O’Malleynomics: A Complete Failure

While Gov. Martin O’Malley revs up his 2016 presidential campaign with barbecue dinners in Iowa and major speeches in Charlotte, his home state of Maryland is experiencing an economic failure. A few weeks ago the U.S. Department of Labor reported that the state’s unemployment rate was creeping back to its all-time high, set right after the start of the financial crisis.

To struggling residents of Maryland, this bad economic news is not a surprise.  Since he was first elected, O’Malley’s fiscal policies have led many to believe that failure was not a question of ‘if’, but ‘when.’  His fiscally conservative predecessor, Gov. Bob Ehrlich, left him with a budget surplus and a relatively vibrant private sector. However, six years, 24 tax hikes and over $180 billion later, O’Malley’s economic plan is failing the citizens of Maryland.

At his core, O’Malley believes that government can create prosperity. The “O’Malleynomics” theory relies on government employees to fill the bulk of the tax base, massive government spending to spur economic activity and failed welfare programs to make it appear as if government can solve all of our problems. O’Malleynomics is also politically convenient and designed to allow O’Malley to get the most number of votes in an election year, enrich his political friends, and skip out on Maryland to run for higher office just before it goes bankrupt.

O’Malleynomics heavily depends upon a large federal workforce to keep state government working. O’Malley has been a major beneficiary of the bloated D.C. bureaucracy and its never-ending supply of cash – many federal agencies are located in Maryland and their workers call the Free State home.  To curry favor from the government employee unions who spend heavily in elections, O’Malley has turned Maryland into one the most anti-business states in the country. The non-partisan Tax Foundation ranks Maryland 42^nd out of 50 for small business tax climate, and CNBC puts the Free State in the bottom tier of competitive states. O’Malleynomics emboldens public sector unions to dominate the discussion at the state capital, which is why tax hikes, spending increases and high unemployment are the norm.

During O’Malley’s tenure, the annual state budget has increased by nearly 20%, as O’Malleynomics has put Maryland on an unsustainable spending path. In 2009, the state received nearly $4 billion in federal stimulus money from the federal government. While even liberal Governors across the country used the money as a one-time bailout, O’Malley used it as a baseline for future budgets.

Mismanagement and unrealistic expectations have also left Maryland taxpayers with a $19.7 billion unfunded pension liability on top of $15 billion in unfunded health care liabilities. Unlike Gov. Walker in Wisconsin, O’Malley has refused to tackle pension reform for government employees – and why would he?  Asking government workers to contribute more to their retirements would upset the union bosses who give gobs of money to his campaign and who will be key allies in his run for President.

Friends of Gov. O’Malley love O’Malleynomics – they get rich while the working class struggles.  A bevy of former staffers make a fantastic living by using their connections with O’Malley to gain favors for political clients. A perfect example was a bill passed last month to expand gambling in the Free State. Who was representing MGM, the huge gaming company pushing for construction of a brand new casino?  None other than KO Public Affairs – a cadre of former O’Malley staffers, campaign fundraisers and political cronies. O’Malleynomics rewards the politically well connected, and punishes those who dare challenge the all-powerful Governor.

The results of O’Malleynomics are not good by any measure. Since 2007, over 6,000 small businesses have left Maryland, or have permanently closed shop. Venture capital, the driving force behind private sector job creation, has plummeted to its lowest level in almost 16 years. A recent report from a non-partisan think tank shows successful Marylanders – those that create jobs and pay the bulk of the taxes – are leaving the state in droves.  And the state continues to operate on an annual structural budget deficit.

The problem with O’Malleynomics is that government cannot create prosperity, and will eventually run out of other people’s money. Maryland, like California, has a shrinking tax base.  As more Marylanders flee and take their wealth with them, the burden to pay for O’Malleynomics falls on fewer and fewer shoulders.

As O’Malley delivered a primetime Democratic National Convention speech, Democrats and Americans alike should have asked themselves a simple question: do we really want to give an opportunity to a failed economic philosophy?  As someone who’s had to live through six years of O’Malleynomics, I hope not.

Dave Schwartz is the Maryland State Director of Americans for Prosperity and can be reached at dave@afpmaryland.com.