by James A. Bacon

The fiercest rivalry in American politics today may not be between Barack Obama and Mitt Romney, suggests Stephen Moore in today’s Wall Street Journal. It may be between the governors of Maryland and Virginia: Martin O’Malley and Bob McDonnell.

Not only do the two governors and their states vie for bragging rights over job creation and economic growth, as any two neighboring states might do, they champion competing governance models. Maryland represents the blue-state governance model of activist government that raises taxes to “invest” resources in public works, schools, transit and other assets offering a social return on investment. Virginia represents the red-state model of more limited government, lower taxes and restrained spending.

That tussle takes on more meaning than, say, the rivalry between Virginia and North Carolina, because Maryland and Virginia both comprise part of the Washington metropolitan area and compete for a greater share of the region’s jobs, corporate investment and economic growth. Writes Moore: “The two [governors] regularly spar on the Sunday talk shows, on the pages of the Washington-area newspapers and over the radio.”

A prominent advocate of small government, Moore makes no secret of which governor and governance model he favors. Citing O’Malley’s triumphalism earlier this year when he bragged on CNN, “We’re creating jobs at two-and-a-half times the rate Virginia is,” Moore notes that Maryland proceeded to lose jobs the next six months, even while the nation as a whole was gaining them. Since O’Malley’s inauguration, he writes, Maryland has lost 30,000 jobs, or three times as many as Virginia. Maryland’s unemployment rate is 7%, while Virginia’s is 5.9%.

On O’Malley’s watch, Maryland has seen 20 fee and tax hikes. Moore cites a study by Change Maryland that found the Terrapin state lost 30,000 taxpayers from the state, costing $1.7 billion in lost tax revenues over the past five years. Maryland’s wealthiest counties saw the highest rate of out-migration, suggesting that high-income residents were voting with their feet. Virginia experienced a net in-migration of taxpayers over the same period.

Moore also cites Virginia’s successes in corporate recruitment. The Old Dominion beat out Maryland for the Northrop Grumman corporate headquarters, and has enticed Bechtel and Accentia to move major operations from Maryland across the Potomac.

Bacon’s bottom line: Moore acknowledges that many factors influence economic growth, and I must agree. While I share with him a faith that the “red state” economic model is superior to the “blue state” model — that, all other things being equal, smaller government and lower taxes are better than bigger government and higher taxes — I concur that the the size and reach of government is only one factor of many influencing growth. The impact of growing/shrinking the size and scope of government is best measured over decades, not years.

The dynamics of economic development have changed considerably in the past half century, when the low cost of land, labor and taxes was a valid recipe for growth in Virginia. To maintain a high and improving standard of living, the Old Dominion now must compete upon its ability to innovate, not on the basis of low costs. To attract corporate, venture and equity capital, Virginia must have human capital. To recruit and retain human capital, Virginia must build the kind of communities where educated members of the creative class want to live. Critical assets include better schools and universities, more transportation options, a cleaner environment, and a greater array of parks and recreational facilities, among other things. (Creatives also value openness and authenticity, attributes that governments cannot readily create.)

Schools, transportation, environment and public amenities are things that taxes can buy. In theory, if Maryland’s higher taxes buy more of these things and create communities more attractive to creatives, the Terrapins may generate more economic development in the long run, even if higher taxes drive off some high-income households…. but only if O’Malley and his liberal brethren “invest” wisely. Personally, I don’t have a lot of confidence in politicians of any ideological stripe to invest money wisely.

The trick to achieving prosperity in the 21st century is to create communities attractive to the creative class while also keeping taxes lower and letting wealth creators keep more of their wealth. How is that done? There is no simple formula, but it starts with the recognition that some of our basic institutions — K-12 education, higher ed, health care, transportation and land use — are broken. The blue state model of propping up broken institutions with more money and/or more government regulation is not a winning strategy. But the red state model is incomplete. Simply keeping taxes low — starving the beast — will not bring about reform of core functions of state and local government.

For the red state model to succeed over the long run, free marketeers and fiscal conservatives need to articulate a vision of how to restructure and reform our broken institutions. They have done the best job thinking about K-12 education: arming parents with vouchers to give them more school choice and encouraging schools to compete for students. But there has no been no serious discussion about applying the voucher concept to higher ed, where costs are out of control. Economic conservatives have batted around ideas for injecting market principles into health care, but they have not pushed them very aggressively. And when it comes to transportation and land use, conservatives tend to support the dysfunctional status quo.

