John Hood John Locke Foundation
November 27, 2013
For North Carolina liberals intent on recovering some political power in Raleigh, a funny thing happened on the way to a quorum: reality intruded on their most-cherished claims about the two biggest issues in North Carolina politics.
Well, okay, liberals probably don’t find it funny.
What are those two biggest issues? Health care and economic growth, of course. The disastrous launch of the Affordable Care Act exchanges has crumbled President Obama’s credibility and public approval, made Kay Hagan’s Senate seat vulnerable in 2014, and introduced a new generation of voters to timeless wisdom about the inability of coercion and central planning to deliver on the grandiose promises of clueless politicians.
Although some left-wing bitter-enders are continuing to defend Obamacare, smart Democrats are already strategizing how best to distance themselves from the fiasco. A common method will be to express regret and then quickly shift the debate to more favorable territory.
In North Carolina, that favorable territory was supposed to be the state of the economy. Liberals and Democrats had planned to blame conservative policies and Republican politicians for North Carolina’s jobless, substandard economic recovery. Only, according to the latest data from the Bureau of Labor Statistics, the state’s economic recovery has been neither jobless nor substandard.
BLS conducts two monthly surveys to generate employment data. One of them, the larger one, surveys employers about changes in payrolls. The other, the smaller one, surveys households to determine, among other things, the unemployment rate. According to the payroll survey, North Carolina added 30,000 net new jobs during September and October. So far this year, state employment is growing by an annualized rate of 2 percent, faster than the national average of 1.7 percent.
According to the household survey, North Carolina’s unemployment rate was 8 percent in October, down from 9.4 percent in October 2012. Our jobless rate is no longer in the top 10. It is even lower than that of two neighboring states, Tennessee (8.4 percent) and Georgia (8.1 percent).
On the other hand, the household survey suggests that essentially all of the drop in North Carolina’s unemployment rate over the past 12 months occurred because people previously looking for work dropped out of the workforce. It shows no net gain in employment. That doesn’t comport with the payroll survey in North Carolina, which found 80,000 more jobs in October 2013 than in October 2012.
Economists tend to believe the broader payroll survey is more credible. The household data may well be adjusted upward in the coming months. But we don’t have to wait until then to assess political claims about North Carolina’s economy. Longer-term data are available — and devastating to the liberal argument.
You may remember that back in 2011, then-Gov. Bev Perdue proposed to close a $2 billion deficit in North Carolina’s General Fund budget in part by extending most of a temporary sales-tax increase scheduled to sunset in the 2011-12 fiscal year. The newly elected Republican legislature, pursuing a more fiscally conservative course, rejected her proposal. As a result, the state sales tax dropped by a penny, reducing the state tax burden by more than $1 billion a year.
Liberals predicted dire economic consequences. They argued that any positive effects of reducing the sales tax would be swamped by massive layoffs of government workers — which would, in turn, weaken consumer spending and hamper North Carolina’s economic recovery. Using more realistic assumptions, conservatives predicted that lowering North Carolina’s sales tax would create thousands more jobs in the private sector than might be lost from spending restraint in the public sector.
What happened? From June 2009 to June 2011, North Carolina’s rate of job growth was an anemic 0.5 percent, lower than the national average of 0.7 percent. From June 2011 to October 2013, by contrast, North Carolina employment grew by 174,000 jobs, or 4.4 percent vs. a national average gain of 3.8 percent. Even the household survey shows a healthy gain of 122,000 jobs.
Strike two. Time for liberals to change the subject, again.
Hood is president of the John Locke Foundation. For more information, visit www.johnlocke.org