It’s an article of faith among North Carolina’s Republican leaders that tax cuts and tight restraints on state spending have stimulated the state economy and created jobs. But repeating something doesn’t necessarily make it true, and it’s increasingly looking like this article of faith is a falsehood.
State Senate leader Phil Berger repeated this Republican boast in his reply to Democratic Gov. Roy Cooper’s State of the State address Monday. Berger said Republican lawmakers took over in 2011, soon cut taxes and were able to “slash the unemployment rate in half by empowering the private sector to create half a million new jobs.” Republicans are so excited about tax cuts spurring jobs that the state House and Senate now have dueling plans to cut taxes some more.
The misleading aspect of the Republican claim of “half a million new jobs” is the number is without context. Yes, the state has added 574,700 payroll jobs between the start of the recovery in February 2010 and January of 2017. That translates to an average growth of 2 percent a year, largely in line with growth in the national economy.
More significantly, North Carolina’s job growth has come as the state’s population has expanded. Jobs are merely keeping up with more people, a pattern that almost certainly would have occurred – as it has in other states – without tax cuts.
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Finally, all jobs are not equal. Many of the new jobs are low-paying or temporary. Wage growth has been stagnant even as inflation has crept upward. Most people sense that they are not gaining ground. That’s why Gov. Pat McCrory’s campaign talk of a “Carolina Comeback” didn’t resonate with workers. Many haven’t come back, they’re falling behind or staying in place.
A job shortage
John Quinterno, a principal with South by North Strategies in Chapel Hill who specializes in labor market analysis, has studied and largely debunked claims about the “Carolina Comeback” and the ephemeral, if any role played by tax cuts for the wealthy and corporations. He says North Carolina actually faces a shortage of jobs because job growth has not kept up with population growth and people returning to the workforce. That shortage, he says, shows up in a lack of growth in wages.
Quinterno says, “I think we've reached the point where headline figures about job growth and employment aren't telling much about what actually is going on in the state's economy and whether it is translating into improvements in well-being for individual households. The growth we've been seeing, while positive, has not been adequate to meaningfully raise wages, incomes, and, by extension, living standards.”
If there ever were a time to maintain rather than reduce taxation on the wealthy and profitable corporations, the past few years have been that time. A booming stock market and rising home values have disproportionately benefited the wealthy and expanded income inequality. Corporate profits are at an all time high. Since the first quarter of 2009 – the low point of the Great Recession – U.S. household wealth has soared by $38 trillion, according to Federal Reserve’s latest quarterly report. While that increase benefits many Americans, the lion’s share goes to the top. The top 3 percent of households by income hold 54 percent of the nation’s wealth.
Republicans have squandered the national recovery by failing to tax the increased prosperity of the wealthy and the high profits of corporations. Instead, the state is giving up $1 billion a year through tax cuts and refusing billions of dollars in federal aid for Medicaid expansion.
North Carolina has gone the way of Kansas in cutting taxes and hoping for growth. That’s been a disaster in Kansas, but less so here where population growth has buffered the effects of austerity. But the unemployment rate has stopped dropping, growth is slowing and federal spending that is vital to North Carolina’s research industry could be cut under President Trump.
Berger’s claim of cause and effect between tax cuts and job growth was and is an illusion, yet now he wants a constitutional cap on income taxes. That will only make a tax break permanent for those who need it the least and ensure that the state will have a harder time recovering once the next economic downturn makes the folly of excessive tax cuts clear.