Gov. Martin O'Malley says his goal for the 2012 legislative session is "job creation." The real goal is much simpler: more government spending to benefit his most diehard political supporters and those in the construction community who benefit largely from government contracting. This is political payback to the teachers unions — which have generously contributed money and warm bodies to his campaigns — dressed up as job creation.
He wants the legislature to approve $372 million in funds to build new public schools. He projects this will create about 11,000 construction jobs for our state.
Leave aside for only a moment the fact that his construction-job figures are wildly optimistic, because something else needs to be said first. It's clear from other proposals the governor supports that this wouldn't mean "net job creation." To pay for public school construction and other projects, Mr. O'Malley supports raising the gas tax, the so-called flush tax and possibly even the state sales tax. He wants to hike the sales tax (again!) from 6 percent to 7 percent, which would be a 40 percent increase during his term of a tax that provided ample revenue to cover Maryland's needs for decades. These increases would undoubtedly have a negative impact on employment, cancelling part of or all of whatever jobs his construction spending generates.
Those tax increases would come on top of the largest tax increase in Maryland's history, which he signed in 2007. And they would bite into Maryland's economy, which already has an overall state unemployment rate of 6.9 percent, well above our historical average. There is never a good time to raise taxes, but any increases should be considered alongside the real possibility of a recession in the next few years, brought on by Europe's looming financial crisis. If we take more money out of the private sector at this precarious time, the very likely outcome will be fewer hires and more layoffs by Maryland businesses — and 11,000 phantom construction jobs would not begin to make up for the difference!
Yes, I say "phantom" construction jobs because it's unlikely Maryland could create anywhere near that many jobs with $372 million. Take the governor's general proposal and divide by 11,000 and you get about $33,800 per construction job. It took the federal government more than three times that amount per job created in Maryland with the stimulus act, even using its own optimistic figures for "jobs created or saved." And we haven't yet factored in any other expenses, including building materials. In other words, $372 million is only a small fraction of what it would cost to employ that many people building public schools.
If members of the legislature are inclined to grant the governor's proposal, they should know this is only the first bite of a multi-billion dollar apple — including the construction, operation and maintenance of the schools — and that it's part of his larger and more odious goal. Mr. O'Malley means to expand the government sector in Maryland to take up a much larger percentage of the state economy. His approach to nearly every issue is more government. He wants to do this for reasons both cynical and naïve. The cynical part has to do with where he comes from. He is a Democrat, but he really represents the party of Big Government. Its growth fuels his political future, in Maryland and beyond.
But he also seems to be a true believer. Economists of a more Keynesian bent still have faith in the voodoo trick of substituting public for private demand (i.e. "stimulus spending") to help even out the business cycle. Mr. O'Malley believes a larger, more muscular Maryland government can help to solve what ails our economy.
However, Maryland must at least get close to balancing its budget. Unlike the federal government, the Maryland government cannot finance its latest whim through borrowing forever. That means Mr. O'Malley's expansions come with an immediate price tag attached. It costs us in the short run to pay for his faith-based initiatives, with no obvious relief as we wander through this desert.
Christopher B. Summers is president of the Maryland Public Policy Institute. His email is firstname.lastname@example.org.