GOP measures do little to halt NC unemployment

August 21, 2013 

After the 2013 session ended, state Sen. Neal Hunt sent his constituents a list of what he considers the accomplishments of the Republican-led legislature. One “to-do” item checked off by the Raleigh Republican was typical of the GOP’s claims:

“You expected us to create a competitive business climate to lower our unemployment rate and to put our citizens back into high-quality jobs; tax reform and regulatory reform will accomplish this.”

So there we have it, the problem and the solution. Yet the problem isn’t going away, and the Republican solution seems to be making it worse. North Carolina’s unemployment rate ticked upward in July, putting the state in a tie with Rhode Island for the third-highest level of joblessness at 8.9 percent.

Even as the state tries to spur private-sector hiring, it’s increasing unemployment – and cutting demand for goods and services – by squeezing the public sector with tax cuts that lead to budget cuts that lead to job cuts. Employers added 8,200 jobs last month, but that gain was offset by a loss of 5,300 public-sector jobs.

Low spending costs jobs

State policies can’t do much to stem broad, national economic trends, and the nation is caught in a slow recovery from the Great Recession. That slowness is caused in part by Republican obstructionism in Congress. The Congressional Budget Office estimates that the sequester cuts could cost the nation 750,000 jobs this calendar year.

State policies can make a bad situation worse, and there are indications that the actions state Republicans are crowing about are actually doing harm.

Sen. Hunt uses the future tense in his claim about what will happen, but after two and a half years of Republicans’ controlling the General Assembly, that “will happen” is changing into “when will it happen?”

Two years ago, Republican lawmakers refused to extend a temporary 1-cent sales tax despite a plea from Democratic Gov. Bev Perdue. Republicans said the money should be returned to taxpayers who would use it to boost the economy. The tax disappeared into its sunset, costing the state $1.2 billion annually. Two years later, unemployment is ticking upward, and North Carolina is nearing the top of the list for jobless rates.

This year the legislature further tightened the tap on spending even when the money was coming from the federal government. It rejected an expansion of Medicaid and, with it, an influx into the state economy of $601 million next fiscal year and more than $2 billion annually afterward. It said no to a federal extension of unemployment funds that would have pumped $20 million a week into the state economy through the end of this year. In the next few years, state spending will be further restricted to compensate for tax cuts passed this session that will reduce state revenue by $2.8 billion in the next five years.

Staying the course

Perhaps years hence North Carolina will be thriving economically, and credit will belong to these stout Republicans who persevered in their faith that Keynesian economics is wrong, that Obamacare is evil, that unemployment assistance fosters unemployment and that, on the third or fourth try, trickle-down tax cuts for the rich really will trickle down to everyone else.

The early results are not encouraging. Much of the decline in unemployment since Republicans took control reflects people taking low-paying jobs in the leisure and hospitality services and frustrated job-seekers dropping out of the labor force. John Quinterno, a principal with South by North Strategies, a research firm specializing in economic and social policy, noted that in July the labor force participation rate fell for the sixth month in a row. The current rate of 62 percent is the lowest monthly figure recorded at any point since January 1976.

“That step back in the labor force participation rate, that’s a pretty disturbing number,” Quinterno said.

With tax cuts and budget cuts, state Republicans promise they’re blazing a path to a better future, but getting there apparently requires going by way of January 1976.

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