of overall benefit to the nation. It’s time to wean our state off the opioid of living off the federal employees and make strides in diversifying our economy. For that reason, making our state more business-friendly simply has to occur.

The manufacturing perspective on TPP

November 9, 2015 · Posted in Business and industry, Campaign 2016 - President, Inside the Beltway, National politics, Politics, State of Conservatism · Comments Off on The manufacturing perspective on TPP 

Political junkies know the first Friday of the month will generally bring the unemployment rate and job creation numbers from the previous month. As of Friday, the government told us we were at 5% unemployment for the first time since the Bush years, when economists talked us into a recession. (This was back when tepid job growth actually increased the unemployment rate. Of course, people blamed the president at the time.)

Be that as it may, though, there were no net manufacturing jobs created during the month, a fact which concerned pro-manufacturing organizations like my old friends at the Alliance for American Manufacturing. To quote their president, Scott Paul:

Underneath the euphoria over a good topline employment number is this fact: Manufacturing hasn’t gained a single net job since January. 

That’s terrible news for our economy. The effects of China’s industrial overcapacity can be seen in waves of layoffs in American steel, aluminum, and other manufacturing sectors. This weakness in factory hiring comes at a very inconvenient time for the proponents of the TPP, which analysts predicted will widen our record manufacturing trade deficit. (Emphasis in original.)

Regarding the TPP, the U.S Business & Industry Council (USBIC), an advocacy organization for small businesses, said in a statement that the TPP is full of “special deals” for multinational businesses. USBIC president Kevin Kearns:

The TPP is anything but the free trade agreement it purports to be.  The use of the term ‘free trade’ is simply a codeword designed to attract the support of Congressional Republicans who lurch zombie-like to support anything so labeled, without examining the fine print.

A real free-trade deal could be written on a single sheet of paper, with commitments to remove all tariffs and non-tariff barriers of any kind.

Over at the National Association of Manufacturers (NAM), writer Linda Dempsey demanded a thorough review of TPP’s provisions. All this makes it clear that manufacturers are wary about the effects of this trade deal. I also covered some of the other potential pitfalls on Friday for my weekly Patriot Post piece, which leads me to wonder: just who the heck is for the deal?

Well, actually, NAM is part of a broad coalition of business interests seeking the deal, which makes it less of a Main Street vs. Wall Street issue and mote of a tug-of-war between union interest in protectionism and businesses after free trade. But one question worth asking (as Kearns does) is why we need over 5,000 pages of agreement to clear the trade docket? One can also ponder what benefits we really get as the largest partner by far – it’s not a coalition of equals by any stretch of the imagination, although depending on the source the per capita GDP has been measured slightly higher than ours for partners Australia and Singapore.

If there was ever a case where the devil is in the details, this may be the one. I noted in Friday’s article that time is not of the essence – the 12 nations have up to two years to ratify the agreement, with only 6 (one being the United States) being enough to enable it under certain conditions. (It boils down to we have veto power, and Japan also might depending on the direction of its GDP compared to the dozen as a whole. The Japanese are close to the 15% of total TPP GDP needed to sink the deal if they don’t pass it. By the way, we have a roughly 65% share so we are by far the biggest frog in this little pond.)

The concept of free trade works best among equals. Unfortunately, there aren’t many peers at the level of the United States so you get the complexity of the TPP, which I won’t dare profess to understand. Just on gut instinct I think the acronym KISS is in order here but when it comes to modern government it seems we can only weave tangled webs.

More woeful manufacturing news

It’s been a crusade of mine to encourage the rebirth of American manufacturing – unfortunately, we seem to be going the wrong way, according to the union-backed Alliance for American Manufacturing. Holding Barack Obama to his promise for one million new manufacturing jobs in his second term, the net gain has fallen with the September employment results and the August revision to 370,000. Even if you consider that their figure is a net figure, we’re still way short of one million jobs created.

Overall, the job market is creating about 200,000 jobs per month – slower than last year, but still positive growth. Unfortunately, it’s barely exceeding population growth.

You may ask yourself, though – why the emphasis on manufacturing in these quarters, particularly when you work in a service industry? To me, the answer is simple: economic growth is achieved when we add value to the overall economy. Sure, you can print money until the printing presses break but that just adds paper and not value.

Consider the iPad I’m writing this on. Originally it was a number of raw materials extracted from the ground. The first addition of value came when they were extracted, but a far larger one came when the component parts were created. A further increase in value came from the assembly process, which made the iPad into something usable by a member of the public. At that point, a little extra was added in shipping it to the venue of retail.

