Column: A Recipe for Economic Revival

Column: A Recipe for Economic Revival


Just six years ago, Maryland was ranked a healthy third in the nation as a “New Economy” state burgeoning with technology companies and awash with capital. It was ranked 12th out of the 50 states as a best climate for business according to CNBC. Gross domestic product grew at 3.3 percent and seven Fortune 500 companies had their headquarters here. Biotechnology was the rage with Maryland ranking second nationally in Milken’s Science and Technology Index. Over the next six years, under Gov. Martin O’Malley, Maryland legislated tax generating casinos, increased taxes across the board and instituted a “millionaire’s tax” to fund social programs. Revenues swelled and the economy soared — right? Wrong.

In 2014, according to a CNBC analysis that used economic data including competitiveness, access to capital, taxes, and regulations Maryland plummeted to a rank of 35th as a preferred place to do business. Maryland retained only four Fortune 500 Company headquarters. Its gross domestic product had zero growth in 2013 placing it nearly last in the nation except for Alaska and the District of Columbia according to the U.S. Department of Commerce. Maryland’s economic climate had so deteriorated that in 2013, Gov. Rick Perry from Texas was emboldened enough to violate a sacrosanct rule of economic development — “ Thou shalt not obviously poach another state’s economic bounty.” As a self-proclaimed liberator, Governor Perry openly wooed Maryland’s business promising those emigrants lower taxes and less regulation. Maryland had lost its economic swagger and its dignity was threatened. In a short six-year span Maryland fell from economic grace and was branded as among one of the worst places for business. Many pundits, including the American Legislative Exchange Counsel, listed 32 separate tax increases instituted by Governor O’Malley suggesting that high taxes, over regulation, fiscal mismanagement and a lack of strategic economic vision were responsible for the economic decline. Gov.-Elect Larry Hogan rode into office on an electoral wave of dissatisfaction with his predecessor’s economic policies. What can Governor Hogan do to reinvigorate Maryland’s competitiveness?

Economic development is a fabric that includes transportation, education and housing. It is not limited to taxes and regulation. Government incentives or “tax giveaways” as their protractors like to call them, are popular attraction tools often cited by the press but are not the main ingredient to attracting quality companies. For example, the Wall St. Journal reported that Georgia lured the Mercedes Benz headquarters from New Jersey to Atlanta with an economic package of $23M in tax credits and other incentives. That amounts to about $4,000 per job for the expected 800 jobs. According to Jeff Rhodes, a senior consultant for corporate decisions, “strategic location is more important then incentives that amount to little more then a rounding error for Mercedes.” It is much more likely that Mercedes made its decision based on right to work laws, highway systems, and accessibility to ports and proximity to educated workers.

There are five platforms outside of lowering taxes and decreasing regulation that Governor Hogan can endorse immediately to increase Maryland’s competitiveness:

  • Keep the educated workforce in Maryland through tax incentives and credits.

Maryland is first and second in the nation for the highest percentage of bachelor's-degree holders and graduate- and professional-degree holders, doctoral scientists and engineers. The workforce development challenge facing Maryland is retaining that brainpower. By 2018 it is projected that of the then available 3.1 million jobs, 900,000 will be generated in the next eight years with 67 percent requiring advance degrees. The University System of Maryland Board of Regents acknowledges the state’s deficiencies in science, technology and math (STEM), noting that Maryland currently produces less than two-thirds of the amount of STEM graduates that will be needed by our state’s private sector by 2020. Enacting legislation to help students defer or waive college debt as long as they commit to a three-year stay in Maryland is an attractive policy.

  • Expand affordable housing.

Even the best-educated workforce will not stay in Maryland if they cannot find suitable safe housing for their families. With housing prices out of control, firefighters, teachers, health care workers and essential first responders cannot live in proximity to where they work. The Department of Housing working with federal agencies needs to expand credit and improve access to mortgages.

  • Invest in Maryland’s academic/federal partnerships.

Innovations in Maryland's economy are bolstered by research parks, which facilitate joint research among universities, state and federal government institutions, and private industry. These parks include: The Johns Hopkins Bayview Campus (life sciences research) in Baltimore; and Shady Grove Life Sciences Center (biomedical & life sciences research) in Montgomery County. Also significant are the Applied Physics Laboratory in Laurel and the Space Telescope Science Institute in Baltimore, both affiliated with The Johns Hopkins University. Federal agencies located in Maryland have been a catalyst for the State's technology base. These include the National Institutes of Health, the National Institute of Standards and Technology, the National Aeronautics and Space Administration, Goddard Space Flight Center, and Department of Defense operations. Advanced technology enterprise is especially strong in telecommunications, computer sciences, and biotechnology. A greater push to commercialize these technologies will keep Maryland competitive.

  • Brand Maryland as a “Cyber Capital” state.

Our nation is at constant risk from cyber attacks. Our credit cards, privacy, personal security and even our health are in jeopardy with this new form of warfare. Maryland’s higher education offers advanced IT degrees in cyber security. With our proximity to the Homeland Security and Defense agencies this niche is a natural. Legislation expanding small business cyber incubators that nurture small companies offer capital and services. Programs to mentor these cyber technologies into the federal government will attract international attention.

  • Market and utilize the existing bounties that Maryland offers.

Maryland is blessed with geographic diversity, from the mountains of western Maryland with its rich lumber, wind and water resources to the agricultural fields of the eastern shore. Maryland’s highway network allows trade from corner to corner. Baltimore’s ports are among the deepest on both coasts. Its mid-Atlantic location offers temperate weather and easy access to a multi-billion dollar federal market. Three international airports are accessible. Maryland is a leader in per capita in on-line usage and is well connected for trade.

If Governor Hogan’s cabinet responds to sensible economic policies that include integration and compatible growth strategies with the core agencies of housing, education and transportation then Maryland will once again be competitive and open for business.

Potomac resident Bill Askinazi, Esq.,MBA is a former Assistant Secretary for Business and Economic Development under Gov. Robert Ehrlich. He served as a Fortune 500 Assistant General Counsel.