About Raquel Frye

Raquel Frye is the Associate Director of the Regional Economics Studies Institute (RESI). RESI is considered a leading expert on Maryland’s economy and is responsible for providing economic consulting services for public and private clients across the State. An enthusiast of economics and economic education, Raquel’s posts tend to focus on analyzing the economics of policies and current news stories (with a little econ humor thrown in for good measure).


We are once again busy preparing for this year’s Economic Outlook Conference. In past blog posts, I’ve written about all the work it takes to put together the outlook presentation and the extremely important part that students play in helping us put the event together. This year marks the ninth conference that I have been a part of. However, this year’s conference has the special distinction of being my very favorite one yet. I feel as though I have to preface that statement by saying that it has nothing to do with the conference-sponsored happy hour we hosted two weeks ago. In fact, this year’s theme, “The Economic Impact of Craft Brewing in Maryland,” is proving to be even more interesting than I expected.


In preparation for the event, we have been learning a little more about the craft brewing industry. For example, there’s a big decision to make when deciding whether or not to can or bottle the brew. There’s also a difficult trademark process, and cease and desist letters are commonplace. These are just a few of the topics that the panel will be covering. I’ve also learned that there are jobs such as Chief Economist at the National Beer Wholesalers Association (Where did I go wrong in my career?).


This year’s speakers are a diverse group of individuals with varied knowledge in the industry. We have a historian who specializes in the brewing industry in Maryland (She even has a book!) and the marketing director of local brewery Heavy Seas, just to name a few. In case that wasn’t enough, we’ll kick off the day with our own Chief Economist Dr. Daraius Irani providing us with the economic outlook for the year. Every year, attendees look forward to the insightful findings (and lighthearted jokes) that his presentation has become known for. During an election year, the economy plays a significant part in the outcome of elections. Dr. Irani will help to frame the current climate and outline what his expectations are for the economy in the coming year. Fortunately, the theme will play into whatever outcome is expected—here’s hoping we will be cheering for a positive outlook. Registration is still open, and we can’t wait to see you all there!



Is hosting the Olympics worth the investment?
The winter and summer Olympic Games encompass significant work on behalf of the host cities. Before the Olympic Games begin, construction activity and preparation occur years in advance. One of the most frequently asked question once the Games are done is, “does the time and money invested to host the Olympic Games really benefit the host country?” One can assume that, aside from the pride gained in hosting, countries are expecting some benefit from their investment.


Sochi-2014-Company-OlympicsThe 2014 winter Olympic Games were hosted in Sochi, Russia, home to 343,000 citizens. This year’s host country invested significantly in the opening ceremony to boost tourism and create a lasting legacy. The ceremony featured a record 88 countries, 66 world leaders, and 800 performers. The cost to host this year’s winter Olympics in Sochi was an estimated $51 billion—a record high investment. Approximately 235 projects were facilitated to prepare for the Olympics, such as repairs to infrastructure and new housing for local residents. Through improvements due to the many projects and the added tourism of the games, the city is expecting to see a lasting positive effect on the economy.


Economists…in agreement?
Recently, National Public Radio (NPR) ran an interesting story regarding the long-term impacts of the games. One of my favorite parts of the story is this line: “Economists are notorious for being unable to agree on anything. So it’s striking that on the finances of the Olympics, they almost all agree.” Opinions usually point to the fact that once the games are over a country mostly ends up with an indebted city. This is almost in direct contrast to the expectations of Government stakeholders.


The British Government, in particular, claims that they were different. A report (nearly 1,000 pages) estimates that they earned at least $1 billion more than the $15 billion they spent to host the 2012 Summer Games. However, there has been a lot of criticism of the report, mostly because the report was funded by the government. Max Nathan, a London economist for the National Institute for Economic and Social Research, claims that it is too soon to really gauge whether or not hosting the London Olympics was worth the investment.