While I can’t ascertain where the raw materials came from, the iPad is manufactured overseas and shipped to the American market. Supposedly Apple has moved some production here, but not for iPads.

I don’t want to get bogged down in those nuts-and-bolts, but suffice to say that I think manufacturing adds more value per dollar invested than service industries. Certainly it can be fickle – the fanfare associated with this early ’70s plant expansion died quickly when a national recession shuttered it within a couple years – but more often than not good jobs are provided.

We are better off when we make stuff. China may be cheaper, but is it better? How many times have you purchased some Chinese-made trinket only to scrap it in a couple years because it was assembled in a shoddy manner with substandard parts? America used to be better than that, and I want to see us return there.

Is the era of full employment over?

April 6, 2015 · Posted in All politics is local, Business and industry, Delmarva items, National politics, Politics, Radical Green, State of Conservatism, Wal-Mart · Comments Off on Is the era of full employment over? 

Simply put, March was not a good month for job creation around the country. Numbers were down markedly from previous months while, as the Americans for Limited Government advocacy group pointed out, the labor participation rate tied a 37-year low.

The news was even worse in the manufacturing sector, where it contracted by 1,000 jobs. While Scott Paul of the Alliance for American Manufacturing blamed the strong dollar, calling it “a big loser for factory jobs in the United States,” it’s only a piece of the puzzle.

Paul would favor a more interventionist solution, adding:

There’s plenty that could be done to turn this around. The Treasury should crack down on currency manipulators, the Federal Reserve shouldn’t act prematurely, USTR should be assertive about enforcing our trade laws, and Congress must address currency and trade enforcement in the context of new trade legislation.

Based on Barack Obama’s promise to create a million manufacturing jobs in his second term, he needs to add 628,000 in the next 21 months – a Herculean task for any president, and almost impossible for this one. Let’s consider a few facts:

First of all, the continued low price of both oil and natural gas has tempered the energy boom to some extent. According to Energy Information Administration data, the number of oil and natural gas rigs in operation last week was 1,048. In terms of oil operations, the number is down 45% from last year and for gas it’s down almost 27%. While gasoline in the low $2 range is good for the overall economy, oil prices need to be between $60 and $80 a barrel for operators to break even, and the benchmark price has held lately in the high $40s.

As I noted, low energy prices are good for some aspects of job creation, but the energy boom is on a bit of a hiatus and that affects manufacturing with regard to that infrastructure. Throw in the unfair competition we’re receiving when it comes to OCTG pipe and it doesn’t appear this will be the cure to what ails us as far as job creation goes.

More important, though, is the financial aspect. Our corporate tax structure is among the most punitive in the developed world, which leads to capital flowing offshore despite the “economic patriotism” appeals of our government to demand it come back. Once you have the opportunity to take advantage of other countries’ willingness to charge 20% or even 15% tax, why should you willingly pay a 35% rate? Their slice of the pie may be less, but they get a lot more pies this way.

And then we have the aspect of regulations, particularly when it comes to the financial restrictions that Dodd-Frank places on the lending industry and the environmental mandates an overzealous EPA is putting on industry – look at coal as an example. If we went back to the conditions of 2006 the environment would likely not suffer serious harm and companies would have a much easier time with their accounting. I haven’t even touched on Obamacare, either.

Not all of this is Obama’s fault, but the majority of these problems can be laid at his feet. Alas, we have 21 months left in his term so many of these things will not change despite the presence of a Republican Congress which will be blamed for any setbacks.

So the question becomes one of just how many employers in general, not just in manufacturing, will be able to weather this storm. Even the recent news that both Walmart and McDonalds will be increasing their wages brought out the cynics and doubters. But it’s worth pointing out that both Walmart and McDonalds have stated they wouldn’t oppose a minimum wage hike. Such a move makes sense for them because their bottom lines can more easily manage a modest wage hike for their employees and they know their local competitors can’t. Both also have the flexibility to adopt more automation where they used to have a row of low-wage employees. As an example, most of the local Walmarts adopted a number of self-serve checkout lanes over the last year or so. If you hire a dozen fewer cashiers it’s easier to give the others another dollar an hour.

Change is a constant in the labor market, and we know this. But there are some circumstances under which businesses thrive and others where they struggle, and history has gone long enough to suggest the broad outlines we should follow. It’s unfortunate that some want to blaze a new trail when we know where the correct path is.

A look ahead: 2015 in Wicomico County

The more things change, the more they stay the same. It’s telling that most of the issues I wrote about last year at this time are still with us.

