Opinion: Daily Journal

A tale of two recoveries

A Carolina Comeback really happened. The question is whether the gains of recent years can be sustained under divided government.

The following editorial appeared in the February 2017 print edition of Carolina Journal:

Timing matters, in both stand-up comedy and interpreting statistical trends.

Left-leaning groups are likely to seize on findings by N.C. State University economist Mike Walden, in his monthly Carolina Journal column (reprinted here), to deflate the notion that a Carolina Comeback ever occurred.

Citing the inflation-adjusted growth rate of gross domestic product from the end of the Great Recession, Walden notes that North Carolina’s economy has not performed as well during the current recovery as it did during the same period after other recent recessions.

This is an anomaly. As Walden says, North Carolina traditionally “had faster bounces from recessions” than the nation as a whole — which has not been the case from the bottom of the Great Recession until now.

Using that eight-year time frame to base his analysis, Walden is correct. From the trough of the Great Recession until now, North Carolina’s economy has not performed as well as the nation as a whole.

But before the Left breaks out the champagne, let’s recall that the period Walden is using comprises both terms of Barack Obama in Washington (suggesting Obama’s policies were bad for the Tar Heel State) and separate terms of two North Carolina governors with very different philosophical outlooks: Democrat Beverly Perdue and Republican Pat McCrory.

During Perdue’s years, North Carolina’s economy was a laggard, relatively speaking. And during McCrory’s tenure, the sluggish trends reversed, and the state outpaced the nation as a whole.

Starting in January 2013, conservatives in the executive and legislative branches embraced policies that relied more on individual initiative and private investment than government planning and micromanagement.

And if you look at the evidence, it’s easy to make the case that as North Carolina’s policy landscape changed, our economy improved as well. Actions had consequences.

North Carolina’s GDP growth rate has exceeded the national average as these dynamic, market-oriented policies have had time to take effect. From the second quarter of 2014 to the second quarter of 2016, the annual average rate of growth after inflation was 2.3 percent for North Carolina but only 2.1 percent nationally.

For the most recent 12 months of data, the second quarter of 2015 to the second quarter of 2016, the comparison is even stronger in real terms: 2.3 percent for North Carolina versus 1.2 percent for the United States.

State policies matter. North Carolina’s moves to simplify, lower, and flatten taxes; cut needless regulations; and focus state spending on core government functions (while setting surpluses aside to handle emergencies) has helped result in, yes, a Carolina Comeback.

Over the coming years we will see if those economic gains can hold under divided government, and if Gov. Roy Cooper can prevent himself from repeating the mistakes of his predecessors that kept North Carolina’s dynamism in check.