As the nation enters its 68th month of recovery with falling gas prices, falling deficits, rising job numbers, a recovering real estate sector, and a booming stock market, some may ask what happened to Maryland. While many—myself included—have proclaimed that Maryland’s economy can be described as “Eds, Beds, Meds and Feds,” this characterization exemplifies the problems facing Maryland going forward.
Our job growth has been in the bottom third of the nation recently, and while our real estate market did not suffer the plunges into the abyss as experienced by the sand states (AZ, CA, GA, FL, and GA), our foreclosure rates are among the highest in the nation. Most notably, Prince George’s County is still struggling to recover. Maryland’s dependency on the federal government applies to not only its labor force, of which an estimated 5 percent are employed by the federal government and an additional 10 percent are indirectly supported by the federal government, but also numerous installations and agencies located in Maryland. So, when the federal government cut back spending, Maryland felt the effects across many sectors in the local economy.
Reducing Maryland’s Dependency on the Federal Government
Recently, the Augustine Commission released a series of recommendation, and one of the more prominent recommendations was to reduce Maryland’s dependency on the federal government. While that is easier said than done as this dependency not only impacts our labor force, but the federal government is the primary customer (in some cases the only customer) for many Maryland-based businesses. Moreover, many businesses do not realize that their services and products may have nonfederal uses domestically as well as internationally. Two recent announcements by the Greater Baltimore Committee (GBC) and Maryland’s Department of Business and Economic development (DBED) will provide assistance in diversifying Maryland’s economy, and RESI will play a role in both.
Joining an Economic Development Network
Baltimore, through the efforts of the GBC, was selected to join an economic development network created by the Global Cities Initiative, a five-year joint program of the Brookings Institute and JP Morgan Chase. This initiative is focused on assisting business and civic leaders with growing their metropolitan economies by strengthening international connections and competitiveness. According to some projections, nearly 80 percent of global GDP growth between 2013 and 2018 is expected to grow outside the U.S. Moreover, over 40 percent of job creation comes from existing firm expansion, but only 5 percent of U.S. firms have plans for expansion through exporting.
Receiving an Office of Economic Adjustment (OEA) Grant
Through the efforts of DBED, Maryland was awarded an Office of Economic Adjustment (OEA) Defense Industry Economic Diversification grant. This grant is intended to assist defense communities in developing strategies to increase economic diversification to minimize impacts on regional economies due to potential declines in the Department of Defense’s budget. For example, St. Mary’s County’s economy is nearly 80 percent economically dependent on NAS Patuxent River. As a result, any small decrease in defense spending at NAS Patuxent River would have a disproportionate impact on the local economy.
RESI is fortunate to be involved in both projects. Our initial role is to provide an assessment of what the local defenses supply chain looks like as well as the levels of exports from Maryland-based businesses. The title of this post suggests that we have three events converging into one goal, and that is increasing Maryland’s competiveness worldwide while reducing Maryland’s dependency on the federal government.