Tax cuts have hindered - not spurred - NC economy

Published April 27, 2014

Editorial by News and Observer, April 26, 2014.

North Carolina’s Republican lawmakers are holding up the latest jobs report like long-ridiculed Bigfoot hunters who’ve come down the mountain with the body of a Sasquatch.

“See,” they declare, “there really is such a thing as a wide economic benefit from trickle-down economics.”

For evidence they point to the state’s jobless rate and job growth. The legislature cut taxes for the rich and squeezed spending on the poor and, lo and behold, the jobless rate, after several years of hovering above the national average, has fallen below it: 6.3 percent vs. 6.7 percent. And the state added nearly 20,000 jobs in March, the second-largest gain in the nation.

Senate leader Phil Berger says, “Our economy is moving in the right direction, thanks to the tax cuts and balanced budgets enacted by Republicans in the General Assembly.”

Republican State Sen. Bob Rucho contends that the numbers reflect continuing job growth under Republican policies. He wrote in a email to The News & Observer: “Our better N.C. strategic plan and tax reform is stimulating economic growth and created nearly 220,000 jobs.”

The state’s economy is improving, but it’s doing so in spite of – not because of – Republican policies. Indeed, the state is riding a national economy that has grown stronger, albeit painfully slowly, every year since President Obama took office. The Dow Jones Industrial Average has nearly doubled in value since 2009 and job growth has crept up steadily. As the Wall Street Journal reported last week, the economy has been expanding for 58 months and the expansion is poised to become the fourth-longest since the Civil War.

Republicans, despite the rising prosperity of their corporate supporters, give the president no credit for saving the economy from the brink. Yet Republicans in North Carolina claim they have fixed their state’s economy.

They’ve done nothing of the sort. John Quinterno of South by North Strategies, a Chapel Hill research firm specializing in economic and social policy, points out in his analysis of the March jobs report that job growth isn’t improving. Year over year, the rate of job growth has barely changed since the recession officially ended in 2009. Between March 2013 and March 2014, job growth was 1.6 percent. During of the last four years, annual job growth has been stuck between 1.5 and 1.7 percent.

“No matter how one cuts the data, North Carolina has experienced the same slow rate of job growth for the last four years,” Quinterno says.

Meanwhile, the drop in the unemployment rate is caused in large part by the state’s draconian cuts to unemployment benefits and eligibility. Those who have lost unemployment benefits don’t have to keep up the active job search required of recipients. They’re no longer counted as active job seekers, which shrinks the labor force and the unemployment rate.

The real story of the state’s economy isn’t about what Republicans did but what might have been if they had done nothing. The Republican tax cuts took effect in January and are projected to result in $524 million less in combined revenue through mid-2015.

Without the budget cuts, there would be more public sector jobs. And without the tax cuts, the state would be enjoying – like many other states – a growing surplus. That surplus could have been used to boost pay for the state’s 95,000 teachers and to undertake infrastructure work that could have employed thousands of workers.

Instead, that future was sidetracked by another fruitless trip down the path of trickle-down economics. The tax cuts have created uncertainty about state revenues, and possible shortfalls loom. When lawmakers return to Raleigh in May for the short legislative session, the debate may be about what must be cut further rather than about who can be helped and what can be built.

April 27, 2014 at 11:29 am
Norm Kellly says:

If the tax cuts, more realistic budget enacted by the Republicans hasn't had a positive impact on our economy, does the N&D give credit where it is due? If I had kept reading, the answer would be obvious. And the answer is more than obvious, considering the source of this editorial. They credit the current White House occupier. Naturally. Nothing this man has done is actually bad for the economy. Increasing federal regulation does not hurt the economy. Waging war on job creators does not hurt the economy. Forcing citizens and businesses to conform to a new federal take-over of the health insurance market does not hurt the economy. This is a law that none of those who voted for it actually read. This is a law that left much of the regulation to be written and implemented by the secretary at DHHS, not by lawmakers. The continued disregard for the US Constitution by this occupier also has no negative effect on the economy. Just ask the N&D editorial staff and they will obviously tell you that tax cuts hurt and the occupier has us headed in the right direction. A national debt that is at ridiculous levels since he's been the occupier has no negative impact on the economy? How so?

The N&D references 'John Quinterno of South by North Strategies'. If this were a conservative organization, the N&D would specifically note so. Since there is no indication of the political leaning of this organization, it is clearly a lib leaning/socialist leaning organization. It's customary amongst libs to point out the status of their opponents, but give no such credit to their lib buddies. They don't want to appear biased in their sources, I guess. But, since conservative organizations simply report what the people who paid for the report want them to report, the conservative groups' analysis is not only always suspect, but usually full of lies and distortions. Not so with lib sources. They are unbiased. Just ask the unbiased liberal N&D.

