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Economist to local Md. governments: Prepare for a downturn

Anirban Basu speaks Friday at the Maryland Association of Counties annual meeting in Ocean City. (The Daily Record / Bryan P. Sears)

Anirban Basu speaks Friday at the Maryland Association of Counties annual meeting in Ocean City. (The Daily Record / Bryan P. Sears)

OCEAN CITY — A leading state economist urged local government officials to prepare for an inevitable economic downturn that he said is coming soon.

Anirban Basu, speaking to a gathering of county leaders at the annual Maryland Association of Counties summer conference, said that while he is optimistic about the economy for the balance of the year he sees turbulence on the horizon.

“By this time in 2019, the economy could be in a different place, and I mean a worse place,” said Basu, chief executive officer of Sage Policy Group. “Sometime in 2019, 2020, I see the next downturn coming.”

“Every recovery has ended. There’s absolutely no recovery that has lasted indefinitely. They’ve all ended. And if you believe that it could end in two or three years, some think it might happen very soon, before that, you de-risk your portfolio. Maybe take some money out of the stock market. If you’re fully invested in the stock market, sell some stock.”

Basu also cautioned that people should avoid the temptation to “pay too much for homes” and businesses should look at leasing rather than buying equipment.

One concern noted by the economist is the state’s lack of economic diversity and its continued reliance on the federal government.

Basu also told the audience that the economic status of individual counties continues to paint a picture of two Marylands. The state, he said, continues to languish under an unfriendly attitude toward business.

“It’s a relative thing,” said Basu, who serves as chairman of Republican Gov. Larry Hogan’s Maryland Economic Development Commission. “If our paid sick leave policies are similar to competitor states, it’s not problematic. Businesses will still gripe about it but it doesn’t create a competitive disadvantage. Our corporate tax rate of 8.25 percent when the Democratic governor of Virginia is saying, ‘I want to go from 6 percent to 5 percent,’ that’s a disadvantage.”

Two years ago, some Democratic lawmakers on the Augustine Commission balked at discussions about lowering corporate income tax rates, saying it would leave less money for priorities such as public school funding and create “a race to the bottom.”

Basu said lowering the rates would ultimately result in higher corporate tax collections and higher collections of personal income taxes resulting from business relocating to Maryland and bringing jobs with them.

“We have to compete with the North Carolinas and South Carolinas,” said Basu. “That’s where all the investment is going. If we’re not competitive with them — and we’re not — then we’re going to leave many people in our state behind and really it’s the people in our rural communities that get left the furthest behind.”

Privately, some union representatives took issue with Basu’s comments and pointed out that Democratic legislators in recent years have passed “employee-friendly” policies, including phasing in an increase in the minimum wage to $10.10 an hour and last year passing mandatory paid sick leave — a law vetoed by Gov. Larry Hogan.

Basu, in his talk, noted that wages in the state were on the rise.

“I wonder how much of that had to do with the minimum wage that we passed,” said Sen. Thomas M. “Mac” Middleton, D-Charles County and chairman of the Senate Finance Committee. “That’s got to have some bearing on wages increasing. All of us take real pride in that, but does it happen on its own or does it happen because government forcing it to go up? Then people have more money to spend and that’s what’s driving the economy, as (Basu) said.”

“All of that (legislation) about the minimum wage and paid sick leave is about the middle class is falling and we need to do something to bootstrap it and pick it up,” Middleton said.

But Middleton said he did find useful takeaways in Basu’s discussion, including a need to focus on rolling back needless business regulations.

“That’s money, a cost,” Middleton said. “Consumers are spending but my god you could stretch the dollar a lot further if you didn’t have people having to spend so much on regulations.”

 

 

 


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