And as I suspected when the pixels were placed in late 2013, we have a majority of “new” Council members and, as it turns out, a new County Executive in Bob Culver. That new broom is already in the process of sweeping clean as the county’s former public information officer was relieved of her duties and the longtime Parks and Recreation director suddenly opted for retirement.

Yet almost all of the issues I alluded to last year are still with us. One thing which may assist the county in moving forward, though, is that the County Executive and County Council will be working from the same political playbook, with elections now a relatively safe four years away. Maintaining the 6-1 Republican majority on County Council will mean that there should be few issues, although one might argue that the support certain GOP members gave to the former Democratic County Executive Rick Pollitt could make some votes interesting.

The three main issues of 2013 could be resolved at the state level, though, with a little help from a Republican governor. For example, a more farmer-friendly tier map which places less land off-limits to development may be doable with a less stringent Maryland Department of Planning, one which grants more leeway to county desires and less emphasis on the despised PlanMaryland guidelines. As a corollary to that, the “rain tax” may not get to Wicomico County, although the city of Salisbury approved its version late last month. This could provide some tension between city and county as those who would want access to city water and sewer may balk at the additional fees.

On the other hand, the quest for an elected school board will certainly get a boost since the three largest obstacles are all out of the way: Rick Pollitt, Norm Conway, and Rudy Cane all have left (or will leave) office. With the resident delegation now boasting two Republicans to one Democrat – all of whom are freshmen – electing a school board may occur as soon as 2016.

In short, the biggest issue facing Wicomico County in 2015 will be what it does (or can do) to arrest a lengthy slide in employment. Year-over-year employment in Wicomico County has declined all 11 months this year and in 18 of the previous 22 months, with the most recent peak in employment being 50,369 in July 2012. (As a rule employment in this county fluctuates by a few thousand each year, peaking in July.) And while the unemployment rate is down for 2014, the number is somewhat deceptive because a lot of that positive change came as a result of a labor force that averages 847 fewer workers while average employment is down 380. Job one of the Culver administration is to make Wicomico County a more business-friendly environment, although having a governor who also wants to decrease red tape at the state level will help. Still, the solution for our needs may be as simple as attracting business out of high-overhead urban areas across the bridge to relocate here.

There is also the prospect of a revitalized downtown Salisbury to help attract new residents. Salisbury will one of six county municipalities to hold elections for municipal office in 2015, with Salisbury’s situation this year being rather unique: a charter change put in place a few years back will allow all municipal offices to be contested in one election this year, rather than the staggered terms common to most towns and cities. They are also adopting a five-district system, the boundaries of which leave three current City Council members in one district. According to the Maryland Manual, the other municipalities holding elections next year are Delmar (3 seats in November), Hebron (3 seats in April), Mardela Springs (2 seats in August), Pittsville (2 seats in November), and Willards (2 seats in May.) Fruitland and Sharptown will have their next elections in 2016.

With the new administration coming in, along with a revamped County Council, it won’t take long to find out whether the management style of Bob Culver will feature the leadership our county needs to recover and compete. Tomorrow I will turn my attention to the state of Maryland, including what role a bevy of new local elected officials might play.

A doable goal?

Yesterday we received word that the unemployment rate dropped again, with another month of job growth in the 200,000 range. It’s not the Reagan recovery of the 1980s – when we had 15 straight months of job growth in 1983-84 that would put this latest number to shame, including a whopping 1,115,000 jobs created in September 1983 – but it is a reasonably decent run.

Yet just as manufacturing didn’t share in the Reagan-era gains as much as other sectors did (in fact, it lost some ground), the second Obama term has also fallen well short of manufacturing growth goals. I’ve discussed this group and its job tally before both here and on my former American Certified site, but the Alliance for American Manufacturing tracks progress toward the one million manufacturing jobs Barack Obama promised in his second term.

AAM’s president Scott Paul isn’t all that pleased about it, either.

The good news is that manufacturing jobs have grown over the past few months. The bad news is that they haven’t grown fast enough. I’m very concerned that a surge of imports from China and a paucity of public investment in infrastructure will continue to hamper the great potential of the productive sector of our economy.

Hopes of achieving the White House goal of 1 million new jobs in the Administration’s final term are fading fast. Without some progress on the trade deficit and a long-term infrastructure plan, I don’t see that changing. No doubt the economic anxiety that many Americans still feel is compounded by stagnant wage growth and diminished opportunities for middle class careers.

