Debt crisis could have outsized effect on Maryland

Maryland more vulnerable than other states because of heavy concentration of federal workers and contractors

July 16, 2011|By John Fritze and Don Markus, The Baltimore Sun

Bracing for the loss of a steady paycheck is becoming something of a routine for Frank Silberstein.

A statistician for the U.S. Census Bureau and a union steward for the American Federation of Government Employees, Silberstein said the pitched battle in Washington over whether to raise the nation's $14.3 trillion debt ceiling has — for the second time this year — put federal workers in Maryland on edge about whether they'll still have a job in a few weeks.

"It feels like they're coming at us with an ax," said Silberstein, of Hyattsville. He notes that federal workers were caught in the political crossfire over deficit reduction just four months ago as Congress struggled to pass a budget to avoid a government shutdown.

"People are just hoping for the best," he said.

As Washington attempts to negotiate a deal to raise the debt ceiling by Aug. 2 or risk defaulting on the nation's financial obligations, hundreds of thousands of Maryland-based federal employees, contractors and Social Security beneficiaries are watching the political brinksmanship warily.

If Congress and the White House fail to broker an agreement, they could all be affected.

And the pain would be deeper and more widespread, economists say, than was threatened during the government shutdown.

Without authority to borrow money, President Barack Obama's administration would face immediate choices on which bills to pay: Federal employee salaries or Medicare recipients, out-of-work residents who receive federal unemployment benefits or investors who expect to receive interest payments on the country's current debt, veterans or air traffic controllers.

While there are similarities to the showdown in April that threatened to shut down the federal government, economists say, a default could affect a broad swath of Americans that don't typically interact with the government at all. Interest rates could increase on mortgages and credit cards. And while the administration vowed to send Social Security checks during the shutdown, it has made no such guarantee for the debt crisis.

"Unlike the situation posed by a government shutdown, we have no previous experience to draw on where debt defaults are concerned," said Stan Soloway, president of the Professional Services Council, which represents federal contractors.

Maryland is home to 850,361 Social Security recipients, 794,039 Medicare beneficiaries and 753,100 people on Medicaid.

Between hands of a pinochle game at the Waxter Senior Center on Cathedral Street, Marian Wright said her biggest concern is whether the government would stop sending Social Security. Wright is only 59, but is on disability.

"It's the only income that we have," Wright said. "I don't think that this should be a threat to us to get the debt down. Find something else and don't use the seniors and the disabled to get the debt down."

No one knows precisely how the administration would prioritize the nation's obligations — the White House, citing optimism that a deal will be reached, has refused to say — but Maryland, with its concentration of federal employees and contractors, has more to lose than many states.

Census data show that 286,814 federal workers live in Maryland. There are 131,350 federal employees who work in the state, and local companies were responsible for about $60 billion in federal contracts in 2010.

"Maryland is more vulnerable," said Sen. Benjamin L. Cardin, who has become increasingly vocal in recent days in pushing for a bipartisan agreement to the debt limit.

"If we don't increase the debt ceiling, it would have a catastrophic effect," the Maryland Democrat said. "I'm not overstating that."

Lawmakers have been discussing the looming debt deadline since last year's midterm election. Republicans captured control of the House of Representatives in that election in part by promising to use the debt limit to reduce federal spending and cut the nation's burgeoning budget deficits.

But political leaders have failed so far to find enough spending cuts to make raising the ceiling palatable.

A bipartisan group of congressional leaders — the latest in a series of groups charged with negotiating a deal — met with Obama for five consecutive days last week. In a news conference Friday, Obama said the sides have made progress, but warned that time is running out.

The group includes Rep. Steny Hoyer of Southern Maryland, the second-highest ranking Democrat in the House.

"My hope is, is that after some reflection, after we walked through all the numbers this week and we looked at all the options, that there may be some movement, some possibility, some interest to still get something more than the bare minimum done," Obama said.

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