RALEIGH — I’ve never been one to ridicule USA Today. Gannett’s flagship national newspaper isn’t heavy reading, but its attention to color and design, its lively writing, and its innovative editorial page have likely invited some Americans into the world of daily newspapers who might otherwise have long abandoned the genre for television — or consumed no news at all.
Unfortunately, USA Today does have its drawbacks. A key one is a lack of depth and rigor — as demonstrated by a recent national ranking of state fiscal management that has North Carolina politicians repeating howlers about our state’s supposedly good fiscal stewardship, including on the floor of the North Carolina Senate on Monday.
The ranking is accompanied by a surprisingly good discussion of how states got into the fiscal mess of the past couple of years. The story includes various points of view, it provides good examples, and it sets the stage for comparison.
Then the trouble starts. The newspaper attempted to create a ranking system for North Carolina and other states based on five years of spending and tax data, bond ratings from Wall Street, and a separate ranking system devised by Governing magazine. For North Carolina, all three of these sources of data were either flawed or misunderstood by USA Today. The result was a totally unearned “excellent” ranking that has all the empirical validity of an Internet insta-poll.
Let’s start with the fiscal data. USA Today chose the time period 1997 to 2002 to examine state spending and tax trends. This choice makes North Carolina look artificially restrained in its spending patterns. You see, most states didn’t start running into serious fiscal problems until the 2001-02 fiscal year. But North Carolina, due to its reckless policies of the late 1990s, ran into trouble a year earlier — in the middle of the 2000-01 fiscal year. New Gov. Mike Easley had to make midyear course corrections in the state budget to compensate, thus pulling actual expenditures down. So while most states posted four years of rapid growth and one year of slower growth (2001-02) during the five years studied by USA Today, North Carolina had three years of boom and two years of bust. This isn’t good news. It’s bad news. It shows our state to be worse than average in fiscal management, not among the best.
A different time period would have yielded a very different result. For example, from 1996 to 2000 North Carolina’s spending growth was second in the nation at 7 percent a year, on average. The national average rate of growth was only 4.75 percent. USA Today simply didn’t know what it was doing by choosing the time period it did. Going back further in time by just a year or two would have significantly changed the outcome.
Problem number two is that the newspaper’s use of bond ratings for states apparently wasn’t very astute. North Carolina actually had its bond rating downgraded last year by one of the rating houses, despite political promises that the 2001 tax increases would prevent that. Few other states have experienced such a downgrade — though in fairness our bonds remain relatively well-rated.
Third, and most significantly, USA Today says it relied on a Governing magazine ranking of fiscal policies to make its own assessments. The newspaper made no further explanation. It should have, as its entire rating system is apparently little more than fruit from a poison tree.
As I noted in a previous column, the Governing study released back in February was wildly biased in favor of high-taxing states that have implemented all the usual liberal fiscal policies (punitive income taxes, no constitutional spending limits, and so on). In my earlier examination, I looked down the list of states in the Governing analysis and noted that those with higher average tax burdens tended to be graded higher than those with lower average tax burdens. It was also remarkable, by the way, that American households and businesses seemed not to share Governing’s — and now USA Today‘s — fiscal policy preferences. The five states to which the magazine gave only one star (out of four) in both the “adequacy of revenue” and “fairness to taxpayers” — Alabama, Florida, Nevada, Tennessee, and Texas — experienced an average growth in population of 27 percent from 1990 to 2000 and an average growth in gross state product (GSP) of 93 percent. The six states that garnered either three or four stars in both categories –Delaware, Hawaii, New Mexico, North Dakota, South Dakota and Vermont — were hardly the barnburners of the decade, posting below-average growth rates in both population (10 percent) and GSP growth (67 percent).
Basically, the states that Governing ranked the worst in tax policy grew at roughly twice the rate of the United States as a whole during the 1990s and at three times the rate of those states that Governing ranked highly. Unless you believe that people were irrationally choosing to reside and start businesses disproportionately in America’s worst-run states, the only other conclusion from these data is that the country’s premiere magazine covering state and local government has missed the boat on tax policy.
Now, with the USA Today ranking relying in part on this previous and patently absurd one, we can see a measurement blunder repeated to a larger audience. North Carolina deserves no kudos. We are the only state in the nation to have enacted major tax increases in each of the past three years. Few states have had as herky-jerky a budget process as we have. No serious person familiar with the fiscal facts about state governments could conclude that North Carolina’s fiscal mismangement is “excellent,” and ranks “fourth best in the nation.”
Yes, I know that some of our politicians said that on Monday, but I said no “serious person” could so conclude.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.