The red state governance model may prove to be less destructive than the blue state model. You won’t see many red states swirling down the whirlpool of higher taxes, capital flight, eroding tax base and even higher taxes like California and Illinois. But avoiding fiscal disaster is not setting the bar very high. Virginia can, and must, do better.

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  1. There are some here in BR that profess to be Ryan supporters who, at the same time rail against the Clown Show in Richmond and hold up Maryland as a better governance…..

    the numbers I’d like to see between Md and Va is a comparison of what they spend on education, public safety, transportation and MedicAid which are the big 4 in Virginia’s budget.

    So how about an apples to apples comparison between the two states instead of the cherry-picking “gotcha” points?

    I do not see Md as “propping up” failed institutions any more or less than Va doing so but if there are obvious examples, let’s see them.

    The problem with the right wing rhetoric is that it is just that – it is rhetoric more than real evidence.

    Most every industrialized country in the world is configured in governance similar to this country – and this includes countries like Sweden, Singapore, and Hong Kong which are NOT “failing” as the right loves to point out with regard to Greece.

    The point is that no matter what level of governance you have – you can do it in fiscally responsible and fiscally irresponsible ways.

    You need to look no further than the Bush years to see how governance can be abjectly irresponsible even as it claims to be “efficient” and “business friendly” – and you need to look no further than Sweden which is about as socialist as you can get but it has a balanced budget.

    we have way too much partisan blather and way to little of objective evidence IMHO.

    small govt is NOT efficient nor prosperous governance just by virtue of it being small but if you believe the Ayn Rand lovers – you’d think that the only folks of any “use” are those that are wealthy and everyone else are parasites. But then you have the Ayn Rand wannabies which are indeed a sad and hypocritical lot much like lemmings to the fiscal cliff.

  2. Peter Galuszka Avatar
    Peter Galuszka

    I am really skeptical of the numbers of jobs cited here and what’s more, you really should not refer us to the WSJ when we have to go through the bother of either logging through their paywall of having us go through the trouble of looking up our frigging passwords.
    This blog was developed on a no-pay basis. I fail to see why you should make us pay to read this bullshit in the Journal if you are inadvertently making us pay for it.
    If you are getting us to blog for free, then let us get to your cites for free or not all at. Got it?
    I really don’t want to have to pay extra for that asshole Rupert Murdoch.


    1. Sorry about the WSJ firewall. I didn’t realize it was an issue. Apparently, Google takes you to a different URL with the same content, so I have plugged that into the link.

      You must have been in a sour mood last night. Dismissing the op-ed as “bullshit” and Rupert Murdoch as an “asshole” doesn’t constitute an argument. But I will say, we are hearing a lot of that from the left these days.

      1. reed fawell Avatar
        reed fawell

        Indeed we are.

  3. I agree with Peter. WSJ has lost a lot of it’s objectivity from my perspective as of late and is essentially functioning as a mouthpiece for the partisan right on many, but not every issue.

    the changes became apparent soon after Murdoch took over.

    WSJ has forfeited their reputation as an honest broker of information and issues. It’s not across the board. They still have some principled writers but they also got FAUX news types shoveling crappola now also.

  4. anytime any article in any media source starts talking about “socialism” in the context of this govt – which has not changed in any significant way since Clinton, we know that it’s yet more partisan blather.

    You’ll never see the WSJ call Singapore and Hong Kong health care “socialism” even though it is pretty much the same as most of Europe’s approach.

    What the right and the WSJ specializes in these days is cherry picking isolated examples of something they want to show while totally ignoring the context – like health care in most industrialized countries around the world.

    Then they expand on their cherry-picked examples to claim that universal health care will lead to nation bankruptcy – again – totally ignoring how many countries that have universal health care that have prosperous, booming economies.

    It is the right’s “company line”.

    Then we have the budget “cutters” who suggest cutting our entitlements as a way to get to a balanced budget and reduce our debt and they give all kinds of disaster scenarios if we don’t do it – but they want to exempt DOD from the cuts and even JB here admits that does not compute.

