The reality behind McCrory's misleading "Carolina Comeback"

by Chris Fitzsimon, NC Policy Watch and NC SPIN panelist, January 7, 2014.

Governor Pat McCrory is spending a lot of time these days talking about what he calls the “Carolina Comeback,” his political slogan for what he describes as the state’s economic recovery created by his policy decisions in the last year.

McCrory points to the drop in the state unemployment rate as the most prominent evidence that he has turned things around in North Carolina and he points to the “tax reform” passed last summer as a primary reason for the success in job creation.

That would be the tax reform that McCrory and his supporters have claimed will allow North Carolinians to keep more of their “hard-earned money.”

Well, not exactly. Wealthy taxpayers and out of state corporations will certainly pay less in taxes this year, but most people in the state will pay more, as will many small businesses who will lose a tax break lawmakers passed in 2011.

Supporters of what was really more of a tax shift than tax reform used to bristle when folks like the N.C. Budget & Tax Center pointed out that many families in the state will pay more in taxes under the new plan—many of them vigorously insisting that it wasn’t true—but now they have been forced to admit that the critics were right.

An Associated Press story over the holidays cited an analysis by the General Assembly’s own Fiscal Research staff showing that a married couple with two children that earns $20,000 a year will pay $262 more in taxes thanks to the “reform” McCrory keeps touting.

A couple with two children that earns $250,000 a year will get a tax cut of $2,318. Quite a tax shift indeed. Then there are the tax hikes on everything from movie tickets to mobile homes and the end of middle class tax breaks, like the popular 529 college savings plan.

And what about the jobs McCrory says his administration have created that are responsible for a two percent drop in unemployment?

It’s true that the unemployment rate has fallen from 9.4 percent in December of 2012 to 7.4 percent in November of 2013, but job creation inspired by tax cuts has little to do with it.

In fact, as UNC Chapel Hill Economics Professor Patrick Conway pointed out recently, the state actually lost 6,000 jobs in 2013.

The unemployment rate is lower because the labor force itself is significantly smaller, declining by 2.5 percent in the first eleven months of 2013, most likely because many discouraged workers simply gave up looking for a job after a long fruitless search.

Workers who are no longer seeking employment are not eligible for unemployment benefits and they are not considered part of the labor force when calculating the state unemployment rate. Fewer workers looking for jobs means a lower unemployment rate even if no jobs have been created.

McCrory is essentially boasting about an unemployment rate that is masking the state’s economic problems, not reflecting any successes in rebuilding the economy.

Remarkably, the Governor also points to his decision not to expand Medicaid under the Affordable Care Act as another part of the reason for the alleged economic comeback, even though studies show Medicaid expansion would create thousands of jobs in the state while providing health care coverage for 500,00 people who are currently uninsured.

Add it all up and McCrory’s Carolina Comeback is actually nothing of the sort. It’s a soundbite, not a real economic recovery, as thousands of struggling families in North Carolina can painfully attest.