Two of the key issues AAM harps on are, indeed, currency manipulation and infrastructure investment, although they also took time recently to praise Obama’s manufacturing initiatives and chastise Walmart for their ‘buy American’ effort because much of it comes in the form of produce and groceries. Around these parts, we don’t really mind that emphasis because we produce a lot of American-grown poultry so if Walmart is willing to invest in us we’re happy to provide. (Then again, that promised distribution center would be nice too.) Of course, AAM is backed in part by the steelworkers’ union so one can reasonably assume their view is the center-left’s perspective.

Even so, the group is useful because it makes some valid points. And I think we should have some focus on creating manufacturing jobs in Maryland, as the defunct gubernatorial campaign of outgoing Delegate Ron George tried to do.

Thus, I think the incoming Hogan/Rutherford administration should make it a goal to create 50,000 new manufacturing jobs in Maryland over his first four-year term – if he succeeds, you better believe he deserves a second. According to BLS figures, as of September an estimated 103,000 people are employed in manufacturing in Maryland. But if you look at past data, it’s not unprecedented to have 150,000 (as late as November 2002) or even 200,000 (as late as June 1990) working in the field. And when you take the confluence of a state that is supposedly #1 in education and combine it with the proximity to both major markets and inexpensive energy sources, there’s no reason we should have lost 30,000 jobs in the manufacturing sector under Martin O’Malley – or 16,000 under Bob Ehrlich, for that matter.

But how do you turn things around in four years? Maryland has to make people notice they are open for business, and there are some radical proposals I have to help with that turnaround.

First of all, rather than tweak around the edges with lowering the corporate tax rate, why not just eliminate it altogether? The revenue to the state from that toll is $1.011 billion in FY2015, which is far less than the annual budgetary increase has been. Would that not send a message that we are serious about job growth and immediately improve our status as a business-friendly state?

The next proposals are somewhat more controversial. To the extent we are allowed by the federal government and its environmental regulations, those who choose to invest in the state and create jobs should have an easier path to getting environmental permits and zoning approvals. Even if a moratorium is temporary, making it easier to deal with MDE regulations would encourage job creation. Most of Maryland’s towns and cities already have industrial sites available, but we shouldn’t discourage construction in rural areas if a job creator needs more space.

We’ve also heard about the construction of the Purple Line in Montgomery and Prince George’s counties and the Red Line in Baltimore – combined, the two are expected to fetch a price tag of $5.33 billion. For that sum, it seems to me we could build a lot of interstate highway – even if this $4 million per mile figure is low (and it would be 1,267 miles of highway based on the combined cost of the Red Line and Purple Line) we could do a lot to assist in moving goods through and from Maryland, whether by finishing the originally envisioned I-97 through to the Potomac (and with Virginia’s assistance, to I-95 near Richmond) or enlisting Virginia and Delaware’s help in improving the U.S. 13/58 corridor to interstate standards to provide a secondary route around Richmond, Washington, and Baltimore.

Once we eliminate the onerous restrictions proposed for fracking and begin to open up the western end of the state for exploration, and (dare I say it?) work on making Maryland a right-to-work state like Virginia – or even creating right-to-work zones in certain rural counties like the Eastern Shore and Maryland’s western panhandle – the potential is there to indeed create those 50,000 manufacturing jobs – and a lot more! It just takes a leader with foresight and the cajones to appeal to the Democrats in the General Assembly as well as a Republican Party unafraid to take it to the streets in the districts of recalcitrant members of Maryland’s obstructionist majority party.

But even if we only create 40,000 or 25,000 manufacturing jobs through these policies, the state would be better-positioned to compete for a lot of other jobs as well, and the need is great. For too long this state has put its economic eggs in the federal government’s basket and there’s a changing mood about the need for an expansive presence inside the Beltway. Rightsizing the federal government means Maryland has to come up with another plan, and this one has proven to be a success time and time again across the nation.

A million and four too many

October 12, 2014 · Posted in All politics is local, Business and industry, Campaign 2014, Delmarva items, Maryland Politics, Politics, State of Conservatism · Comments Off on A million and four too many 

I have a friend that’s tired of seeing this commercial for Jim Mathias because, as she said, “I feel like I’ve seen this same Jim Mathias commercial a million and four times already.” So it’s time for me to expand it and tell you what he’s really saying.

The ad cuts through a number of different scenes from around the area. Most of it is shot in a restaurant but there are stills from a number of outdoor scenes, inside a firehouse, and so forth.

The script is rather simple.

Mathias: Hi, I’m Jim Mathias, your Senator. In Annapolis, I make SURE we get heard and get results for the Eastern Shore. I fight for lower taxes and less regulation so our businesses thrive, make money, and hire more people.

