This week’s “Daily Journal” guest columnist is Rick Henderson, Managing Editor of Carolina Journal.
RALEIGH — Has government made North Carolina great? That’s what you’d believe if you buy the spin coming from Gov. Bev Perdue, General Assembly Democrats, their allies in the left-wing interest groups, and even some of the journalists covering the Capitol. Those mean old Republicans want to savage public services to such an extent that we’ll be living in mud huts and foraging for nuts and berries.
At least that’s the liberal/establishment perspective. This argument was wrapped up in a bow by News & Observer columnist Rob Christensen last week, in a piece titled “N.C. spent, thrived.” The story goes that in the 1920s, while our neighbors in Dixie were building a manufacturing base by offering “low wages, low taxes, and no unions,” Tar Heel State leaders also said no to unions while luring outside capital by spending and borrowing public money for roads, schools, and cultural amenities.
One historian called this philosophy “business progressivism,” and as Christensen wrote, “it has dominated the state’s political ethos ever since.”
And that’s the problem. As North Carolina has remained fixated on a nearly century-old strategy for economic development, our neighbors and competitors have chosen policies more in tune with today’s dynamic economy. They’ve done a better job acknowledging that taxes are not delivered by a fat man in a red suit piloting a sleigh, but instead come from the proceeds of private economic activity. In other words, profits are generated by hard work, commerce, and entrepreneurship.
Other states in the region have invested in transportation networks, public research universities, and cultural resources. But they also have kept taxes lower and regulations less invasive. They’ve maintained and expanded a commercial base by providing an environment that welcomes private enterprise.
In the Tax Foundation’s 2011 State Business Tax Climate Index, North Carolina finished 41st nationally, the worst score of any state in the former Confederacy (neighboring Virginia, South Carolina, and Tennessee ranked 12th, 24th, and 27th, respectively). As Tax Foundation researchers reported, entrepreneurs take note of high-tax environments. “Business taxes affect business decisions, job creation and retention, plant location, competitiveness, the transparency of the tax system, and the long-term health of a state’s economy,” the study said.
Consider the individual components of this formula:
Public education, mainly higher ed. Over the more than 20 years I’ve lived outside North Carolina, when someone asked me where I went to college, and I said I was a proud alumnus of UNC-Chapel Hill, the typical reaction was: “That’s a really good school.” The UNC system should be a source of bragging rights.
But in isolation, having a top-notch public university system — and UNC is one of the top four or five in the country — tells you nothing about the economic health of the state. Our rivals include California, Michigan, and Texas. And look at them. California is imploding, fiscally and culturally. Michigan is emptying. Texas remains robust, but that’s because, unlike its peers, the Lone Star State has kept taxes low and regulations under control.
Entrepreneurs in the knowledge economy value an educated work force and strong research institutions. But they prefer making money over both.
Cultural amenities. North Carolina is home to first-rate musical institutions, dance troupes, theater companies, museums, and performing arts centers. Over time, though, cultural and business elites have viewed entertainment facilities (wrongly) as economic engines.
Too many recent additions are merely white elephants, like the infamous Sparta Teapot Museum, the Randy Parton Theatre, the NASCAR Hall of Fame, and every publicly financed sports arena. Entertainment venues may generate commercial activity in the neighborhoods where they operate, and may be sources of civic pride, but the vast majority are money pits rather than cash cows.
Roads. Here’s the rare public good that delivers as promised. Highways are the primary way we reach our homes, jobs, schools, and loved ones. They’re the main avenues of business travel, recreation, and commercial transportation. Carefully managed and maintained, roads are sound public investments.
Problem is, today’s progressives see highways as so 20th century. They drool over high-speed passenger rail, which would require billions of dollars in debt for construction, millions more in annual subsidies for operations and maintenance, and would not reduce congestion.
Satisfying the fantasies of rail lovers diverts money that would go to much better use building and improving highways … or staying in taxpayers’ pockets.
For the first time in decades, North Carolinians have elected legislative leaders who seem to understand that governments do not create or generate wealth. They redistribute it, only occasionally to provide legitimate public services.
This change in philosophy has the state’s long-time movers and shakers in an uproar. And when the best-known supporters of “business progressivism” are the likes of Benito Mussolini and Huey Long, you know the establishment is grasping.