Photos Tell the Tale
Perhaps more telling than any economic report are images from past cities that have hosted the games. A photography project (http://olympiccityproject.com) led by Jon Pack and Gary Hustwit visits cities such as Athens (2004), Barcelona (1992), and Beijing (2008). The conditions they found in some of these Olympic villages are a far cry from their grand expectations. Some have been turned into prisons or malls while others have been left to decay.

Athens—Faliro Olympic Beach Volleyball Center - Photo credit: NBC News

Athens—Faliro Olympic Beach Volleyball Center – Photo credit: NBC News

It will be interesting to see what happens to the facilities in Sochi now that the Games have ended. How these facilities will be used in the future will say a lot about the long-term benefit to Sochi. According to Forbes, for some past host cities and countries, the Olympics have marked the transition to being a world player. They cite Tokyo (1964), Seoul (1988), and Beijing (2008) as prime examples. For Russia as a whole, the hope is that the Olympics has given the country a bigger starring role on the international stage and laid the groundwork for future international investment growth.



As the legislative session marches on, Maryland lawmakers and supporters are proposing to raise the minimum wage.  A number of bills have been introduced that increase the minimum wage to as high as $12.50 per hour.  At the current minimum wage rate of $7.25 per hour, a full-time worker would bring home approximately $15,000 a year—well below the poverty line of $23,050 for a family of four that is currently set by the federal government.


The minimum wage is one of the topics that economists most like to debate and theorize about. For instance, the traditional model of economics explains that, in a market where supply and demand maximize employment, an artificial increase in the wage rate (such as an increase of minimum wage) will reduce employment. Alternatively, other theories posit that increased wages translate to more spending and therefore more demand for goods services—driving the demand for employment upward. Other theories look at it from the supply side of the equation. The belief is that, when workers are earning better wages, they will be encouraged to work harder and be more productive. The extra cost incurred by businesses for higher rates will be offset by increased productivity and output. The ultimate impact will vary since labor markets each have their unique characteristics. The true impact of wage increases will vary by geographic location, type of industry, and labor market composition.

minimum wage

Image credit: Marguiles (Click for full size image)


The majority of the opposition comes from retail or food-related business owners who say that increased labor costs will severely impact their bottom line and increased costs would drive them to have to decrease their staff. However, other business owners do not share in that sentiment. Some argue that better pay equals lower staff turnover (which can be extremely costly) and can impact the success of a business venture.


Clearly, the economics of the minimum wage debate are highly nuanced. The ultimate impact on Maryland is difficult to determine without thorough analysis and projections. What we do know is that Governor Martin O’Malley is fully in support of raising the minimum wage during his last term in office.



The Senate is scheduled to vote this week to advance the nomination of Janet Yellen for Chair  of the Federal Reserve. If confirmed, Yellen would replace Ben Bernanke next January. There has been a lot of talk and controversy around her nomination. Yellen would be the first woman to chair the Federal Reserve, so that has definitely drawn some attention. She has faced opposition from some Republicans who oppose the current direction of the Federal Reserve’s policies. However, this all leads us to the question: just how important is the Chair?


Let’s first begin with a quick summary of what the Federal Reserve is and what its purpose is in our economic system. The Federal Reserve is the nation’s central bank and controls the supply of money in the economy. It ensures that banks have plenty of money to meet their obligations, and it can step in to provide loans to these banks if necessary. The Federal Reserve Chair is essentially the CEO of the whole operation. The Chair doesn’t have sole responsibility for the actions and outcomes of the system but is often held liable for any missteps. The Chair is part of a seven-member board that makes decisions regarding monetary policy. Their power comes from being able to influence the ultimate outcome of the board’s decision by setting the agenda of each meeting and refereeing the discussion.


Image credit: Cagle Cartoons

Image credit: Cagle Cartoons


All signs indicate that Yellen will likely continue to support the expansionary policies that Bernanke has supported. During her confirmation hearing, she made it clear that she would keep interest rates low to continue fueling employment growth. What this means is a continuation of low long-term interest rates.  Evidence of the success of this policy is mixed and many argue that it has not been successful at all. After all unemployment remains high even amid the lowest interest rates in history.