Talk about a typical liberal rag! Like this line 'draconian cuts to unemployment benefits'. No cut is ever anything other than 'draconian' if you are a lib/socialist. Increases in taxes, costing citizens more, is never a draconian increase in taxes. But every cut is considered draconian by libs; every single time. But the facts are important. The state was going broke paying for federally mandated benefit extensions! The demons had already borrowed billions from the feds to continue this largesse. The demons HAD NO PLAN for paying back the loan. Worse, the demons planned to continue to extend benefits and borrow money from the feds. Putting the state further into debt. The Republicans in NC asked permission from the feds to extend benefits, but with a different formula, so that perhaps our state could continue to pay without getting another loan from the feds. The answer from the central planners? No! Absolutely not! We either did it according to the rules demanded by the central planners or we didn't participate at all! No flexibility from the central planners! So, desiring to be fair to as many people as possible, which includes us tax payers, the legislature did what seems to be the best option available. Instead of going further into debt, with no payback plan, the legislature took THE ONLY action allowed by the central planners. They chose NOT to participate in the extended benefits scheme. Which is better for the long term health of our state, further debt or balanced budgets? Fair to ALL, including taxpayers, or tilted toward a single group? I'm not completely heartless, as the N&D would have you believe, but there has to be a middle ground. Yet the central planners refused to allow a middle ground to our state, as the legislature asked for. The feds forced us to take a stand; more debt or not participating.

Near the end of this socialist diatribe, the N&D editorial gets to the meat of their issue with conservatives and Republicans. They say ' there would be more public sector jobs' if the Republicans had NOT cut taxes! See, it all comes down to how healthy the government is NOT how healthy the economy for the rest of us is. With socialists it is ALWAYS about the state of the government. The demons were even honest about this when they controlled Raleigh and refused to cut the gas tax. We were paying more at the pump for a gallon of gas. At the same time the demon party was raising the gas tax. The citizens experienced a double whamy at the pump. The demons said that the state could not afford to not raise the tax. More interest in the state than in the people. Little to no concern as to how it would impact the people, only concern for how it might impact the state. The state couldn't afford, but no concern for whether we could afford or not.

How is increasing the public sector employment good for the economy? Three scenarios come to mind. Let's explore all three.

First: private sector employment goes up. Tax revenue to the state increases. Expenses for the state go down because the employed person doesn't get unemployment benefits, may not need food stamps, doesn't get free/reduced lunches for the kids at school, may no longer need free/subsidized health coverage, etc. etc. etc. Good for the person/people, good for the state.

Second: unemployment remains constant or increases. Tax revenue to the state stagnates or shrinks. Expenses for unemployment benefits goes up, food stamp costs might increase, all of the above mentioned items would/could cost the state more. Increased expenses at the same time that it reduces income to/for the state.

Third: unemployment decreases by an increase in public sector employment. Tax revenue to the state increases due to income taxes paid by the new employee. Unemployment benefit expenses probably go down, food stamp expenses probably go down, free/reduced lunch at school might go down, etc. What goes up is more than offset by all of these. The salary of that new government employee comes directly out of tax revenue. State & federal taxes come directly out of tax revenue. All the benefits, including medical benefits for the (potential) family of the new employee. At best, a new government employee is a wash for income & expenses on the state budget level. At worst, it costs more for a new government employee than it generates. And I'm willing to bet that if a true study were done of government employment, there's a very low line that is crossed between the benefits of hiring and the cost of not hiring.

The best scenario is for the private sector to be healthy. The best scenario is for citizens to be working for a non-government business. It's likely that it's better for the economy for people to be unemployed than to be a public sector employee.

Regardless of how much the libs/socialists/N&D editorial board wants public sector employment to increase, this is the WORST way to improve any economy. All we have to do is look at states run by the demons, and/or look at socialist European states. How well are those economies performing? What good can be said of socialism and statism? Check out Detroit before you answer how well demons and socialists run things. Use Detroit as an example of socialism and it's success before you answer me. Your challenge, libs/socialists, will be to be honest about the situation with socialism. You'll have to take off your rose-colored glasses first. Very hard for yall to do, if not impossible. Turn on your thinking cap first. Almost as hard as taking off the glasses, but you can do it. Regardless of what your socialist leadership tells you, you actually do have the ability to see clearly and think yourself into a logical conclusion. Then I will welcome you into the light, away from the dark side.

April 27, 2014 at 6:12 pm
Richard Bunce says:

In the perfect N&O world everyone, including the N&O staff would be State employees... 1st Amendment press clause no longer required.