Jealous is right: Maryland's economy isn't leading the nation (or anything close to it) under Hogan

Candidates Hogan and Jealous disagree on state of Maryland's economy during Monday's gubernatorial debate.

During Monday’s debate, Gov. Larry Hogan and his Democratic challenger, Ben Jealous, clashed over and over again about Maryland’s economy. That might seem like a strange strategy for Mr. Jealous, since Governor Hogan has been cultivating the economy and the improvement of Maryland’s business climate as central to his brand since long before he even announced he was running for office four years ago. “Open for business” is literally on the “Welcome to Maryland” signs on the highway, right next to his name.

The governor can point to the lack of major tax increases during his tenure and some modest, targeted reductions, as well as efforts to review Maryland’s regulatory structure in order to remove red tape. The National Federation of Independent Businesses pointed to both things in announcing its endorsement of Mr. Hogan, saying he “is overwhelmingly supported by the association’s state members [and] has an excellent record of supporting small business.” The latest Goucher Poll suggests voters believe him when he says he has gotten Maryland moving again: Respondents reported the strongest assessment of their personal finances and the greatest optimism for their own economic situations since 2012, and they said they have more confidence in Mr. Hogan than Mr. Jealous to handle the economy by a 66-23 margin.


So why on earth would Mr. Jealous spend so much time during his one and only chance to debate Mr. Hogan before the general election talking about what, to all appearances, is his opponent’s greatest strength?

Because he actually has a point, that’s why.

We have no way of knowing how Maryland’s economy would have been doing today had former Lt. Gov. Anthony G. Brown beaten Mr. Hogan in 2014, nor how things would look in 2022 if Mr. Jealous wins. Some of his proposals, such as a $15 an hour minimum wage and the tax hikes that would be necessary to support a single-payer health care system and big increases in education spending, are of great concern to business groups. But the crux of Mr. Jealous’ argument is that under Mr. Hogan, Maryland’s economy has fared poorly compared to our competitors in the region and compared to the national average — and in key respects, he’s right.

Job growth

Annual growth in jobs since 2007
Annual growth in jobs since 2007(Baltimore Sun)

Mr. Hogan said during Monday’s debate that Maryland has more jobs now than at any time in its history, and that’s true. It has been true, actually since late in former Gov. Martin O’Malley’s term, when the state finally exceeded the high point it had reached before the Great Recession. But it’s not doing quite as well as Virginia in that regard, and while both states suffered less than the rest of the country, neither is creating jobs at anywhere close to the national average now. Maryland now has about 5.2 percent more jobs than it did back in 2007, when Mr. O’Malley took office and before the recession began to be felt. Virginia is about 6.5 percent ahead of where it was then, and the nation is more than 8.2 percent above its 2007 level.

A graph of the annual increase or decrease since then shows no discernible change in the trends from the O’Malley administration to Mr. Hogan’s term. If anything, Maryland has fallen a bit further behind the pace in the last couple of years. You can make an argument that Mr. Hogan is correct that Maryland “went from losing 100,000 jobs to gaining 100,000 jobs,” if you slice the numbers in the way that’s least favorable to Mr. O’Malley and ignore both the global financial meltdown and the recovery that was well underway before he left office. But when Mr. Hogan said during the debate that “We had some of the fastest job growth in America,” it was simply not true.

Wage growth

Wage growth since 2007
Wage growth since 2007(Baltimore Sun)

The two campaigns sparred about more than the raw jobs numbers. Mr. Jealous also contends that wage growth in Maryland has lagged behind the region and the nation under Mr. Hogan’s tenure. The governor was on the defensive about that even before his opponent raised it as an issue; he accused one of the reporters asking questions during the debate of having her facts wrong with a question about stagnant paychecks. Mr. Hogan countered that wages are up 9 percent since he took office.

He’s right about that if you .a) round up from 8.5 percent and b.) count from January 2015 to August 2018 and ignore the lack of seasonal adjustment for that particular data set. (Wages tend to be higher in the summer.) That figure is substantially better than the comparable period in Governor O’Malley’s second term, though forces outside his control, like federal sequestration, played a big part in that. But once again, Mr. Jealous is right to point to the regional and national context. During that time, wages grew by 9.5 percent nationally and 10 percent in Virginia. If Maryland had Virginia’s wage growth during that time, the average Marylander’s earnings would be about $700 higher this year.

Other measures

Income lost to other states
Income lost to other states(Baltimore Sun)

There are plenty of other ways to measure the strength of Maryland’s economy. During the 2014 campaign, Mr. Hogan made much of the idea that people were fleeing the state because of high taxes and the lack of economic opportunity. The IRS publishes data on the number of people and amount of personal income that flows from one state to another based on where people file their tax returns, and it indeed shows that Maryland has historically lost both people and funds to other states, with Florida (where there is not only a warm climate but also no income tax) typically ranking as the largest beneficiary. The data lag by a couple of years, so we only have a sense of what was going on through the very beginning of Mr. Hogan’s term. But the gist is this: In dollar terms, the exodus shrank to almost nothing toward the tail end of the recession and rebounded to a high of a bit more than $1.6 billion lost between 2012 and 2013 before declining again throughout the rest of Mr. O’Malley’s term. But between the 2015 and 2016 tax years (the first data that would reflect what was going on during the Hogan administration), the figure jumped back up to nearly $1.6 billion.

Annual GDP grown
Annual GDP grown(Baltimore Sun)

In terms of gross domestic product, Maryland’s annual growth has lagged the national rate since the end of the recession and Virginia’s rate in the last year. There has been little if any change in that broad measure of economic growth since Mr. Hogan took office.

Private sector job growth
Private sector job growth(Baltimore Sun)

Finally, Governor Hogan has, for good reason, made much of his efforts to boost private sector hiring and business formation. Maryland’s dependence on the federal government is assuredly a double-edged sword, as we have seen during times of federal spending cutbacks. The flatlined economy Mr. Hogan complained about four years ago was largely attributable to the lingering effects of sequestration. But the state has made little progress during the last four years in boosting private sector employment relative to government jobs. When Mr. Hogan took office, the share of government jobs here was about 22 percent higher than the national rate. Now it’s 21 percent higher.

Is it fair to think that Governor Hogan could transform Maryland’s economy in just four years? Of course not. Macroeconomic factors beyond his (or any other governor’s) control play a huge role, and nurturing new businesses from start-ups to established, major companies takes time. Moreover, Mr. Hogan has been working with a legislature controlled by the other party, so he can fairly claim that he has not been able to achieve as much as he would if he could easily pass his own legislation, or even sustain his vetoes. But that’s not what he’s arguing. Mr. Hogan says Maryland under his governorship is a national leader in economic growth. It’s not.