Without a doubt, Yellen’s resume is impressive. She certainly has the experience and knowledge to do the job. However, the main question is and will be: will she able to know when to pull back the reins before it’s too late? Critics believe that this policy of easy money has inflated the stock and real estate markets possibly creating another asset bubble that could eventually burst. If that is the case, it would mean a catastrophic blow to the economic recovery.




The Regional Economic Studies Institute (RESI) hosted its 17th annual Economic Outlook Conference on November 6th, 2013, focusing on the film industry and its challenges, future, and impacts. The conference this year was comprised of two separate segments—one focusing on the economy and the other on the film industry in Maryland. The title for this year’s economic outlook presentation was The Sum of All Fears. The presentation provided a current and long-range view of the economic indicators affecting Maryland and the U.S. economy. In addition, it focused on the five years since the financial meltdown and how the national economy has managed to recover.



Keynote Speaker Kevin Kilner with RESI Staff. Click the photo to view more!


Let’s be honest, sometimes presentations full of data and charts can start to get a little boring. To keep our audience engaged and spice up the data, RESI utilized Prezi—a relatively new presentation software. This new technology helped to keep the presentation exciting and entertaining. We received lot of positive feedback about it so we are excited to keep using it for future presentations. Our keynote speaker this year was well-known Baltimore native, film, television and stage actor, Kevin Kilner, or “Senator Kern” from House of Cards. Not only did he provide the insider’s perspective on the film industry, he was also very passionate about the filming that is done in Maryland. Kevin brought a lot of excitement and energy to the conference. Can’t wait for next  year! Any ideas what our next conference theme should be?


Here’s a video that highlights a few segments of the 2014 RESI Economic Forecast:




As is customary this time of the year, RESI is busy preparing for our annual Economic Outlook Conference.  This year’s conference will be focused on the impact of the film industry in Maryland. The agenda will feature our Maryland economic forecast presentation, a discussion of the impacts of The Film Production Employment Act of 2011, and a panel discussion on the return on investment of the film industry.


Preparations usually begin months in advance of the actual event and preparing for the conference is always a time consuming affair. We are lucky at RESI to have the support of a fantastic group of students that are integral in helping us prepare for the conference. We rely on them extensively for developing ideas, data collection, research, and editing. This year’s conference theme is closely tied to work we are doing for the Maryland Film Industry Coalition. One of our student interns, Molly Rozran, recently took time out of her day to discuss her involvement in the project and her thoughts on the theme of the 2013 Economic Outlook Conference.



RESI has always made it a priority to integrate students in our day-to-day activities. Their support, ideas, and enthusiasm keep us (stodgy economists) constantly on our toes. Having them available for assistance in preparing for the Conference has been of particular significance this year since we have experienced a particularly unique challenge. Due to the government shutdown, websites that are used frequently as sources for our presentation; places such as the Bureau of Economic Analysis and the U.S. Census were completely shut down—preventing us from being able to gather updated data for our presentation. During that time we relied on our student interns to collect anecdotal information and even dig back into cached websites to try to find data. Now that the shutdown is over they will be working furiously to help us catch up on all the time we have missed. It is safe to say that without our student interns our conference would not be the successful and informative event that it has become known for.



If it seems like we have been here before, it is because we have. This time, the U.S. Congress is headed for a two-round knockout fight over fiscal matters.  The first round involves funding for the Federal Government. Conservative House Republicans, in particular, are not budging on their stance of allowing a government shutdown by not passing a continuing resolution bill if their demands are not met. Their expectation: to have Obamacare (the Affordable Care Act) defunded. If a resolution is not passed, the lights will go out on the Federal Government on September 30 at midnight. The shutdown impact would be far and wide: national parks would close, passports would fail to be processed, and direct deposits for military spouses would stop.