When we need to repair a bridge like a Pocomoke, make our roads safer like Route 113, or improve our schools like James M. Bennett, I get the job done. I’m asking you for your vote so that we can continue to preserve our way of life on the Eastern Shore.

So let’s go through this a little at a time.

Hi, I’m Jim Mathias, your Senator.

Not by choice, and certainly not by voting record.

In Annapolis, I make SURE we get heard and get results for the Eastern Shore.

That can be taken any number of ways, but based on the fact we have higher unemployment and slower growth than the state as a whole, I’m not sure you’re getting them to listen or give us the desired results.

I fight for lower taxes and less regulation so our businesses thrive, make money, and hire more people.

Now wait a second. You’ve voted for 11 of the 12 total state funding items since you’ve become Senator – all four operating budgets, all four capital budgets, and three of the four BRFA bills – 2012 being the exception. In that year, you waited until the Special Session to vote for that BRFA, which was the one that shifted teacher pensions to the counties. Seeing as that the budgets you voted for were increases over the previous year, wouldn’t it follow that revenue had to come from somewhere?

It seems you don’t have a lot of influence on your party since they keep voting for the tax hikes and regulation, yet many of them give you campaign financing. And as I referenced above, when compared to other parts of the state, businesses aren’t hiring more people so it’s doubtful they’re thriving or making money.

When we need to repair a bridge like a Pocomoke…

Interesting you should bring that up. According to the SHA, the Pocomoke River bridge project was paid for by the gas tax increase you opposed, yet it’s been in the pipeline for a few years. From the minutes of the Somerset County Roads Commission, November 15, 2011:

Commissioner (Charles F.) Fisher then asked about the status of the Pocomoke River bridge. Mr. Drewer (Donnie Drewer, SHA district engineer) stated that the north bound side deck will be replaced and a latex overlay will be placed over the south bound lanes. The project is slated to be funded with FY2013-2014 funding.

FY2013 began July 1, 2012, so the project ended up being almost two years behind schedule.

It’s noted that Mathias was present at that Somerset County meeting so if he was fighting as hard as he states, wouldn’t that bridge be finished by now? Instead, the SHA added it to their FY2013-18 plan, which reveals that of the $17.2 million cost, the federal government covers almost $13.8 million. (Page 447 of this exceedingly large file shows it.) So maybe Andy Harris deserves more credit.

…make our roads safer like Route 113…

This is a project which has spanned decades, with original studies dating from the 1970s and off-and-on construction over the last 20 years. So there’s not much Mathias has really done for it. It’s actually been dedicated to the man Mathias was appointed to replace in the House, Bennett Bozman.

…or improve our schools like James M. Bennett, I get the job done.

Actually, much of the money for improving the Bennett Middle School – which I assume is the one he’s talking about since the high school was under construction when he became Senator – comes from Wicomico County taxpayers, who are the recipients of millions in debt to build the new school after two members of Wicomico County Council caved to a vocal support group and changed their initial vote against the bonds. The state money wasn’t coming until the Council bowed to the “Bennett babes.”

The job that was done was placing those children who will eventually attend the new BMS in debt.

I’m asking you for your vote so that we can continue to preserve our way of life on the Eastern Shore.

There are a lot of things worth preserving on the Eastern Shore. But for all the rhetoric, I come back to something I wrote four years ago when Mathias took advantage of the retirement of Republican Senator Lowell Stoltzfus to jump from the House to the Senate:

There’s a reason that I get day after day of mailings from Jim Mathias explaining how, despite his Baltimore roots, he’s an Eastern Shore conservative at heart (today it’s being against “liberals” and for the death penalty.) Annapolis Democrats wouldn’t be backing him if he weren’t useful to them – they know the score and the fact they need Republicans to have fewer than 19 Senate seats to keep them meaningless. He will be no such thing as a loose cannon.

In order for the state of Maryland to be a true two-party state and keep in check the appetite of the liberals who have been running our state into the ground for God knows how long, Republicans need to maintain at least 2/5 of the Senate, or 19 of the 47 seats. (Getting 19 Senate seats is paramount because that can sustain a filibuster.) The GOP got to 14 seats in 2006, only to lose two in 2010 – one of them being to Jim Mathias. Prior to that, the 38th District Senate seat had been Republican for nearly 30 years, which matched the conservative nature of the district.

