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Bad for Business

By Russ Smith | Posted 1/18/2006

The absence of an unmistakable corporate villain, such as Enron, creates an intolerable void for those citizens who believe America’s capitalist system is largely riddled with corruption, greed, and exploitation of what is patronizingly called the “working class.”

The current target is the behemoth retailer Wal-Mart, the chain of huge and ugly warehouse-like outlets that offer low prices, creating a highly competitive market across the country for purveyors of food, toys, electronics, books, and basic household necessities. Wal-Mart, whose profit margin is a puny 4 percent, is vilified—especially by those who don’t work for the company—for the low wages it pays employees and its meager benefit packages. And so, in Annapolis last week, the Democratic-controlled General Assembly overrode Gov. Robert Ehrlich’s veto of the “Fair Share Health Care” bill that will require state employers with more than 10,000 workers to spend at least 8 percent of payroll costs on health benefits or pay the difference to the state’s Medicaid fund.

State Sen. Gloria G. Lawlah (D-Prince George’s County), the bill’s lead sponsor, told The Washington Post after the victory, “Maryland is not a shrinking violet. . . . Let us light the torch today. Let us lead.” Presumably, that flowery rhetoric refers to the approximately 30 legislatures in other states that are considering similar measures. Lawlah’s counterpart, Sen. E.J. Pipkin (R-Upper Eastern Shore), weighed in for the losing side, telling The New York Times, “The message is ‘Don’t come [to Maryland].’ This is an anti-jobs bill.”

Health care is an emotional and complex issue that’s easy for politicians to demagogue. Although insurance rates are out of control, I believe it’s in a company’s best interest to make sure their employees are covered for basic medical procedures, let alone catastrophic emergencies. The cost is crippling for both huge and small businesses, as City Paper publisher Don Farley commented in an e-mail last week. (City Paper has 42 full-time employees, and all have 100 percent health insurance.) He acknowledged a double-digit increase in cost for 2006, but said, “I’d rather have an employee who feel[s] at ease about this topic rather than [one] looking for another job that offers coverage.”

That’s a sensible position in my view, but the “Fair Share” travesty sets a potentially crippling economic picture for the state: Wal-Mart is already reconsidering opening a distribution outlet on the Eastern Shore that would provide 1,000 jobs. No one can really tell if Wal-Mart is just posturing—the bill may be tied up in court for a long time—and will eventually knuckle under and meet the “Fair Share” requirement. In order to do so, however, it wouldn’t be surprising to see layoffs at existing Wal-Marts in Maryland or the closing of its less profitable stores in the state.

The anti-business message this sends to national companies is clear: Maryland cannot be relied upon. Yes, the bill limits punitive measures to employers with over 10,000 workers—currently just four: Giant Food, Northrop Grumman Corp, Johns Hopkins, and Wal-Mart—but why would any large company risk the possibility of a future bill, particularly if a Democrat defeats Ehrlich this fall, that might lower the bar to, say, 5,000 employees?

Even The Sun, in a Jan. 1 editorial, came out in support of Ehrlich’s veto, saying that “mandating one company’s level of benefits” is not “an appropriate approach.” The Washington Post ran a far more forceful editorial against the bill Jan. 12. Despite the typical mud-slinging of comparing Wal-Mart to Scrooge or the shark in Jaws, the paper wrote:


The Maryland bill is a legislative mugging masquerading as an act of benevolent social engineering. . . . And unlovable as it may be, Wal-Mart serves low- and middle-income people, both by creating entry-level and part-time jobs for people who might otherwise be unemployed and by saving its moderate-income customers a staggering amount of money.


Politically, it’s difficult to predict how the action against Wal-Mart will affect the gubernatorial race. It’s perfect for Democrats who either don’t understand or pretend not to understand that when you kill the golden goose—business—you don’t get any more golden eggs (benefits and higher wages). Curiously, the Jan. 10 Rasmussen Report poll on Maryland’s election has Ehrlich leading Mayor Martin O’Malley by a 47-42 margin, as opposed to the mayor’s lead (46-40) back in November. In the Senate contest, Republican Lt. Gov. Michael Steele has also flipped into the lead over Democrat U.S. Rep. Ben Cardin, 45-40 percent. In November, Cardin was favored by Rasmussen respondents 49-41 percent over Steele.

It’s up to Ehrlich to take his lumps in Annapolis from the Democrats and use those defeats to rally support from moderate and independent voters who don’t want Maryland’s cost of living to further escalate and rival other “blue” states in the exorbitant Northeast.

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