    But it does not stop the WSJ and allies from continue to parrot ideological corrupt concepts.

    Then the really funny thing. we have folks who will vote for what the WSJ and company are advocating – as if it would really work .

    I do not excuse the Dems but the Dems have never claimed to be fiscal conservatives from the get go – unlike the GOP which took over from Clinton and proceeded to wreck the budget with their grand supply-side ideas.

    And now, with WSJ leading the charge, they want to try it again.

  5. Peter Galuszka Avatar
    Peter Galuszka

    You are missing my point. I don’t care about the arguments. I am getting increasingly frustrated with having some people give out their stuff digitally for free and then others charging you for it.

    Bloggers at BR, regardless of their political reference point, represent more than 100 years of combined experience and talent. It’s all for free and it’s all you can eat. Why not put BR behind a paywall and pay us all a percentage for our contributions?

    Why let people come on anonymously? Why do I have to put my name and reputation out there only to be torn apart, sometimes very unfairly and personally, by someone who hides behind a pseudonym?

    How long is this for-free BULLSHIT mentality going to continue? What makes us for FREE?. Maybe Rupert, although he is an ALIEN ASSHOLE, does have the right idea.
    Your thoughts? I thought you were the free market go-to guy?

    (PS: I went back and found the WSJ article in my hard copy I was going to recycle and his jobs figures are limited. But please don’t send us to paywalls. Again, why should I contribute to Bacon’s Rebellion for free and then have to pay extra to read arguments being proposed on it?

    1. I love it when you sound like such a capitalist!

    2. Seriously, you make a valid point. The new economics of creating content are bewildering — and most unfavorable to the content creators themselves. I don’t put Bacon’s Rebellion behind a paid firewall because I worry that the audience would drop significantly. Then — poof! — there go the sponsorships.

  6. FWIW, I’d contribute to BR but I refuse to pay WSJ or the NYT, what I consider to be an outrageously overpriced product.

    I would pay a REASONABLE fee on a per article basis – in the less-than-dollar range more along the lines of what GOOGLE gets for one-click Ads, etc.

    I would set up an account like I do for EZ-Pass with a balance and then draw on it on a per article or per use basis (for WSJ or NYT).

    I think they’ve got the wrong business models for their paywalls – which basically is one price and everyone eats all they can.

    I’ve offered WSJ to pay a yearly subscription on the order of $60 or so but they are hard on their $99 approach.

    but I have to tell you – not each and every article is worth paying for. some of them are not worth the time it takes to read them and that applies to some of the partisan WSJ articles. I’m not paying them money to read partisan blather. I can do that for free.

  7. […] Virginia is Destroy Governor O’Malley of Maryland The Virginia-Maryland Border War Posted on August 25, 2012 by James A. Bacon| 10 […]

  8. Before contemplating a move to the Washington, D.C. area in the mid-1980s, I had always presumed Maryland was the better place to live. When I transferred to Washington from the midwest, I talked to two people in my company’s new D.C. office about where they lived. I had previously worked with both individuals. Both lived in Virginia because they felt taxes were lower and the state had a much less penchant for bigger government. I started looking for a place to live in Virginia.

    When I started working in the D.C. office, I began discussions with some of my new colleagues to see where they lived. Most professionals lived in Virginia for the same reasons. I moved to Virginia. I’ve lived here since November 1984; moved two more times, but never considered moving to Maryland. I don’t see any significant benefit in the activities of Maryland state and local governments beyond what state and local governments in Virginia do. State and local governments in Virginia are far from perfect, but both Democrats and Republicans here have much more respect for my income and assets than do Democrats in Maryland. I could never see myself moving to Maryland.

  9. the interesting thing is that some folks think Maryland is a home rule state but they are not.

    see page 8

    the stated difference between Virginia and Maryland is that Virginia is said to decentralize at the local level whereas Maryland centralizes at the State level.

    this can make a big difference when it comes to development and transportation infrastructure although I’ll admit that I have no specific comparisons to delineate the differences.

    passed over 95 on the way home today.. it seems that most weekends now that the road is clogged as much as it is during weekday commuting hours.

    It will be interesting to see what effect HOT lanes will have (or not) on the congestion.

