Did we miss the press release announcing that Peter Franchot had joined the tea party? The comptroller certainly sounded like he'd gone over to the side of anti-government activism Monday when he cast the lone vote against a proposal at the Maryland Capital Debt Affordability Committee to accelerate some of the state's planned borrowing in hopes of spurring the economy through infrastructure spending. The Montgomery County Democrat opined that attempting to create jobs through such public works was "failed policy," adding, "Let the private sector create jobs."
For starters, the private sector in Maryland has been creating jobs, albeit at a frustratingly slow pace. According to the latest numbers from the Commerce Department, private employers in Maryland added about 2,000 jobs in November — not much consolation to the 200,000 Marylanders who are unemployed. Gov. Martin O'Malley has, quite correctly, argued for increasing short-term spending on schools, bridges, roads, mass transit and other projects that can be started relatively quickly as a means to help accelerate the economic recovery. Such efforts unquestionably create jobs in the short term in construction, engineering and other sectors, and they boost Maryland's long-term economic prospects by leading to a better-trained work force and more efficient transportation systems, among other benefits. That's why the state's major business groups support a boost to infrastructure spending.
The other thing to bear in mind about the capital debt committee's recommendation is that it is exceedingly modest. The members are not suggesting that the state should change the self-imposed limits on how much debt it can issue — borrowing cannot exceed either 4 percent of Marylanders aggregate personal income or 8 percent of state revenue. Doing so would be a mistake and could put Maryland's AAA bond rating at risk. What the committee voted to do was to recommend that some borrowing planned to take place over the next several years be accelerated to occur in the fiscal year that starts in July. The overall amount borrowed wouldn't change, but the timing would. That would allow the state to take advantage of low interest rates and low labor costs and put the money to work now, when it's needed most.
The only real complaint that could be made about the debt committee's action is that it is wholly insufficient. Moving money around in the borrowing schedule just frees up about $150 million, not enough to make a meaningful dent in either the unemployment rate or the state's backlog of infrastructure projects. To do that, Maryland needs to increase transportation revenues, most likely through some kind of increase in the gas tax, which was last raised almost 20 years ago. Of course, Mr. Franchot opposes that, too. In October, he called for a two-year moratorium on tax or fee hikes of any kind in Maryland. That puts him to the right of the Maryland Chamber of Commerce — no bastion of liberalism — which has made a gas tax increase to fund transportation projects a part of its agenda for the 2012 General Assembly session.
Mr. Franchot insists that he hasn't gone Republican ("I'm not suggesting we shrink government because we like smaller government," he says) but that his thinking on the matter was colored by a report from his office a week before showing reduced projections for sales tax collections. "When I look at the fiscal situation in the aggregate," he said in an interview, "it is very sobering." That is certainly true. But where he has it wrong is in his insistence that increasing government spending during an economic downturn is a mistake.
Mr. Franchot's chief piece of evidence is that the state faces fiscal problems in spite of the tax increases and new spending the governor and General Assembly enacted during a 2007 special legislative session. But that's false reasoning. That effort was focused on filling a pre-existing gap between spending and revenues, not on boosting public works spending, and it came before the global financial meltdown and recession. To say that other factors have been at work since then would be an understatement.
We appreciate Mr. Franchot's concern for Maryland's fiscal situation and his willingness to ask hard questions of his fellow elected officials. He was right, for example, to criticize the O'Malley administration for seeking this increase in borrowing without specifying exactly what it would pay for. But his cuts-only approach to balancing the state budget is guaranteed to result in job losses while doing nothing to better position the state for economic recovery. We need a more balanced approach.