I won’t deny that Jim Mathias has a more moderate voting record than most Democrats in Maryland, and on certain issues he will vote with Republicans, such as overt tax increases or the gun law. But these seem to be the exceptions to the rule, and now Jim is casting himself as someone who got pork for the district. Going along to get along, with the exception of votes where the hall pass to vote against the party line because the votes are already there, is one thing.

But in order to “preserve our way of life on the Eastern Shore” we need a reliable conservative voice to reflect the conservative area and that’s not Jim Mathias.

Let’s get back to work

Yesterday, in my thoughts on an unrelated subject, I alluded to the massive loss of jobs in Maryland. Turns out it was worse than I thought – based on the unrevised Bureau of Labor Statistics totals, 16,286 fewer people in Maryland were working in July than June, adding 10,057 to the ranks of the unemployed.

The state compiles this data for Wicomico County as well, and I thought it would be instructive to note the June totals for the last several years. It’s worth noting that employment here normally tops out in July, with June usually a close second. The numbers are readily available for the period 2009-14, which covers the trough of the recession and the recovery.

So here are the June totals since 2009:

  • 2009 – 49,271 employed, 4,556 unemployed (8.5%)
  • 2010 – 49,548 employed, 4,856 unemployed (8.9%)
  • 2011 – 49,160 employed, 5,030 unemployed (9.3%)
  • 2012 – 49,585 employed, 4,759 unemployed (8.8%)
  • 2013 – 48,991 employed, 4,526 unemployed (8.5%)
  • 2014 – 48,760 employed, 3,964 unemployed (7.5%)

Over the five-year period, the unemployment rate went down 1 percent, but the number employed also went down by 511.

Just as a comparison to use a (generally) worst-case scenario, here are January numbers:

  • 2009 – 47,015 employed, 4,722 unemployed (9.1%)
  • 2010 – 45,526 employed, 5,669 unemployed (11.1%)
  • 2011 – 46,838 employed, 5,393 unemployed (10.3%)
  • 2012 – 46,758 employed, 5,178 unemployed (10.0%)
  • 2013 – 46,806 employed, 5,066 unemployed (9.8%)
  • 2014 – 46,711 employed, 4,338 unemployed (8.5%)

Over that five-year period in the month which is generally the nadir for local employment, we still lost 304 jobs although the rate deceased 0.6 percent.

But it’s estimated that Wicomico County gained 2,163 people between the census in April, 2010 and the 2013 estimate. So how are those people supporting themselves on 300 to 500 fewer jobs?

The title of this piece comes from a tagline and hashtag that District 38B candidate Carl Anderton, Jr. has been using during his campaign. While state numbers have fluctuated due in large part to changes at the federal level, the number of jobs in this area really doesn’t depend on the mood of the federal government. Instead, much of it is influenced by the policies at the state level and, judging by the figures, it’s pretty obvious that what’s being tried isn’t working – particularly if you’re one of those who had a job and lost it.

It’s often forgotten that the government doesn’t necessarily produce anything nor does it create value. Even in cases where infrastructure is being improved (such as the airport runway I described a few days back) the actual work is contracted out to a private company. But that private company has to follow additional rules and regulations to access that federal money, ones which may not apply in a truly private transaction – oftentimes there is a prevailing wage provision, for example. Meanwhile, we also have to pay the bureaucrats who reviewed the grant application, wrote the specifications, and so forth. The airport is receiving $5.53 million, but it may have cost taxpayers $7-8 million with the overhead involved.

Simply put, the Washington bureaucrats served as a conduit and a filter, meaning they received their cut first. Sure, this project will create a handful of construction jobs but imagine what the overhead could have done. It’s pretty much the same when Annapolis or local government is involved, since they get their cues from higher levels.

There are a number of economic drivers which this area relies on: agriculture (particularly poultry, with the feed stock being an integral part of this), tourism, and to a small extent, technology (thanks to spillover from Wallops Island.) Here’s where we really need help from the state:

  • improving transportation by using the gas tax we pay to actually build the needed bypasses and through routes to make access easier for tourists and getting goods to market more efficiently for producers;
  • leaving alone our true environmentalists, the farmers, by allowing them to use their land as they see fit and reforming the transfer of development rights to a generational term rather than perpetual;
  • creating a sales tax-free zone to allow us to compete directly with Delaware for retail sales;
  • finally, putting an end to blaming farmers for environmental problems and looking at common-sense solutions for cleaning the Chesapeake Bay. Work on the problems we know we have and put a moratorium on new regulations until we can determine how well the ones we have in place work.

Larry Hogan addresses some of the problem in his new video:

But the other side of that is reining in the Maryland Department of the Environment and Chesapeake Bay Foundation, neither of which Hogan addresses. That’s okay, though; I’d rather not telegraph those sorts of moves.

