RALEIGH – Now that the North Carolina House has adopted its version of a state budget for the next two fiscal years, the final phase of the Great 2009 Budget Debate is underway. Here’s my recommended reading lists for Carolina Journal regulars who want to be well-prepared for the next few weeks of argument, rhetoric, and political posturing.
First, do a little homework on taxes. Both the Senate and House included significant tax increases in their fiscal plans. But North Carolina’s fiscal woes don’t derive from the “problem” of North Carolinians keeping too much of their own money to spend or save for their own needs. The state budget is way out of whack because of a recession – which has already hurt North Carolina families – and because former governors and lawmakers created scores of spending programs over the years that taxpayers simply can’t afford.
To raise taxes in the face of these problems is to worsen them – to make North Carolina a less-attractive place to shop, invest, and create jobs and to protect excessive spending.
Second, there are some valuable resources you can consult to understand better why state government has become too large, costly, and intrusive. Check out JLF fiscal analyst Joe Coletti’s original alternative budget and subsequent work on state spending. And check out the Raleigh News & Observer’s instructive new series, the Generous Assembly, which examines particular examples of questionable fiscal priorities.
Third, refresh your memory about the real reasons why North Carolina, the nation, and much of the world are suffering a severe economic downturn. It’s not the result of too much capitalism, or too little regulation, or private firms and households enjoying too much after-tax income. As usual, the current worldwide recession primarily reflects a painful adjustment to economic realities after excessive monetary creation by the Federal Reserve and other central banks earlier in the decade.
Inflation breeds artificially low interest rates, which foster bad investment decisions and the accumulation of excessive debt. Businesses invested in increasingly risky enterprises. Banks lent money to increasingly risky borrowers. Investors chased increasingly risky opportunities for returns. Now the results of these bad decisions have to be written down, worked off, or wrung out.
Federal policymakers haven’t addressed the problem. Their frantic flurry of bailouts has just made the problem worse, just as North Carolina lawmakers seem intent on adopting counterproductive tax policies in response to the recession. Actually, state lawmakers helped pioneer Bailout Nation in the first place.
Arm yourself with good information and sound fiscal and economic analysis. The next few weeks promise to be rocky ones.
Hood is president of the John Locke Foundation