RALEIGH — One argument that North Carolina’s political class advances to excuse itself from responsibility for chronic budget deficits is that other states are a similar straits.
Not bad, guys. This actually has a shred of truth to it, though few states have experienced four straight fiscal years of budget gaps and few have responded with significant tax increases. North Carolina is an egregious example of what is admittedly a widespread trend: state politicians spending other people’s money with increasingly reckless abandon during the 1990s and then pointing fingers elsewhere when the stock market crested and revenues got sluggish.
Many of these same spendthrifts are now begging Washington for a bailout. Various versions of a federal aid bill have floated around Congress, none with redeeming graces. It would be the height of folly for the U.S. House and Senate to reward the fiscal irresponsibility of the 1990s by rerouting taxpayer money from either tax relief or legitimate federal purposes (isn’t there a war on?) to fund bloated state bureaucracies and expansive state promises.
As this excellent web resource from the Reason Public Policy Institute suggests, federal intervention would not only excuse state lawmakers from responsibility and reduce the discincentive they should have to repeat their sorry performance during the next economic boom. It would also bring more federal strings, rules and regulations that would make state programs less cost-effective. A key concern is the Davis-Bacon Act, which forces states to pay union-scale wages in projects fully or partially funded from Washington.
Having just completed the Locke Foundation’s Freedom Budget proposal for the 2003-05 budget biennium, I have no doubt that willing legislators who want to straighten out North Carolina’s budget mess and alleviate our crushing tax burden could address these issues without “help” from Washington. We recommended nearly $1.7 billion in General Fund budget savings and proposed tax reforms and reductions that would take North Carolina’s personal and corporate taxes to a flat marginal rate of 6 percent. The budget protects core functions and wouldn’t result in the dismissal of a schoolteacher or the closure of a prison or mental hospital. Indeed, it would reduce the state’s General Fund budget by only about 1 percent over the next two years.
States are subject to the vagaries of the national economy to some degree, and must live under excessive federal red tape. But for the most part, they can still chart their own course on budget and tax policy. During the 1990s, they got lost. Washington shouldn’t just secure some very binding ropes and drag them back into port. Washington should let state lawmakers learn how to steer.
A postscript: this nautical language prompts me to explain why we changed the name of our alternative budget project from Changing Course to The Freedom Budget. The answer is simple. Having published several editions of Changing Course, we decided to opt for something different, something that more succinctly communicated the theme of our effort.
Besides, you gotta have something to read while you’re eating Freedom Fries.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.