Image Credit: Marguiles

The second round will see the clock once again ticking on the U.S. government’s ability to borrow money. In all actuality, the nation already hit the debt threshold in May of this year. Since then, the Treasury has been using various “extraordinary measures” to keep things moving along. These measures free up approximately $260 billion by limiting the investment and reinvestment of money from various retirement and disability funds. If the ceiling is not raised and these stop-gap measures fail to give the nation an extra spending cushion, the Treasury will have to make hard decisions regarding what bills get paid with the cash balance on hand.


A heated debate and extensive negotiations between the two parties over whether to raise the debt ceiling in 2011 adversely impacted financial markets and caused the downgrade of the U.S. credit rating from AAA to AA+ by Standard & Poor’s. This time, President Obama is standing firm on his stance of no negotiations. However, it looks like a showdown is imminent as the Republic House Speaker John Boehner is eager to work out a deal. Although the looming debt ceiling crisis is not receiving as much attention as it did in 2011 (mainly as a result of the focus on Syria), the path to a resolution seems a lot murkier this time around. Another downgrade of the nation’s rating would be catastrophic to financial markets across the globe. If the nation goes into default, there will certainly be no winners in this round. With only a few days until the end of the month, the bell for the first round has been rung.



Increased Interest Rates on Federal Student Loans
On July 1 of this year, the rate on new, federally subsidized student loans increased from 3.4 to 6.8 percent. Leading up to the increase, legislators tried and failed to work out a deal to keep that rate lower. Finally, on July 18th, a bipartisan group of senators announced an agreement on student loan packages. During a time when student debt is steadily increasing, and the job market for new graduates continues to remain lukewarm, this particular issue is something to which we should all be paying close attention to.


How does high student debt affect graduates and the greater economy?
Recent figures estimate that nearly 37 million Americans have some form of student loan debt, and, according to many sources, the total amount owed is at the $1 trillion mark. High student debt and low paying jobs prevent graduates from reaching financial goals, such as financial independence, homeownership, and retirement saving. These factors have an impact on the greater economy, which relies heavily on consumer spending to fuel its engine. This particular generation, the “Millenials,” are faced with higher student loan debt than any other in the past. These individuals, who are not able to fully become independent citizens, are not helping an already anemic recovery. According to the Census Bureau, the percentage of men between the ages of 25 and 34 who are living in their parent’s home increased from 13.5 to 16.9. The rate for women also increased—from 8.1 to 10.4 percent. The housing market’s current recovery is not being led by first-time homebuyers, further pointing to the financial roadblocks that young people are facing these days. Unfortunately, the ultimate impacts of this trend will not be immediately evident.


Image credit: R.J. Matson

How will high student debt continue to affect graduates and the greater economy?
We will continue to see repercussions for years, even generations to come. As student debt follows graduates into their later years, it will affect their purchasing power, ability to start up their own business ventures, and ultimately paying for their own children’s college education. It’s important that, as a society, we begin to take a hard look at both the ways of financing a college education as well as the escalating costs. Tuition rates have been soaring—outpacing medical and cost-of-living inflation over the last 30 years. At the current rate, neither is sustainable in the long term. If we want to continue on a path of economic prosperity, it’s important to tackle these issues now, before they become part of a broader, more long-term problem. The rate of student loans is only part of a broader college affordability issue.


What does the new Senate bill mean for student loan rates?
The bipartisan approved agreement caps rates at 8.25 percent for undergrads and 9.5 percent for graduate students. The borrowing rate would be tied to current interest rates and would lock in the surcharges paid to the government for administrative costs. The proposal is also backed by the White House. This agreement is favorable for students now due to historically low interest rates. For instance, if the agreement is voted on and approved, students taking out new loans for the fall semester will pay 3.86 percent. However, in the future, as the economy continues to recover, we can expect rates to increase which would mean higher rates for borrowers which could exceed the current rate of 6.8 percent—not exactly a better option as far as I’m concerned.



When was the last time you paid sales tax to the state when making an online purchase for a store that did not charge you sales tax? Never? Although you are technically required to do so, you are probably not alone. Peter Franchot, the state’s Comptroller, estimates that Maryland is missing out on approximately $175 million in uncollected taxes as a result of noncompliance.

