Sunday, October 17, 2010

Personal Reflections on the 2010 Maryland Gubernatorial Campaign

My apologies to out of state readers, but as this is a mid-term election, all races are local. I hope the following has enough connection to national issues and national trends to be of interest to the general reader - Publius

My church participates in an organization called P.A.T.H., which stands for People Acting Together in Howard County. It is an interdenominational, faith-based, community advocacy organization that seeks to provide a voice for the needy in Howard County (Maryland). My impression is that it is fairly non-partisan and certainly its recently accomplished policy goals have been, in my view, fairly non-controversial. The first is the establishment of the Healthy Howard program (, a privately run county government initiative to provide health care to the uninsured in Howard County and the second is legislation to help mobile home owners if the land they are renting is sold ( So, when they announced at my church that P.A.T.H. was looking for people to attend a candidates forum last Thursday (October 14, 2010), which the current Maryland Governor, Martin O'Malley (D) had already agreed to attend and which his challenger, former Maryland Governor Bob Ehrlich (R) had been invited to attend (but had not yet confirmed) and that was billed as a non-partisan event and a chance to see the candidates unscripted, I jumped at the chance, even though I had not previously been active in P.A.T.H.

In reality the event was not unscripted (candidates were given the issues to be discussed and the questions to be asked ahead of time) and hardly non-partisan. Although technically not a partisan event, it turns out that P.A.T.H. is part of the Maryland I.A.F. (Industrial Areas Foundation), which also includes A.I.M. (Action In Montgomery County) and B.U.I.L.D. (Baltimoreans United In Leadership Development). The MD-I.A.F. is a chapter of the national I.A.F., a Chicago based entity for community organizing with a very leftist agenda (their website has a link to an article in The Nation about how the Democrats are not far enough to the left: Far from being an open forum for voters to hear from the candidates, the event was a politically charged gathering at which Gov. O'Malley was welcomed as a hero and which Gov. Ehrlich, wisely, chose not to attend, opting instead to meet with MD-I.A.F. leadership privately the next day. The purpose of the meeting was to advance the following agenda, crafted by MD-I.A.F.:

1) Jobs: The Maryland I.A.F. stated that putting Maryland back to work was its number 1 priority and it's solution was to ask the next Maryland Governor to organize the National Governor's Association to call on President Obama to create a New Deal style public works program.

2) Move our Money to Create Jobs and Stop Usury: MD-I.A.F. called on the next Governor to move state assets from, "usurious large banks," to community banks that, "do not charge [interest rates] above Maryland's state usury laws." They also called for the creation of a Maryland state bank.

3) Fully Fund Education: In 2002, the Maryland General Assembly passed what is known as the Thornton legislation, which mandates increases in state spending on education, but does not provide a funding source for these increases. The MD-I.A.F. called on the next Governor to keep these commitments and invest a minimum of $250 million each year for school construction.

4) In-state tuition rates for all Maryland high-school graduates: regardless of immigration status

5) Affordable Health-Care: MD-I.A.F. called on the next Governor to work under the auspices of the federal Affordable Care Act to create a non-profit health insurance co-op in Maryland to provide affordable health insurance who currently do not have insurance, cannot afford insurance, and will be forced to buy insurance under the new federal law. It turns out that those covered under the Healthy Howard program in my county do not count under the new federal law because they still haven't bought health insurance, even though they have access the health care...

Governor O'Malley, of course, agreed to this agenda almost without reservation: although he did prudently stop short of promising something he couldn't deliver (a federal public works program or being able to move the National Association of Governors on an issue) and said he needed to study how the federal health care legislation affects Maryland and Marylanders before figuring out how to proceed on that issue. I do not know how Governor Ehrlich responded to these issues in his private meeting the following day. I do know that both candidates are committed to fully funding the Thornton education legislation and merely differ on how they would pay for it.

Both of Maryland's gubernatorial candidates for 2010 agree on the education position, and I will concede that it is the job of the next Governor to figure out how to implement the federal health care legislation in the state, assuming it survives court challenges and attempts at repeal (although it is ironic that the upshot of the Affordable Care Act is to mandate that impoverished Marylanders purchase health insurance that they cannot afford...). The rest of the agenda, however, is quite leftist and much of it is divorced from economic reality.

