The debate about recent economic growth in North Carolina has a peculiar dynamic.
Democrats who think President Barack Obama’s economic policies have succeeded are simultaneously claiming that the economic policies of North Carolina’s legislature and Gov. Pat McCrory are failing. Republicans who think Obama’s economic policies have failed are simultaneously claiming that North Carolina’s economic policies are succeeding.
Neither position is inherently inconsistent. It is quite possible for America as a whole to do well while North Carolina does relatively poorly, or for America as a whole to do poorly while North Carolina does relatively well. Moreover, since the Democrats in Washington chose to increase taxes, spending, and regulation while Republicans in North Carolina chose to reduce taxes, spending, and regulation, it seems impossible for both sets of decisions to be the correct ones.
The real rhetorical problem is that many partisans on both sides have tried to use the same labor statistics to prove their respective cases.
At the national level, liberal defenders of President Obama and Democratic policies point to a decline in the standard unemployment rate from its peak of 10 percent in October 2009 to 6.3 percent in April 2014. Conservative critics respond that a large portion of this apparent improvement is a mirage caused by discouraged workers dropping out of the labor force. Add them back into the calculation, they argue, and the “real” unemployment rate would be far higher.
In our state, the rhetorical positions are reversed. The conservatives are the ones pointing to the fact that North Carolina has had one of the nation’s largest drops in unemployment since the Republican legislature began enacting tax reduction, regulatory relief, and other fiscally conservative policies in 2011. In response, liberals are arguing that North Carolina’s labor-market improvement is a mirage caused by discouraged workers dropping out of the labor force.
I’m a fiscal conservative. So if your views about economic policy differ from mine, you may not be inclined to take what I’m about to say at face value. I understand. I encourage you to check the source data yourself and draw your own conclusions.
Still, here’s the truth of the matter. The nation as a whole is indeed experiencing one of the weakest economic recoveries in modern American history. This may be the fault of the fiscal, regulatory, and monetary policies enacted in Washington. Or it may be entirely the result of international trends and market forces.
Yes, North Carolina’s recovery from the Great Recession has been far weaker than normal, too. States have some economic-policy tools of their own, but most will never find it possible to wall their economies off from the national trend. The relevant standard for judging the effectiveness of a state’s economic policies is not a simple comparison with the state’s past economic performance. That fails to control for the predominant role of federal policy. The proper comparison is how the state’s economy performs relative to the economies of other states — which are also subject to Washington’s policy decisions, be they beneficial or baleful.
By that standard, we’ve has done pretty well since the adoption of conservative reforms in mid-2011. Personal income, payroll jobs, and household employment have all grown at least modestly faster in North Carolina than in the nation as a whole since June 2011. Even if you use a broader measure of unemployment that includes jobless workers who’ve stopped looking for work, North Carolina’s rate has dropped by 3.3 percentage points, faster than in all but six other states.
On an alternative measure, the employment-population ratio — which again takes discouraged workers into account — North Carolina has also done relatively well. Since mid-2013, for example, when the state ended extended unemployment benefits and enacted a new round of regulatory and tax reforms, North Carolina has seen its employment-population ratio rise by half a percentage point. The national rate rose by two-tenths of a point.
At this point, then, those who criticize Obama while praising Republican leaders in North Carolina have not only a consistent argument but also one that better matches the available evidence.
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Hood is president of the John Locke Foundation.