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Banker Ok With National Economy
Banker OK with national economy
State economy does not get the same accolades from chamber's leader
By Ed Waters Jr., News-Post Staff
ewaters@fredericknewspost.com
A leading banker painted a positive, if cautious, outlook for the nation's economy during an economic forum Wednesday at Frederick Community College.
Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, believes inflation can be held at around 2 percent.
As a key issue of the economy, inflation is the primary focus of the Federal Reserve Bank, he said.
Lacker and Kathy Snyder, president of the Maryland Chamber of Commerce, spoke at the 2007 Mid-Atlantic Economic Symposium.
Foreclosures and a slumping housing market could be the fly in the ointment for the economy, but Lacker said he didn't believe that aspect would spill over into the overall economic picture as much as many people, including the press, believe it will.
Subprime scandal overblown?
Less than 10 percent of the housing market is suffering from foreclosures caused by subprime lending, Lacker said.
Regulation on lenders would cut out ways for people to improve their lives, Lacker said. Instead, he advocated improving disclosures on loans and education of consumers, and a cracking down on fraud.
"Give the people the education to be equipped to handle complex financial issues," Lacker said.
Lacker expects consumer spending to remain stable, possibly picking up later in the year.
A state shortfall
Looking at the state's economy, Snyder said Maryland faces a $1.5 billion shortfall in revenues.
"We used to have that in surplus," she said.
The passage through the Maryland General Assembly of the Thornton Commission on Education proposals, also called the Bridge to Excellence Act, an unfunded mandate, has cost the state $1.3 billion.
Snyder said roadwork in Frederick County might improve traffic flow here, but there is little money in the state transportation fund for needs across the state.
"Ladies and gentlemen, tax increases are coming," she said. "We want business to be at the table when that is discussed."
Snyder said the state chamber has been seen to oppose bills in the General Assembly it doesn't support, but that in the future, the organization will become more active in the process ahead of time.
"If we are going to look at taxes and bills, we need to see which ones impact business, retaining jobs and bringing new ones to Maryland."
Going after business
She said there is a prevailing attitude among legislators to "go after those business people making all that money."
Of the 158,000 businesses in Maryland, about 3,300 that have fewer than 100 employees drive the state's economy, she said.
Also, businesses are not competing against each other in the same town, or even the state, but with those from surrounding states, the nation and the world.
She said the chamber had discussed and dismissed a 5-cent increase in the gas tax, a similar move to one proposed during this year's session, to fund the growing need for transportation.
"But, we really feel we need to fund it with something else, because higher gas prices hurts working people," she said. Lawmakers considered a 12-cent hike.
Snyder said the chamber is "not a 'no new tax,' 'no tax increase' organization," but the group does want the impact of taxes to be looked at not just from a business standpoint, but that of Maryland residents.
Slots
One of those issues that seem to come back each general assembly and election year is talk of slot machines in Maryland.
But, Snyder said, Maryland has lost its window of opportunity. West Virginia will add table games to its expanded gambling efforts and Delaware already has slot machines.
"The Maryland Chamber proposed slots to help that $1.5 billion shortfall in the state," she said. "We know it is a moral issue for some, but there is a lot of entertainment money going out of the state that could go to schools."
As well as transportation, health care for the uninsured has been one of this year's big topics in Annapolis.
About 780,000 people in Maryland are without health care, Snyder said, even though one-third of those could afford insurance through their workplace.
"Many of these are young people who don't think they will ever get sick," she said.
Massachusetts has initiated a plan where every employer must provide health insurance for workers or pay $295 a year for each person.
"I'd pay the penalty," Snyder said. "It's cheaper than providing the insurance coverage."
Although reluctant to say it, Snyder said the answer to the health insurance issue lies in Washington.
She is concerned about the state's piecemeal approach, she said.
Original Publication: Frederick News-Post; Date: Jun 7, 2007; Section: Business; Page Number: A-12