The state’s political establishment has a Christmas present for every North Carolinian: a lump of coal. Make that two lumps if you happen to be an entrepreneur or employee.
The General Assembly — with the blessing of the Perdue administration — continues to toy with the private economy as if its actions have no impact on job formation, capital investment, or economic growth. Businesses with connections to policymakers, and employers the establishment hopes to woo, are showered with favors. Companies that lack political juice are punished. And instead of keeping government limited to its core functions — law enforcement, essential pubic services, needed infrastructure — state officials continue to waste taxpayers’ money on projects that are better left to the private sector, or not undertaken at all.
Raleigh’s populist response to the recession is both telling and predictable:
• This year’s General Assembly imposed a $1-billion-a-year tax increase and broadened the tax base so that a host of services were added to the revenue rolls. The increase was unnecessary and will be used to increase spending rather than close any anticipated deficit. The 2009-10 budget came in at more than $20.4 billion — $800 million more than was actually spent in the previous fiscal year.
• Gov. Bev Perdue continues to champion a hostile state takeover of four hydroelectric dams in central North Carolina that have been owned and operated by Alcoa for 90 years. Why? The governor and her legislative allies apparently don’t like Alcoa.
The dams powered an Alcoa smelting plant that closed in 2002. Hundreds of jobs were lost. Even though the dams continue to produce clean electricity, and pay taxes to local communities, state officials want to seize the dams. In an October filing, Secretary of Commerce Keith Crisco told federal energy regulators that Alcoa’s “failure to contribute in any manner to the economic health and well-being of North Carolina … has left the state no choice but to act to save this resource from [Alcoa’s] neglect, by becoming the conscientious operator of this invaluable resource for the public good.”
Translation: No business in North Carolina is safe from a vindictive political class.
• The state keeps lavishing taxpayer incentives on favored businesses — including successful ones. In August, Novartis landed roughly $40 million in state and local tax breaks to expand its vaccine production plant. And in mid-November, Perdue announced a new package of $20 million in state and local taxpayer giveaways to Talecris, North Carolina’s largest biotech firm. The company had recently raised more than $1.7 billion from investors.
For decades, North Carolina politicians have treated the state’s private economy as their personal ATM. This crony capitalism has left entrepreneurs and their employees vulnerable to the whims and fetishes of elected officials.
The economy will rebound, but a lasting recovery requires lower taxes, streamlined regulations, and a legislative climate that respects property rights and the rule of law. Sadly, it’s hard to find those items on lawmakers’ Christmas lists.