I have often seen complaints from the other side (of both the Bay and the political spectrum) that we on the Eastern Shore take more from the state than we give to them. For the sake of the argument, let’s say that’s true.

One has to ask, then, why this is the state of affairs? The people of the Eastern Shore seem like the hard-working, prideful sort who don’t like the thought of handouts. All we want is a chance to shine and do what we do best – left to our own devices, we can prosper and lead the state.

But there are those who like the Eastern Shore just as it is, preferring it remain rural and backward so they can look down on us and refer to us as the state’s “shithouse” as they fly through on the way to their beachfront Ocean City condo. Those are the people who need to be on the outside looking in politically in order for us to succeed.

June unemployment figure drops, but manufacturing jobs lag

July 13, 2014 · Posted in Business and industry, Inside the Beltway, National politics, Politics · Comments Off on June unemployment figure drops, but manufacturing jobs lag 

Editor’s note: These were originally prepared for my American Certified Sausage Grinder blog as two different pieces but not used there. It’s a good opportunity to introduce readers who haven’t gone there to check it out (although I have to ask – why haven’t you already?) to the somewhat different style I employ there. Think of it as a sampler plate.

Last Thursday – a day early due to the Independence Day holiday – the Bureau of Labor Statistics announced the June unemployment rate had decreased to 6.1%, which is the lowest rate in nearly six years. A total of 288,000 jobs were added in June; in addition, an extra 29,000 jobs were added in adjustments to April and May’s figures.

All this should be good news, but manufacturing jobs only increased by 16,000 over the period. This brought the ire of Alliance for American Manufacturing president Scott Paul, who complained that:

While the low-wage recovery progresses full bore, the June jobs report shows that high-wage job growth is at a standstill. Manufacturing accounted for only 5.6 percent of job growth in June, far below its weight in the wider economy. Construction job growth was even slower.

Looking for a reason why? It’s all about public policy. Our growing trade deficit with China, currency manipulation by overseas competitors, and a paucity of investment in infrastructure are leaving factory jobs at a virtual standstill. President Obama’s vision of creating 1 million new manufacturing job during his second term is way off track.

According to AAM, the total manufacturing job growth over Obama’s second term stands at 156,000 – far short of the pace necessary to achieve a million new jobs before 2017. That pessimism extends to the public at large, as a Rasmussen Poll indicated just 23% of Americans believed the unemployment rate will be lower next year.

On the other hand, writing at the Shopfloor blog, economist Chad Mowtray of the National Association of Manufacturers took a more optimistic view, calling the report “mostly positive news.” And while he stressed that wages were increasing at a solid clip, he also pointed out that labor force participation rates were still a source of worry.

Strangely enough, a report on exports for May also came out Thursday, as the Commerce Department announced U.S. exports of goods and services hit a record $195.5 billion high. Many in the steel industry – as well as dozens in Congress – are awaiting next week’s determination on possible dumping penalties against South Korea, while other exporters are lobbying for Congress to act on re-authorization of the Export-Import Bank before the September 30 deadline. Going forward, these determinations could affect future unemployment numbers as well as prospects for those who want to make things in America.

On a state level, though, the news was better.

In order to make things in America, workers are needed. And recently released employment data from the Bureau of Labor Statistics shows manufacturing employment was up year-over-year in May in 44 of the 50 states. (Page 17 here.)

With all the winners, though, it may be time to ask about the losers. The six laggards in the field were Alaska (down 1,800 jobs), California (down 1,400 jobs), Georgia (down 900 jobs), Kansas (down 1,700 jobs), Maryland (down 600 jobs), and North Carolina (down 300 jobs).

Alaska is an interesting case as it reflects in part the fortunes of its oil industry – just a few short years ago it was the only state gaining manufacturing jobs long-term over the decade from 2001-11. But a steady decline in oil production has hampered its local economy, and the state lost nearly 13% of its manufacturing jobs over the last year.

The other significant loser is Kansas, but a regional university’s study predicts an upswing in manufacturing employment over the next three months.

Out of the six where manufacturing employment declined, there is no clear political or labor pattern which can be discerned. Four of the six states have legislatures controlled by Republicans, but that’s fairly proportionate to the 28-17 advantage Republicans have overall. Three of the six are right-to-work states, which also reflects the close 24-26 split between our national composition of right-to-work vs. forced unionism states.

