Federal belt-tightening about to hit home
What's the biggest game in town? The federal government. Which is why President Obama's proposal to freeze federal employees' salaries for two years sent shivers down the backs of state budget analysts -- and why locals should pay attention.
Economists have been warning Maryland that the mounting federal deficit would eventually hit home. The state has disproportionately benefited from federal spending, which means disproportionate pain from freezes or cuts.
In the same vein: Defense Secretary Robert M. Gates's declaration earlier this year that the military needs to rein in spending -- including contracting, a big part of Maryland's economy.
As Richard Clinch of the University of Baltimore notes, salary freezes won't hurt as much as layoffs, but they will be a drag on economic recovery. (People tend to buy less if their wages stagnate. That includes houses -- which is why you're reading about this on a real estate blog.)
Economist Anirban Basu thinks state officials shouldn't say "whew, glad it wasn't layoffs" and move on to other problems. He figures federal job cuts are eventually inevitable. Now, he argues, is the time for the state to work on becoming less of a company town by bulking up its private sector.