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Md. Governor Reacts To Debt Crisis

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(Credit: CBS)

(Credit: CBS)

PatWarrenWebPhoto Pat Warren
Pat Warren joined the Eyewitness News team in 1992. Pat came to WJZ...
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ANNAPOLIS, Md. (WJZ) — Maryland’s economy is closely tied to the federal government.  With billions of federal dollars spent here each year, cuts in federal spending are cause for concern. 

Political reporter Pat Warren has reaction from the governor.

Maryland isn’t likely to feel it yet, but the extended outlook is not good.

Tidal wave or ripple effect?  The impact of the US credit downgrade will be felt in Maryland…but to what degree and for how long?

“What Marylanders need to know about our bond rating is that we have a AAA bond rating,” said Governor Martin O’Malley.

What Maryland also has is an economy tied more closely to the federal government than other states, which means ratings agencies could put it on a credit watch.  Maryland has held a AAA rating for years, but it also depends on federal spending.  In fiscal year 2009, for example, 52.4 billion federal dollars were spent here.  An analysis from Trend Advisors shows that a 22 percent cut in spending here would equal a loss of 150,000 jobs.

Governor O’Malley is aware of the stakes.

“We’ve made the tough decisions time and again.  None of them individually have been popular, whether they were cuts or whether they were things like the penny in the sales tax, but we made the tough decisions so we can pay our bills and maintain a AAA bond rating,” he said.

Morris Segall, president of Trend Advisors, says it could be tough for the state to hold that line.

“We’re running a structural deficit of a billion dollars even before this, so to the extent that we had our own difficulties without this, I think those difficulties became a lot more magnified with this,” Segall said.

This is uncharted territory.  One thing we as consumers might notice is higher prices on imported goods since the value of the dollar is down.  Interest rates are not expected to spike but they could be creeping up.

Maryland achieved its rating 10 days ago and doesn’t go back into the bond market until February.

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