Conversely, the states which did quite well over the last year tended to be the ones bordering the Great Lakes. Minnesota (up 4,400 jobs), Wisconsin (up 1,400 jobs), Illinois (up 900 jobs), Indiana (up 2,900 jobs), Michigan (up 8,500 jobs), Ohio (up 5,800 jobs), Pennsylvania (up 3,100 jobs), and New York (up 600 jobs) all benefited, with Michigan’s first-in-the-nation increase by itself making up for the six states which lost workers. It appears a healthier auto industry is leading the charge.

Change Maryland, or pack up and go?

It seems to be the question on the minds of many people, including gubernatorial candidate Larry Hogan. His campaign noted on Wednesday that:

Gubernatorial candidate Larry Hogan this evening said the following of today’s Gallop (sic) poll that half of all Maryland residents would leave if they could, worse sentiment than all but two states.

“We know from Change Maryland’s Taxpayer Migration Study that under Martin O’Malley and Anthony Brown, more than 6,500 businesses and 31,000 residents fled Maryland’s crushing taxes, fees, tolls and regulations.  Now, we learn that nearly half of Maryland residents would leave our state if they could.

 This tragic situation is the direct result of the failed policies of Martin O’Malley, Anthony Brown and Doug Gansler and one-party control in Annapolis.  The only way to make Maryland a state where people not only want to live but can afford to live again is to end the reckless fiscal policies of the past eight years.”

The two states cited as being ahead of Maryland in this Gallup Poll were Illinois at 50% and Connecticut with 49% – Maryland was third at 47%. None of our neighboring states made the top or bottom 10 in the survey release.

So the logical next question I had was whether people are acting on this desire to vacate our premises, and in a number of areas they are. For the most part, what they have in common is that the nine counties where I found slow to nonexistent growth – or even a decline – is that they are among Maryland’s most rural. (Baltimore City also makes this list, and it shares many of the same economic problems as its rural brethren.) This data is gleaned from Census Bureau estimates of population in both 2012 and 2013, compared with the official 2010 count.

Out of 23 counties and Baltimore City, the state’s population grew at a modest 2.7% clip between 2010 and 2013. But five counties lost population overall: Allegany and Garrett in western Maryland, and Caroline, Kent, and Somerset on the Eastern Shore. Others which lost population between 2012 and 2013, according to Census estimates, were Baltimore City and Queen Anne’s and Talbot counties on the Eastern Shore.

There was very slow growth (less than 1% between 2010 and 2013) in Carroll, Dorchester, and Worcester counties, the latter two also representing the Eastern Shore. While no county on the Eastern Shore matched Maryland’s overall growth, Wicomico came the closest at 2.2% and is now barely 1,000 citizens smaller than Cecil County, the largest of the nine Eastern Shore counties.

Perhaps it’s a little easier to see the reason if you compare unemployment data over the last several years with the growth (or loss) in population. All five counties which lost population overall have an unemployment rate persistently above state average, with most of the rest experiencing slow growth or a loss between 2012 and 2013 also suffering from above-average rates. (Carroll and Queen Anne’s counties are the two exceptions; however, other bedroom suburb counties such as Charles, Howard, and Harford counties are still growing.)

It all presents a sort of vicious cycle: people leave because they perceive a lack of opportunity, which leads to other employers closing up shop and people leaving as the economic pie shrinks yet again. It’s been my contention that the state’s onerous policies on growth and the environment, particularly in more or less undeveloped areas like the Eastern Shore, are retarding the potential of these areas to grow on their own so people look for greener pastures. Those who are raised in rural areas are either heading to the more developed areas of the state or abandoning it entirely.

One thing I haven’t heard a lot of discussion about during this gubernatorial campaign is the concept of local control. Maybe they haven’t expanded on this yet, but the range of solutions I hear from all of the candidates is one of a top-down nature. Certainly there is a place for action from the state, particularly on tax and fiscal policies. But where is the passion for restoring local control? I hear a lot about this on the educational front thanks to Common Core, but what about other areas like planning and zoning? Where is the push to let the counties be their own tiny laboratories of policy experiment such as the states were meant to be before the federal government decided to run the whole ball of wax over the last 20 to 25 years?

I know better than to expect such rhetoric from the Democratic side of the aisle, because their sole intention seems to be consolidating government at the expense of the common man, creating in average Joes the serf-like dependence on those for whom power is the ultimate aphrodisiac. So it’s up to the conservatives in the race to explain how they would have the state step aside and allow those rural counties which seem to be the biggest victims of state policy to flourish like some of their more urban counterparts.

Meanwhile, Richard Falknor at Blue Ridge Forum suggests his own bottoms-up approach.

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