RALEIGH — In 2008 the federal government launched a bailout program unlike any seen since the Great Depression. The government borrowed more money, increasing the national debt. Americans were given tax rebate checks to get the economy moving. Rather than spending their rebates, many put them in savings accounts. Taxpayer bailouts were given to insurance giant AIG, General Motors and Chrysler, the banking industry, and the mortgage industry. First-time homebuyers and homeowners fighting off foreclosure got incentives and tax breaks.
By the end of 2008, unemployment was the highest since World War II at 7.2 percent. Instead of reducing taxes, getting money into the hands of businesses and consumers that would get the economy moving and create jobs, yet another stimulus package was introduced.
This time the federal government borrowed trillions of dollars and doled it out over three years to states in direct allocations, with each state’s amount determined by its population. North Carolina, the 10th-largest state, got the 10th-largest allocation — $6.1 billion.
But there were strings attached, with strict guidelines on how the money could be used. Several Republican governors considered rejecting part of their allocations, fearing that increasing entitlement spending would hamper recovery efforts and throw them deeper into debt. Gov. Bev Perdue, on the other hand, said she would drive a pickup truck to any state to pick up its unused stimulus funds and bring them to North Carolina.
Almost none of North Carolina’s money was used to create jobs, improve infrastructure, or help small businesses; instead, it increased social programs, entitlement payouts, and government. Of the $6.1 billion, $1.4 billion patched holes in the state budget created by years of overspending by liberal lawmakers.
Nearly half of North Carolina’s direct allocation money ($2.7 billion) is slated for the growth and expansion of social programs. Many of the programs serve a useful purpose but they are already receiving funding. This money will simply increase government dependency.
Transportation improvements are sorely needed to keep the state’s economy growing. Goods and supplies must move across the state and people need roads to get to work. But of those scarce dollars designated for transportation spending, more than $100 million is targeted for public transportation: carpool vans, parking lots, and roofs for public bus stations. Meanwhile, critically needed road improvements, bridge repairs, and other highway construction were largely ignored.
Even the $700 million designated for education will flow to social programs: school lunch equipment, homeless education, and expansion of Title 1 programs — all commendable but hardly a stimulus for the economy.
Federal stimulus dollars are also slated to realize President Obama’s goal of creating a green energy economy. But capitalism and the free market, rather than government, historically have been the engines of economic growth. Even so, $344 million of North Carolina’s direct allocation was shoveled into green energy. And some of it was more social spending, such as the $137 million committed to “weatherization” — replacing windows and furnishing water-heater insulation in low-income housing.
After three years, when people have become dependent on these new programs, and the federal stimulus money runs out, North Carolina taxpayers will be on the hook. State budget writers know that. Rep. Paul Luebke, D-Durham, chairman of the House Finance Committee, explained during the 2009 budget talks that the $1 billion tax increase for the 2009-10 fiscal year was necessary to provide revenue for the social programs that would be expanded under the “stimulus” program.
Unemployment in North Carolina remains above 10 percent, the General Assembly just passed a $1 billion tax increase, and government is growing. Looks like the only thing being stimulated is Obama’s plan for more and bigger government.
Becki Gray is vice president for outreach at the John Locke Foundation.