`Don't Worry, Be Happy'

November 25, 2003

NATIONAL MEASURES of consumer confidence remain lower than right after the 9/11 terrorist attacks, and Maryland reflects that. But Anirban Basu, economic consultant and Towson University lecturer, begs to differ: "The misery of the Maryland economy," he says, "is everywhere apparent but in the data."

Take a look:

Maryland's September unemployment rate of 4.3 percent was the nation's seventh-lowest, and second-lowest among urban states. Maryland's average is almost 2 percentage points below the nation's.

Among mid-Atlantic states, Maryland was the leader in personal income growth in 2002 and in per capita new business starts for the last two years.

These data are cited in Mr. Basu's 2004 economic outlook for Maryland, titled "Don't Worry, Be Happy." The new report ends with a cautionary kicker on job growth, and it doesn't address the state's budget deficit. But it can be taken as a reminder that the Maryland economy is sound enough that meeting the state's shortfall is not so simple as choosing between raising taxes or legalizing slot machines.

After the 1990s bubble burst, many economists predicted Maryland's economy would get hammered more than many states, but that simply turned out to be wrong. Maryland's economy has outpaced the nation's, and Mr. Basu now predicts 2004 should be "a delightful year" - economically speaking.

Contrary to the entrenched gloom, Mr. Basu sees a healthier year nationally in the strong housing market, an upturn in temporary-help hiring (a leading indicator of full-time hiring), growth in nonresidential investment, rebounding pricing power and corporate profits, and soaring productivity.

Maryland has been looking particularly good because, as this newspaper has noted, the state is one of the most educated in the nation and among the top recipients of federal research spending. And it can bank on a virtually certain stream of federal deficit spending on homeland security and defense technology through 2007, Mr. Basu says.

Or as Gov. Robert L. Ehrlich Jr. put it last week in his own take on the state's economy: "The federal government sends money to Maryland in buckets, and it helps us immensely."

Nationally and in Maryland, the fly in the soup is whether job growth returns. Mr. Basu predicts some uptick in Maryland jobs in 2004, along with almost 4 percent growth in the state's personal income. He admits he's not firm about that, but also acknowledges Maryland's economy could continue to pleasantly surpass predictions.

In that case, Maryland may find it can rely on its growth, spending restraint and modest tax hikes to weather this relatively short-term storm - rather than making the permanent leap of legalizing slots. Nothing's certain, but if any state can financially heal itself without the social upheaval of gambling, Maryland seems ideally positioned.

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