The in-state tuition proposal is a difficult issue. It ignores the salient fact that tuition is cheaper for state residents because they, or their families, subsidize the state colleges and universities by paying taxes. It's a break on tuition for those that pay taxes in the state, not for those who don't. On the other hand, it is hard to oppose creating opportunity for those who have risked a lot to come to this country to work hard and build a better life for themselves. Former Arkansas Governor Mike Huckabee (R) made a compelling case in 2008 Presidential debate defending his signing of similar legislation in Arkansas, when he said he was not about to hold children (the students) responsible for the sins of their parents (that came to the U.S. illegally) because, "we're a better country than that."

However, it is clear that the Maryland-I.A.F. doesn't understand interest rates. As a Maryland tax payer, I certainly want the state to keep its money wherever it can get the highest rate of return, regardless of whether that bank charges high interest rates for loans or credit cards. The Maryland-I.A.F. is particularly incensed by credit cards that charge more than 10% interest (which, I think, is pretty much ALL of them), but this ignores the fact that one pays no interest at all if you don't keep a balance. The purpose of the high interest rate is twofold: first to make a profit for the bank or credit card company and secondly to be high enough to encourage you to actually, eventually, pay the bill. A rate that is set artificially low may not allow banks to profitably provide this service or may encourage reckless spending by providing too easy credit. Didn't we learn this lesson when artificially low interest rates fueled a housing bubble? Interest rates are better set by market forces than by fiat. An interest rate is nothing more than the price of borrowing money and it should be based on the length of the loan, the risk of the borrower, and the availability of capital. Interest rates should rise when savings rates are low to encourage saving and send a signal that there is little capital available for lending (thereby making loans riskier) and fall when the banks are flush with cash, signaling that there is plenty of capital available to borrow. An artificially low interest rate sends signals that there is capital available to borrow, when there isn't. Credit card interest rates are much higher than other loans because they are short term borrowing at higher risk. To set such rates artificially low by fiat would introduce entirely too much risk that would ultimately prove detrimental to the bank and to the credit card holder. And create a state bank? I suppose we should do that because the Federal Reserve has worked out so well...

Maryland I.A.F.'s jobs agenda is laughable. Ignoring the fact that the New Deal was an abysmal failure at putting Americans back to work (unemployment never fell below 13% before World War II and there was a double-dip in 1937 despite the WPA), Maryland-I.A.F.'s answer to joblessness in Maryland is to ask the federal government for money that it doesn't have. This position blissfully ignores the implications of increasing federal spending. If such spending isn't funded by a higher tax burden, then the federal government will have to either print the money or borrow it. Printing, of course, would devalue the dollar further and robs all of us of wealth as each dollar in our savings account suddenly becomes worth less. Borrowing increases the federal debt. Each year, a percentage of the federal budget is money to pay interest on the national debts (to the holders of that debt). In 2009, that amounted to 5% of the federal budget, but as the debt rises, so too will that number to the point were it becomes large enough that money isn't available to spend on other things, such as defense or social security, or education. If we continue on the current spending course, we can either collapse, like Greece, as investors start viewing holding U.S. debt as a bad risk, or reach a point at which it becomes impossible for the government to fund its most basic services. Either way, we pass a huge economic burden to future generations. The proposal also ignores the real issues with regard to job creation in Maryland. Governor O'Malley has worked to create a vibrant biotechnology community in Maryland, offering incentives for biotech companies to complement the academic resources at University of Maryland, Johns Hopkins University, and the National Institutes of Health in Bethesda; for which he was named, "BIO Governor of the Year," in 2010 ( However, other than biotechnology, Maryland has not been a business friendly state. Many potential jobs were denied from Maryland's Eastern Shore when Walmart decided to cancel it's plans to build a big facility there after the Maryland legislature, controlled by Gov. O'Malley's party, passed a bill that essentially targeted only Walmart with fines for not providing enough health benefits for employees. Gov. O'Malley increased the Maryland state sales tax by 20% (from 5% to 6%). Not only does this create an unfriendly retail environment in Maryland, but it is a regressive tax that is hardest on middle class and lower income Marylanders (although at least state sales tax in Maryland exempts groceries). The business climate in Maryland is so unfriendly that when Tim Kaine (D) was Governor in Virginia, he ran commercials encouraging businesses to come there (, and he's in the same party as Governor O'Malley! Repealing the sales tax increase, easing regulations, offering tax incentives for businesses other than biotech could all help ease the pain of recession for Marylanders and create private sector job growth in Maryland, and all make more sense than federal make-work projects that the federal government can ill afford.

Maryland-I.A.F. is, of course, entitled to have and promote its agenda. I just wish I had understood that this was to be an agenda driven event, rather than an open forum for voters to assess the candidates, before I ended up at what was essentially an O'Malley pep rally to promote an agenda that I, for the most part, disagree with.

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