Helping Maryland grow as Uncle Sam tightens belt

Few states have as good a reason as Maryland to be nervous about cuts in federal spending.

The U.S. government employs more than 280,000 Marylanders directly and many indirectly, thanks to the billions of dollars in federal contracts that businesses in the state have pulled in every year. Federal spending per person in Maryland outpaces that in all but three other states and the District of Columbia.

As Congress and the White House battle over plans to attack the looming budget deficit, a Maryland banker has launched a nonprofit effort to help the state thrive in a future likely to see less cash from Uncle Sam.

Blueprint Maryland's first move was to release an economic analysis by Baltimore's Sage Policy Group this week that says Maryland could lose nearly 150,000 jobs over the next 25 years if all the deficit-reduction recommendations from the bipartisan National Commission on Fiscal Responsibility and Reform are enacted.

The projection assumes a decrease in the number of government jobs and contractors and decreased employment at businesses, such as grocery stores, that cater to federal employees and contractors.

John Delaney, chairman and sole funder of Blueprint Maryland, hopes to help the state chart a path to economic growth that doesn't rely so heavily on federal spending. He envisions getting ideas from a wide cross-section of Marylanders, both through forums and the nonprofit's website,

Delaney, 48, chairs Chevy Chase-based CapitalSource, a commercial lender he co-founded. The Potomac resident is also co-CEO of Alliance Partners, a new firm aimed at helping community banks compete with big players.

Delaney talked with The Baltimore Sun recently about Blueprint Maryland, the federal deficit and why he's optimistic about the state's business opportunities.

Why did you start Blueprint Maryland?

This whole region in general is very vulnerable to changes in federal spending. It's kind of an obvious point, but if you think about it, if we just took what the president's deficit commission recommended … it would impact Maryland [and] Virginia more than it would impact Idaho and South Dakota, right?

So, in a way, we are a region that has a dominant industry, not dissimilar to other regions in the country that used to have dominant industries.

Most people are in the camp that spending patterns will change. We don't know how much, we don't know where … but we do know it's going to change. And we ought to think about that, and we ought to start preparing for that.

What are some of the deficit commission recommendations that should give a state like Maryland pause?

No one has a crystal ball as to what deficit-reduction measures will actually be approved and accepted, and it's hard to predict how they will be applied … to certain regions.

But clearly there will be pressure on defense spending, and that ought to affect the state. Clearly, there will be some focus on government "efficiencies," which is kind of a code word for using technology and reducing human overlap, which could get to the sheer number of employees. Clearly, there will be some entitlement reform, which … could get to the quote "overhead" of [the Woodlawn-based] Medicare.

I think going out 25, 30 years, the federal government will still be a dominant part of Maryland's economy. But if it dials back a little bit, it could still have a pretty significant impact.

Federal spending is like a massive ship that takes a very long time to turn. … We have some time to address it, and we don't want to wait too long. There are examples of states that were dependent on a particular industry, and there was a pullback in that industry, and they waited too long.

What are your goals?

Our objective is to put forth ideas and solutions that have broad-based buy-in — which doesn't mean everyone's going to agree with them — and are backed up by some objective research. … The near future is getting feedback and starting to craft solutions.

Why did you decide to start with a report?

It's almost like a stress test. You know how they stress-test the banks? Let's stress-test the area.

There's direct [impact and] there's indirect. Does Starbucks do better because we have defense contractors? The ripple effect is huge. … The report is more about why this is important; it's less about the solutions.

Who do you see as the stakeholders here?

I think the stakeholders are most importantly employees. I think employers are secondary. Companies can do well even when there's high unemployment. … Whatever percentage of the Maryland population is seeking a job at any period in time, this is actually about them. Because they're the ones who benefit if we have a better employment picture.

What do you think Maryland's chances are of developing a more robust private sector with fewer government ties?

I think they're very high. Because the flip side is we've got a lot of assets. It's a great place to live, we have a very well-educated population, we have terrific schools and we're kind of well-located from the perspective of where people want to live.

The question is, what set of policies allow us to get those assets in the mix in the best way to produce the most employment outcomes? There's a lot of ways to win here.

Do you see specific sectors Maryland could be pursuing, could be competitive in?

I think we're in some really good areas — information technology, biotech — that you want to make sure we're as competitive as possible in. You'd like to see … alternative energy. That's clearly going to be a big employer across, I think, the next 50 years.

Some critics of Maryland's business climate say we should aim to be more like Virginia, [which is] seen as more business-friendly. Does that make sense?

It's not unreasonable, but I don't think these things are always that simplistic. Maryland's different than Virginia. Maryland has certain advantages that Virginia doesn't have and certain disadvantages. … We should just worry about ourselves and not worry about comparisons.

Maryland is never going to be the low-cost place to live and work, and we shouldn't try to be because we have a lot of other stuff we bring to the table. And you get what you pay for. … I think we just want to do better with what we have.

You've noted that Blueprint Maryland isn't advocating for deficit reduction, just trying to prepare for it. How do you feel personally about deficit-reduction efforts?

I think it's the No. 1 issue facing the economy long-term. I mean, various estimates out there predict that unless we change things, by 2025, 100 percent of the federal budget will be toward entitlements and interest. Clearly, that's not going to happen. Clearly, we're going to make changes before then. … The reason the deficit being big is a problem is because it may affect our long-term interest rates in this country and it may affect our ability to invest in the things we need to invest in.