RALEIGH – I’m about to throw a pile of numbers at you, so be forewarned. I promise there will be few sharp edges or odoriferous objects.
One of the common themes in this column is the gap between rhetoric and reality in North Carolina politics. Our state politicians are often masters of boosterism and blarney, which are useful talents if you’re selling homes or vacuum cleaners but aren’t as useful if it’s your job to maintain or renovate homes to increase their value. (Admittedly, these talents remain useful if your goal is to vacuum cash out of the taxpayer’s wallet.)
A frequent refrain from the political class is that North Carolina is a regional or national leader in economic progress and development, the result of decades of patient government investment in such programs as public schools, public colleges and universities, and cultural and recreational amenities. Some also argue that the state’s centralized approach to government – funding schools and roads overwhelmingly at the state level rather than the local level – and its grant of nearly unlimited annexation power to municipalities have played a role in North Carolina outperforming other Southern states and the nation as a whole.
These are complex issues, some discussed at length in previous columns and others worth future discussion. Today, I simply want to point out that trends in North Carolina’s relative economic performance don’t lend themselves to such sweeping conclusions.
Let’s look first at per-capita income. Here’s how North Carolina, its neighbors, and key benchmarks fared in nominal income growth over the entire period from 1929 to 2007:
• United States: 5432%
• Southeast: 9462%
• Florida: 7336%
• Georgia: 9654%
• North Carolina: 10155%
• South Carolina: 11515%
• Tennessee: 8798%
• Texas: 7712%
• Virginia: 9471%
As you can see, both Carolinas rank as growth leaders over the long term. But the story gets more interesting when you break the trend up into increments. In the 1930s and 1940s, the Carolinas were the clear national leaders in income growth. In the 1950s and 1960s, however, while North Carolina continued to outpace the national average, its income-growth rate lagged the Southeast average and that of most of its neighbors. In the 1970s and 1980s, North Carolina improved its relative performance a bit, roughly matching the regional average. But here’s the trend since 1990:
• United States: 98%
• Southeast: 102%
• Florida: 97%
• Georgia: 90%
• North Carolina: 95%
• South Carolina: 95%
• Tennessee: 99%
• Texas: 113%
• Virginia: 102%
Part of the overall trend can be attributed to the tendency for the greatest percentage gains to occur for economies that start at the lowest position relative to others. Statistical analysis of relative economic performance typically includes an adjustment for this effect. The Carolinas were among the poorest states in the union in 1929, so it was likely they would post high percentage gains early on. Later in the period, other states such as Mississippi and Louisiana were at the bottom, so they were likely to post the highest gains.
When researchers factor out such effects and formulate regressions to look for correlations between variables such as public spending, taxes, climate, and unionization, they typically find that public policy plays a modest role in explaining variations in state economic performance – and most often, the size of government exerts a negative effect on growth.
Let me conclude with recent trends in another measurement, gross state product. Produced by the federal Bureau of Economic Analysis, it measures the value of all goods and services produced within a given state. Here’s how North Carolina compares with benchmarks and neighbors in real GSP growth since 1997:
• United States: 31%
• Southeast: 32%
• Florida: 41%
• Georgia: 32%
• North Carolina: 35%
• South Carolina: 24%
• Tennessee: 27%
• Texas: 38%
• Virginia: 41%
Not bad, huh? But keep in mind that this is a measurement both of economic output and population growth. Because of relatively low land prices, immigration from abroad to fill construction and agribusiness jobs, and other factors, North Carolina clearly experienced a population boom. When you adjust for population and look at real GSP growth per capita, here’s what you get:
• United States: 20%
• Southeast: 17%
• Florida: 24%
• Georgia: 9%
• North Carolina: 16%
• South Carolina: 11%
• Tennessee: 15%
• Texas 17%
• Virginia: 26%
We trailed the national and regional averages. Am I depicting North Carolina in gloom-and-doom terms? Hardly. I’m only suggesting that North Carolina politicians, so prone to exaggeration and swagger, should calm down. We have plenty to learn from states such as Florida and Virginia about how to operate lean, equitable, and truly productive public services that create maximum opportunities for growth and progress.
Hood is president of the John Locke Foundation.