Despite claims, GOP policies aren't spurring the economy

Editorial by News and Observer, January 15, 2015.

Phil Berger, freshly re-elected as the state Senate’s president pro tem, opened the new legislative session this week with a political version of an old fallacy: The sun rises because the rooster crows about tax cuts.

“And today North Carolina’s future shines brighter than when I stood before you two years ago – and brighter still than when I stood before you four years ago,” Berger said as he began his third term as Senate leader. Republicans balancing the state budget, reducing state government spending and cutting taxes, he said, “have helped turn North Carolina around.”

That the national economy is also recovering thanks in part to the policies of a Democratic president and the heads of the Federal Reserve he nominated got no mention. But the improving national economy is the principle and perhaps the only reason why the state’s economy is improving.

Indeed, the state economy would be better off but for Republican policies that have held down government spending and government hiring. During the last four years of sluggish economic recovery, the state economy could have used the stimulus of government investment rather than a withering of government spending. Balancing the budget isn’t a special feat. It’s a state constitutional requirement. And implying that free-spending Democrats ran up deficits Republicans inherited in 2011 ignores the fact that state revenue plunged during the worst recession since the Great Depression.

The effects of Republican policy are not making it “morning again” in North Carolina. They are bringing the state into a twilight of its former role as a progressive and moderate leader among Southern states. Here are the real effects of Republican policies:

•  North Carolina has forgone billions of federal dollars and thousands of jobs by not expanding Medicaid while 27 states have.

•  State support for operating public schools, often among the largest employers in rural counties, has decreased.

•  The state has not made a major, job-creating investment in infrastructure despite a growing need and low interest rates that would make the projects much cheaper than they will be in the future.

•  The GOP effort to privatize the state’s business recruitment efforts has yet to get rolling, and business recruitment successes have dropped off.

•  North Carolina’s unemployment rate has decreased significantly, as it has nationally, but the main driver has been a shrinking labor force. The share of the population actually participating in the labor force has fallen from 65.3 percent in December 2007 to 60.1 percent in November, which is tied for the lowest rate logged in any month since January 1976.

•  While more jobs have been created, the state still has just barely regained all the jobs lost during Great Recession. Meanwhile, the total number of people potentially available for work in the civilian economy (those age 16 and up) has increased by 768,000, or 11 percent, between the start of the recession and November.

• The ballyhooed tax cuts have choked state revenue to the point where it will not be enough for even an austere budget. Current projections call for a $199 million shortfall, but it could go higher. Meanwhile, the cuts have increased economic inequality by shifting the tax burden downward. A new report from  the Institute on Taxation and Economic Policy found that North Carolinians in the lowest 20 percent of income pay 9.2 of their income in state and local taxes. The top 1 percent pay 5.3 percent.

The Senate leader said, “We are proud of these results, from policies driven by what the voters elected us to do.”

Berger may be proud, but that doesn’t make him right anymore than crowing makes the sun rise.