RALEIGH – If the North Carolina General Assembly ends up adopting the 2009-10 state budget reportedly being developed by leaders of the N.C. House, a number of things won’t happen.
The state’s collective roof won’t collapse. The state’s citizens won’t flee fearfully into the sheltering hills of East Tennessee or the remote swamps of South Carolina. The state’s prisons won’t suddenly empty of dangerous thugs. The state’s Medicaid program won’t stop paying the medical bills of the elderly, poor, and disabled. The state’s schoolchildren will still attend school (although I can’t promise they will still get a good education, as the use of the word “still” would assume facts not in evidence).
In short, if the House budget passes, North Carolinians won’t experience Armageddon – despite all the scary predictions and caterwauling currently emanating from special-interest groups, spending lobbies, and self-styled progressives around the capital city.
How do I know the world won’t come to an end? Because if the legislature adopts a state budget that spends $17.6 billion next year, rather than the originally projected $21 billion, that will still constitute a huge amount of taxpayer money. It will still exceed the size of the General Fund budget in FY 2004-05, an era not exactly lost in the mists of time.
Admittedly, if the General Assembly and Gov. Beverly Perdue end up supporting the rumored House budget, with its billions of dollars in budget savings and no tax increases, there will be pain. Some state employees and vendors will lose jobs. Many state employees and vendors will suffer in other ways, as will North Carolinians who make use of some of the services that the state can no longer afford to finance at current tax rates.
Many state and local agencies will have to set firm priorities with their limited funding, some shouldering higher demands for core public services – due to population growth or economic dislocation – by reducing or eliminating lower-priority spending. Attracting and retaining good teachers will have to take precedence over hiring other personnel, adding new programs, building huge new facilities, or reducing class sizes. Eligibility for public assistance will have to be confined to the truly poor, rather than those making two or three times the (already inflated) poverty level.
Will it be easy? No, certainly not, and fiscal conservatives shouldn’t underestimate the difficult choices and dislocations that such spending restraint must bring.
But the alternative – raising state taxes by hundreds of millions if not billions of dollars a year – would be worse.
North Carolina’s fiscal problems are not the result of North Carolinians keeping too much of their own money to spend. We are not undertaxed. Living in one of the weakest state economies in the nation, many North Carolinians have already suffered greatly. In the private sector, businesses aren’t just freezing salaries or increasing the share of health costs borne directly by employees. Many are laying off 10 percent, 20 percent, or more of their workforces. Some businesses are now out of business altogether.
It would be both unjust and unwise for state government to foist its recessionary deficits onto households and businesses that are already grappling with their own financial problems. In the private sector, one can’t fill budget holes by forcing someone else to pay more. The public sector does have that power, by definition, but it shouldn’t exercise the power.
Recessions drain revenues from households and businesses no less than from governments. Recessions inevitably occur when an unsustainable boom turns into a bust. At the national and international level, permissive monetary policies and other governmental manipulations created asset bubbles in housing, commodities, and equities that eventually popped. And here in North Carolina, a flawed tax system and skewed political culture led to unsustainable growth in state spending, another boom that’s given way to bust.
Digging ourselves out of the resulting fiscal hole will be hard work. But it can be done – and should be done without jacking up taxes again and thus setting the stage for yet another boom-and-bust cycle in the future.
Hood is president of the John Locke Foundation