Economic Slowdown

BEIJING -- In a candid and sober state of the union address this morning, Chinese Premier Zhu Rongji said the government would run a record budget deficit this year to prop up China's slowing economy while it continues to reform failing state-owned businesses.During his speech, which ran 33 pages, Zhu once again pledged not to devalue the nation's currency and to hammer away at endemic corruption that has contributed to protests across the country.In a clear reference to the recent crackdown on China's first opposition political party, he also urged the nation to maintain stability in a year of politically sensitive anniversaries, including the 1989 massacre of pro-democracy demonstrators near Tiananmen Square.

Harford Friends School planned to add first grade this academic year. School officials were looking for four to six students to make up the inaugural class but didn't meet their goal, said Jonathan Huxtable, head of the school. "Only two parents enrolled their children," said Huxtable, who started the school in 2005 in Darlington. "We kind of knew with the economy being so bad, it would be tough. We postponed the addition of first grade until next year." Despite the low turnout for first grade, the school's middle school program is bucking national trends with increased enrollment, Huxtable said.

The Annapolis and Anne Arundel County Chamber of Commerce has canceled the Maryland Seafood Festival this year, citing concerns that it would not break even in the unsettled economy. Chamber officials worried that people looking to cut back on expenses would pass on the festival, which funds itself primarily with ticket sales. They also predicted rising fuel costs would limit the event's regional draw. "Our concern is the direction the economy was going will have an impact," said chamber President Bob Burdon.

More people than ever are calling the Salvation Army's Baltimore offices this year, asking for help paying their utility bills or for food to feed their families. And contributions from individuals, the charity says, are down $100,000 from a year earlier. Around the state, nonprofits are seeing donations fall and pleas for help increase. Their costs to supply food and other assistance are soaring. And they worry that fundraising will fall far short of goals this year, with even the most steadfast of donors, from individuals to foundations, tapped out in light of the economic slowdown.

Despite an economic slowdown that's taken root nationwide, the outlook for the Baltimore area is for continued growth and low unemployment in 2001, local economic development officials and economists say. But that forecast depends heavily on the region's six jurisdictions, since each enjoys its own prospects while also facing unique challenges. For the region, forays into fiber optics in Howard and Anne Arundel counties should spark area job growth, although that could be tempered by losses of manufacturing jobs in and around Baltimore City.

This year's Christmas shopping season isn't expected to be a blockbuster like last year, thanks chiefly to a slowing economy. But it will be strong one, nevertheless, retailers and analysts predict. "I think this is going to be a fabulous year," said Mary Huber, general manager of the Westfield Shoppingtown mall in Annapolis. "The last two weekends, everybody's been spending. Sales have been fabulous." The Christmas shopping season is a make-or-break proposition for most retailers, some of whom reap one-third of their yearly sales and half of their profit during the four frenetic weeks between Thanksgiving and Christmas.

It's no secret that the economic slowdown is hurting the revenues of state governments. What's gone almost unnoticed is how states are trying to make up the shortfall. "The combined average [state and local sales] tax rate rose 26 percent last year," said Diana DiBello, of Vertex Inc., a Pennsylvania tax software company. "That is almost as much as in the previous nine years." The average sales tax rate imposed by states, counties and cities in the United States was 8.534 percent last year.

WASHINGTON - Ending a brief but giddy era of fiscal plenty, the Bush administration released figures yesterday showing that the projected federal budget surpluses outside of the Social Security system had dwindled to almost nothing for the next several years. For the current fiscal year, the administration estimated, the government would run a surplus outside of Social Security of about $600 million, almost negligible in a $1.9 trillion budget and a $10 trillion economy. In April, the White House had projected a surplus of $122 billion in the non-Social Security system for the fiscal year, which ends Sept.

With the economy in a downturn, delinquent loans rising and the potential for interest rates to rise later this year, the banking industry faces some significant challenges this year. Even so, the nation's banking sector is significantly stronger than it was before the 1990-1991 recession, meaning many banks and thrifts could navigate their way to a decent 2002, experts say. "Maybe it won't be quite as good" as last year, said Robert R. Davis, an economist and managing director of governmental relations for America's Community Bankers, a Washington-based trade group.

On the walls of his office in his Guilford home, Frank Burch Jr. has pictures of his father with presidents Jimmy Carter and Richard Nixon, and a framed invitation for his parents to visit President Lyndon Johnson.The pictures remind Mr. Burch that a guy who went to public school and loaded freight, like his dad, can accomplish almost anything. As Frank Burch himself says, "There's really no place in the world he can't go if he works hard and he's ambitious. It's sort of a metaphor for the notion you really can go as far as you want."