Cell Phony The past three days, world markets have been whipsawed over concern that the credit crisis is going to lead to a recession in the US. Congress and the President in a rare moment of bi-partisanship are rushing a stimulus package to bring confidence back to the markets, even while it is acknowledged that whatever stimulus is agreed to won’t have an immediate effect.

In Maryland, it is time to throw out last fall’s revenue projections as the downturn in the real estate market will likely extend through 2008. The sales tax increase may only soften somewhat the decline in retail sales tax receipts as worried consumers extend their cautious buying well into the New Year.

Prices at the pump are pinching consumers’ pockets and declining home sales are going to similarly pinch the flow of revenues into the state’s bank account.

The state’s revenue picture will be much worse than projected last fall. The Governor has already played his hand on taxes in the special session last fall before the extent of the credit and housing crisis was known. Now he won’t have much room to maneuver and will have to look to spending cuts to balance the budget.

When the world is falling around your ears, it’s better to find other things to talk about. If you are a member of the Maryland General Assembly and are powerless to stop the credit crisis or the decline in the value of everyone’s home, and you want improve the common good, what do you do? How about introducing a bill to ban the use of hand held cell phones while driving?

Telling people they can’t use hand held phones in their cars is like telling teenagers to just say no to sex. It sounds nice but it isn’t reality. Cell phones have become one of life’s necessities, like cars and computers. We all drive and talk on our phones even though we know it is distracting and potentially dangerous. You don’t need to look at statistics to know that. I use a hands free and I still find that distracting, but no more distracting than kids fighting in the back seat or having an argument with your girlfriend (mine once got pulled over for going 85 in a 60 mile hour zone while yelling at me about something that I am sure justified the $150 fine she had to pay).

Even if a law is passed, this one is guaranteed to be broken by everyone. Enforcement will necessarily be selective. Like speeding, everyone will do it and take the chance of being caught.

Legislators are always looking for ways to do something to justify their pay and existence. It is an understandable human trait. In this case, instead of doing something, we should be satisfied to pay them just to stand there.

Labels: cell phones, legislature, Maryland

  7:39 AM •  0 Comments • Links to this post

Health Care – Food for Thought With one week to go in this year’s legislative session, the General Assembly has yet to come to agreement on increasing tobacco taxes. This should be a no brainer. It is pretty simple: smoking can make you sick and treatments are costly. Making it more expensive to smoke is one way of deterring smoking – and improving health. Banning smoking in restaurants is another. It’s a form of prevention that works. Get on with it.

Using revenue from an increased tobacco tax to pay for health insurance coverage for the working poor makes sense to as too many working people still can’t afford insurance.

At some point however, this particular solution will face its own structural deficit. Health care costs continue to rise, and if price is a deterrent, the revenue source from tobacco taxes will decline.

Polls show that a majority of Americans want universal health care and that government should provide it. Yet, no one has solved the problem how to pay for it and the costs that keep going up. Keeping Americans healthy is devouring more and more of our gross domestic product (GDP)– we already spend much more on health care as a percentage of GDP than Germany, France and Switzerland - and to have universal health coverage like those countries do will likely require even more spending, and higher taxes.

In fact, we are less healthy than our European cousins, but not necessarily because they have universal coverage and we don’t. Obesity and diabetes have been described as reaching epidemic proportions in the U.S. The pharmaceutical industry keeps pumping out new medications to control and treat these diseases, but the main problem resides in the food we eat and our lifestyle choices.

If people expect government to do more in providing health care coverage for everyone, then we ought to expect government to do more to insure that what we are eating is healthy. Several cities across the country are taking initiatives to create food policy councils to determine food policy. New York has its own food czar to coordinate that city’s food policy, but no major urban city has taken the lead on making food an essential part of their efforts to improve the health of its citizens, especially the poor who suffer most from bad nutrition.

Better access to health care is but one answer to the health care crisis that we face. A better and less costly solution is to improve what we eat. Providing healthier foods to children in schools and to our seniors in meals on wheels programs and senior centers, teaching better eating habits, banning transfats in restaurants, and using vacant land in Baltimore City to create urban farms are some of the other things that government can do to help people to become healthier.

Labels: General Assembly, Healthcare, Maryland

  10:23 AM •  1 Comments • Links to this post

Time For A Gas Tax Increase in Maryland There’s a lot of talk around Annapolis these days about the structural deficit. This is one of those ‘deju vu’ moments: haven’t we heard all this before?