  10. DJRippert Avatar

    As a property owner in both Virginia and Maryland, I have a fairly unique perspective on the question of Maryland vs Virginia.

    Maryland has considerably more local autonomy. In many ways, it’s hard to even talk about “Maryland” without first stating where in Maryland you are centered.

    Maryland counties levy not just real estate taxes but income taxes as well. There is considerable difference between one locality and another when it comes to local income taxes.

    Maryland and Virginia often exhibit extremes where both states are different – but different in opposite directions.

    For example ….

    1. Virginia’s governor cannot server two consecutive terms. Maryland’s governor is term limited to two four year terms. It seems clear to me that Maryland has a better governance plan on that point.

    2. Maryland localities have quite a bit of autonomy, Virginia localities have very little. Again – Maryland has a better plan.

    3. Higher education. Virginia has generally held the upper hand on higher education over the years – especially if you limit the debate to public colleges and universities. However, John Hopkins is a fabulous private university and The University of Maryland, College Park has been gaining on Virginia’s public universities very quickly. Virginia may have the upper hand for now but the issue is in doubt. In the all important STEM subjects – Maryland may already be ahead.

    4. Overall taxation. Virginia taxes too little – especially with regard to infrastructure development while Maryland taxes too much. Much of Maryland’s over-taxation has been the result of the failed policies of Martin O’Malley – who is truly terrible. McDonnell is a much better governor. Too bad he can’t run for a second term.

    5. Re-districting. While Virginia is horrible, Maryland is worse. Maryland is often seen as having the strongest incumbent-protection plan among all 50 states.

    6. Environmental protection. No contest. Virginia sucks while Maryland is a leading light for other states to follow. The two different approaches to the Chesapeake Bay are evidence of two very different philosophies about the environment.

    7. Gun control. Both states are extreme and both are wrong. Virginia’s “buy ’em by the bag” philosophy is wrong as is Maryland’s “keep the guns from the honest people” theory. Baltimore is a crime ridden killing field despite Maryland’s laws and Virginia is routinely cited as supplying the guns for gangs in cities throughout the North East. Overall, Virginia is closer to right but both states need to move closer to the middle.

    This goes on and on … two states with a common border which couldn’t be much more different. Many in NoVa (where I live) would be happy to join Maryland. Many on Maryland’s Eastern Shore (where I own a house) would be happy to join Virginia.

    Maybe the biggest point is this – state boundaries have become completely irrelevant. Maryland has slightly more liberals and they torture the state’s population with libtard policy. Virginia has slightly more conservatives and they torture the state’s population with conservatard policy.

    What a mess we have created for ourselves by sticking hopelessly to antique and no longer relevant geographic boundaries.

  11. Well.. I don’t disagree with much of what DJ said but there IS a process for changing the Va Constitution and it actually is used and this fall, we’ll see an example.

    Why not alter the Constitution to have 2 terms for Gov?

    and as far as taxes are concerned.. Fairfax has (or used to have ) the ability to levy Income Taxes and I suspect the G.A. might consider offering that to other so-called “high growth” or urbanized areas to help fund infrastructure.

    I do not think Maryland does any better job on transportation than Va does myself anyhow except that in Md – county and subdivision roads are NOT the financial responsibility of state taxpayers.

    Md is pretty much a Blue state and NoVa though trending purple at times still is more akin to Md Blue than RoVa Red.

  12. Four years ago, there were many more Obama signs and bumper stickers in NoVA than I see today. Rather, there are a lot of Romney signs in people’s front yards as I travel through NoVA. Anecdotal at best, but things do look different.

  13. Richard Avatar

    The Pentagon is in Virginia; NIH is in Maryland. Which do you think has gotten more money from the federal government since 2001?

  14. The Pentagon is just a part of it. Think David Taylor, Navy Yard, Quantico, For Belvoir, etc, etc… of course Md has Patuxent River..but then Va has Dahlgren….and AP Hill.

    you know Va is likely West Va with a lot of Federal Jobs, eh?

    1. Or, as Northern Virginians quipped 20 years ago, “Take away Arlington, Alexandria and Fairfax, and what you’re left with is… Arkansas.”

      Update that to include Loudoun and Prince William, and the same attitude is prevalent today.

  15. here’s a pretty good list of the Federal agencies that are in NoVa:

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