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Posted Friday, January 30, 2015
Raleigh, NC — Ever since conservatives won majorities in the North Carolina General Assembly and began reducing taxes, spending, and state regulation, liberals have predicted doom.
Without sufficient government spending, they said, the North Carolina economy would suffer. Businesses don’t place as high a value on cost as they used to, liberals assured us, so efforts to promote growth with lower taxes and regulatory burdens will accomplish nothing. Instead, they counseled more spending on schools, infrastructure, and even public assistance as a stimulus.
The Left’s model for economic development was never coherent. Now, with several years of empirical data about the state’s recent economic performance before us, we can say with rising confidence the Left’s model yields poor predictions. Since the advent of tax cuts, budget restraint, and regulatory reform in Raleigh, North Carolina has outperformed the nation and the Southeast in most measures of economic growth.
The latest data come from the Bureau of Labor Statistics. It has just released preliminary job counts and unemployment statistics for December 2014 as well as revised statistics for prior months. Over the past year, North Carolina added about 114,500 net new jobs, an annual growth rate of 2.8 percent. That was significantly above annual rates of job creation for the nation as a whole (2.2 percent) and the Southeast as a whole (1.8 percent).
It’s more informative to look at these trends over a longer period of time. Consider the various rounds of state budgets, tax cuts, and regulatory reforms that the North Carolina legislature has enacted since the 2010 election. The first ones went into effect in mid-2011. Since that time, the North Carolina economy has added some 300,000 new jobs, which represented an increase of 7.7 percent over those three and a half years. The nation’s growth rate during that period was 6.5 percent. The Southeast’s job-creation rate was still lower than that, at 5.5 percent.
Here’s one way to think about these trends. If our state’s job creation rate had merely matched the regional average, about 88,000 fewer North Carolinians would be employed today. Obviously we can’t say for sure how much the state’s turn to fiscal conservatism in 2011 contributed to the state’s relatively strong economic performance since then. Several of our neighbors have experienced strong growth, too. Of course, some of them have also pursued similar policies, such as fiscal restraint and regulatory reform.
My point is simply that if you listened to the Left’s predictions that North Carolina would lag behind comparable states, you made a bad bet. The predictions weren’t just wrong — they were far, far off the mark. Texas (11.6 percent since mid-2011) and Florida (9.4 percent) were the only Southern states to experience stronger job creation. If you add the other large states outside the South to the list, only California (also 9.4 percent) surpasses North Carolina.
Most but not all of the best-performing states in job creation have relatively small governments with lower-than-average taxes and regulatory burdens (California is the most prominent exception). Senate leader Phil Berger, former House Speaker Thom Tillis, other legislative leaders, and Gov. Pat McCrory may have incurred the wrath of liberal activists and left-wing editorialists by pursuing a conservative strategy for economic growth, but they weren’t really taking a risk. They were applying sound principles and the lessons of modern history to the problem. Their critics have done little more than chant outdated Keynesian catechisms and engage in personal ridicule.
Realistically, however, what else can liberals do? They can’t laud President Obama’s economic recovery while calling North Carolina’s economic recovery unimpressive, since North Carolina is growing faster than the nation. And while they can cite declines in the state’s labor-market participation in an attempt to wish away inconvenient trends, those monthly statistics derive from a small-sample survey. Broader BLS measures show that even after accounting for workers dropping out of the labor force, unemployed has dropped faster in North Carolina than in all but a handful of states.
So the Left chants and chides even as the state’s economic comeback continues.
Hood is chairman of the John Locke Foundation. Follow him @JohnHoodNC.
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