Most of us don’t have a clue about what this really means, or the details of government taxing and spending. Unfortunately, many of our legislators don’t either. But here is the simple primer: our government is costing more than we can afford, or we need to do more and can’t afford it. Something’s gotta give, and it’s usually the taxpayers.

Talk of deficits, structural or otherwise, quickly shifts to how to raise more money to pay for them. Now comes the question of choices that need to be made.

The debate has already started about which taxes to raise, or, to use the euphemism of public policy types, how to ‘modernize’ the state’s tax system. The Governor is rightly cautious about staking out a position before he has all the facts. Broad changes to tax policy will have an impact on the state’s economy, often in ways that can’t be anticipated entirely.

Nevertheless, there is one tax that the legislature and governor should not wait to increase, and that is the gas tax. The gas tax is the best user tax there is. It is simple to understand: those who drive, pay. If there is one thing that we should all be able to agree on it is that our state’s transportation system needs drastic improvement. Roads need to be maintained. Maryland is growing and the simple fact is that we are going to need more and wider highways. And all agree there isn’t enough money to do these things.

It is also a time to start making investments in public transportation. Revenue from gas taxes is one reason why other countries are able to pay for modern and efficient public transportation systems. With the exception of the DC metro, the region’s public transport is only slightly better than a third world country. Baltimore needs a Red Line connecting the east and west sides of the city. The region needs a high-speed rail connection that ties our growing population centers together.

We can also affect the environment and national policy. We shouldn’t kid ourselves that Maryland alone can make a difference, but we can at least set an example for that the federal government should follow. Increase prices of gasoline may reduce auto use, and reduced auto use will lower polluting carbon emissions.

Reduced driving also reduces demand for oil and will drive down world oil prices and the revenue that oil producing countries like Iran depend on to pay for their nuclear ambitions. The collapse of the Soviet Union was as much due to the price of oil going to $15 a barrel as anything else.

Senate President Mike Miller wants to increase the gas tax by $.12. Seems like good public policy to me.

Labels: Annapolis, flush tax, Maryland, oil

  11:30 AM •  1 Comments • Links to this post

Taking It Easy in Annapolis? Maryland’s annual state of the state message usually takes on a special significance with a new governor as we wait to see the tone he will set. Controversy in Martin O’Malley’s first speech to the General Assembly was as absent as Bob Ehrlich. It was a low key affair. In contrast with Ehrlich’s hectoring, O’Malley called for civility and cooperation between the governor and the legislature. The fact that there was little to argue with in O’Malley’s workmanlike budget made Speaker Mike Busch and the obstreperous Senate President Mike Miller unusually agreeable.

But is that a good thing for the state? Maybe legislators were tired of fighting with Ehrlich and needed a breather. Civility may be a good thing for cocktail parties, but it isn’t a necessary prerequisite for getting the people’s business done. We pay these guys, women included, to come up with new ideas to solve the state’s problems. It’s in the clash of ideas that progress is made. And if everything is so hunky dory, maybe there aren’t enough controversial new ideas being floated in our capital city.

It’s not as if there aren’t problems that need to be addressed. With all the talk of a structural deficit, there was no attempt made to deal with it in this session. The state’s strong tax revenues, mostly from the hot real estate market, allowed the Governor to dip into the flush rainy day fund to pay for increased school construction and transportation projects.

As Dan Rodricks pointed out in Thursday’s Sun, O’Malley barely mentioned Baltimore in his address. But the problems of bad schools, drugs and crime haven’t changed in the month since O’Malley turned over the city to Sheila Dixon (more on that in another column).

While O’Malley called for civility, another new Democratic Governor, Eliot Spitzer immediately started a fight with the state legislature over his proposals to cut property taxes, radically re-structure New York’s health care system and provide health insurance coverage to 400,000 uninsured children. Unlike O’Malley, he addressed the education needs of his state’s largest city, New York, with his plan to direct unprecedented amounts of new money to the neediest schools.

When I first started in the investment banking business, the bank I worked for proposed to cut its fees to win some business in order to establish itself in a new market. When asked why, my boss explained to the Vice Chairman reviewing the deal that it was a “loss leader”. To which the Vice Chairman replied: “Loss leaders are just losses.”

They may be getting along great in Annapolis, but time doesn’t wait. Civility may be the new administration and legislature’s loss leader. But delaying action is a just a loss for our uninsured and uneducated children and other problems our state faces.

Labels: Governor, Maryland, O'Malley

  6:17 PM •  0 Comments • Links to this post