Overview of the Marketplace Fairness Act
The Marketplace Fairness Act, which has just been approved by the U.S. Senate, will require online retailers with sales of more than one million per year to collect and remit state sales tax. Proponents of the bill tout the benefits to smaller brick-and-mortar stores that cannot compete with online merchants that were not required to collect sales tax. Opponents point out that businesses with one million dollars in revenue per year are relatively small and would be hurt by the higher administrative costs.


Image credit:

Image credit: Naypong Digital Images

How will the online sales tax affect Maryland?
If approved, this legislation will no doubt have ramifications for online sellers as well as Maryland residents. For online sellers, it would likely result in higher administrative costs in order to track sales, calculate distinct tax rates, and complete the necessary paperwork. These higher costs, although initially borne by the seller, could eventually be passed on to consumers through higher prices. However, if the Act is approved, it would mean that the gas tax increase just recently passed in Maryland would increase by a smaller amount.


Maryland General Assembly officials report that if the online sales tax legislation is passed, it would correspond with a decrease of approximately seven cents from the gas tax hike. Either way, consumers will be paying higher taxes. However, who will bear the greatest costs will depend on individual consumer habits. Those who drive a significant amount but rarely shop online will probably benefit the most. On the other hand, those who drive long distances and do a significant amount of online shopping will probably bear the greatest impact. Although the bill easily passed a U.S. Senate vote, the U.S. House of Representatives vote is expected to present a greater obstacle.



Since the 2013 Maryland Legislation session came to a close last week, we thought it would timely to focus on bills that would have a significant economic impact, particularly for the long-term prosperity of the state.


Approval of the transportation funding plan will inject a significant sum of money for the Red and Purple transit lines as well as a variety of transportation-related infrastructure improvements. Voting on the bill was expected to be close since funds would be raised through the gas tax increase. One of the debates against the bill was the increased gas prices for consumers and the impact that would have on their pockets. According to legislative analysts, the increase could total about $19 a year on average, increasing to as much as $100 per year on average as the tax rate increases are phased in. While the individual impact will be relatively small, the overall economic impact would be significant. For instance, the $4.4 billion dollars in funding will mean more activity for the construction and transportation sectors. In a report for the Maryland Highway Administration, RESI evaluated the return on investment of highway spending, and the results are significant. According to our findings:

  • The annual rate of return of highways spending totals approximately 17 cents per dollar spent.
  • Cost savings are also gained in the manufacturing industry, where an average highway dollar reduced annual production costs by more than 12 cents.

Nevertheless, the ultimate impact will be the availability of adequate transportation infrastructure that will continue to nurture the state’s economic vitality and improve its competitiveness against other states.


Image Credit: Holly Nunn, Southern MD News

Image Credit: Holly Nunn, Southern MD News

The Education sector was also a big winner this year as it received nearly half of the State’s general fund (nearly $16 billion). A number of initiatives seek to improve our children’s competitiveness in science, technology, engineering, and math disciplines. In addition, legislators approved $1.1 billion in funding for Baltimore City school construction projects that would renovate existing schools and build 15 new ones. The funding would help approximately 85,000 children enjoy updated and comfortable classrooms. Education continues to be a priority for the state and it shows. Last year, Education Week ranked Maryland schools number one for the fourth year in a row.


The proposal of the state’s minimum wage increase was defeated. The bill proposed increasing the minimum wage from $7.25 to $10 by 2015. Opponents argued that the increased wages would make the state less competitive and cause job losses. It is important to note that, although minimum wage discussion frequently stir up political debate, empirically speaking, no real evidence indicates that raising minimum wages significantly reduces employment.


Overall, this year’s legislative session was one of the most productive. The budget, which has been a source of contention in the past, passed without much fanfare, and legislators tackled several controversial issues. Regardless of how you feel about the ultimate results of the session, it was refreshing to see facts and figures rather than party squabbles dominate the headlines.