Tax cuts have hindered - not spurred - NC economy

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.

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