The Bechtel blame game [Editorial]

The transfer of about 1,000 jobs from Bechtel Corporation's Power Business Unit in Frederick to the government contractor's existing facilities in Northern Virginia is an economic loss that hurts worse than most. These are high-paying jobs — many of them engineers who design and build power plants and transmission systems — that Maryland was already subsidizing with tax dollars to retain the unit's presence in this state.

But it's just as disappointing to see how this decision has been translated in the Maryland gubernatorial race between Lt. Gov. Anthony Brown and his Republican rival Larry Hogan. Mr. Hogan was quick to criticize Mr. Brown and Gov. Martin O'Malley for providing "more than $9 million in grants" to retain those Bechtel jobs and for "reckless spending" and raising taxes that hurt small businesses, according to a statement released by his campaign. Meanwhile, Mr. Brown criticized his opponent for being against "job-creating investments" like those that are bringing an Amazon distribution center with 1,200 jobs to Baltimore.


Neither observation has much to do with Bechtel. In a letter dated Oct. 14, Bechtel's CEO wrote to Governor O'Malley explaining that the jobs transfer scheduled to take place at the beginning of the year is due to a restructuring of the entire company and a "response to fundamental changes in the global marketplace."

As for the state's often-disparaged "business climate?" "We share the strong belief that Maryland is great for business, not just for Bechtel but for any business," William N. Dudley insists in his letter, adding that Bechtel will continue to have a presence in the state.


Now, we don't know whether Mr. Dudley is offering the whole story behind the restructuring and his decision making or just showing some gratitude to Mr. O'Malley for coming up with $9.5 million in Sunny Day money to retain hundreds of Bechtel jobs in 2011. But we can also be confident that the candidates for governor don't know exactly what was behind the move by the privately-held multinational either.

And that, in a nutshell, is precisely what's wrong with the continued debate over Maryland's business climate and regulatory environment. If Bechtel moves some jobs to Virginia to be closer to the Pentagon or to consolidate with other operations, there's not much Maryland can do about that. Until there's evidence that this decision was about taxes or regulations, we have to take the CEO at his word.

To blame every job loss on Maryland's taxes and regulations is foolish. But it's just as silly to talk only about economic growth in terms of deals made by state government as if the next governor might buy prosperity by spending tax dollars. Maryland's economy is bigger and more complicated than either vision allows. We need a grown-up conversation about economic development.

Are certain taxes so high that they are strangling job growth? That deserves to be explored. But that conversation ought to include alternative proposals for raising sufficient revenue to preserve the state's K-12 schools and universities, public infrastructure and other critical investments that contribute to a high quality of life and, yes, also support economic growth. Meanwhile, do tax incentives and grants like the one offered Bechtel pay off for the state in the long run? That ought to be re-examined on a case-by-case basis as well.

Currently, the best hope for a rational evaluation of Maryland's business-related policies rests with the Maryland Economic Development & Business Climate Commission, a bipartisan panel appointed by the General Assembly that's scheduled to submit recommendations in December. One can only hope they'll see the forest for the trees.

If lower tax rates and lax regulations translated into prosperity, states like Alabama and Mississippi would be rich as Midas and Lower Manhattan wouldn't house 10 times more Fortune 500 headquarters than all of Maryland. And it's entirely possible, if not likely, that if Maryland dropped its corporate tax rate to zero tomorrow and gave Mr. Dudley a personal check for $10 million and a license to pollute anything he pleases, Bechtel would still be moving.

(Worth noting: Bechtel is based in San Francisco. California's corporate income tax rate and personal income tax rates are both significantly higher than Maryland's.)

No matter who is elected governor in November, the people of this state should insist that tax and regulatory policy be developed not by politics or mythology but by careful and judicious consideration of the pros and cons associated with any specific alteration. This is complex stuff not easily reduced to sound bites or TV ads. The candidates for governor may not acknowledge that, but voters are unlikely to be so easily duped.


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