Comeback to Prosperity? – Part 1

Pat McCroryBy Mousa Alshanteer.

For the first time in over a century, the Republican Party has found itself in control of the North Carolina governorship and both chambers of the General Assembly. As a result, it has not taken long for the actions of our state legislators to make national headlines.

In a recent editorial in the New York Times, “The Decline of North Carolina,” the Editorial Board stated the following:

“North Carolina was once considered a beacon of farsightedness in the South, an exception in a region of poor education, intolerance and tightfistedness. In a few short months, Republicans have begun to dismantle a reputation that took years to build.”

It took N.C. Gov. Pat McCrory two days to respond to the editorial with a letter to the editor in which he opined:

“The North Carolina I’m leading today is on a powerful comeback. After just six months of problem-solving leadership and making the tough decisions that we were elected to do, there is significant movement on vital reforms to tax policy, energy, education, economic development and transportation.”

Since April 29th, however, thousands of North Carolinians – led by The Reverend Dr. William Barber II of the N.C. chapter of the NAACP – have gathered in Raleigh to protest Gov. Pat McCrory and the legislature’s policies.

Most controversial of these have been measures to cut unemployment benefits, reject Medicaid expansion, repeal the earned income tax credit and reduce spending in education. Though these measures are beneficial in some regards, they are also highly consequential in their effects on many of our state’s citizens.

Reduction in Unemployment Benefits:

In 1951, Gov. Kerr Scott signed legislation that lengthened the provision of unemployment benefits to 26 weeks. A new law – S.L. 2013-2, which took effect July 1st – reduces the length of benefit provision from 26 weeks to a sliding scale of 12 to 20 weeks, reduces the maximum unemployment benefit provision from $535 to $350 per week and eliminates benefits for workers who accept a family or medical leave of absence. This law is described by the legislature as an effort to repay the $2.5 billion the state owes the federal government for previous benefits. Though enacted for a noble reason, the law reduces unemployment benefits for 700,000 workers and eliminates benefits for another 100,000. In a state with the fifth-highest unemployment rate in the nation, however, it sees difficult to justify such legislation.

Rejection of Medicaid Expansion:

A provision in the recently enacted Affordable Care Act (ACA) qualifies adults with incomes up to 138 percent of the federal poverty threshold for Medicaid, since the program is currently available only to parents, children, seniors and the disabled. The act further deems that a state noncompliant with Medicaid expansion would lose federal funding for the program. In National Federation of Independent Business v. Sebelius, however, the Supreme Court prohibited the federal government from denying Medicaid funding to states that reject expansion. The ACA also requests that states establish health benefits exchanges for uninsured individuals through measures such as employer-provided insurance. In the case that a state is not willing to establish an exchange, the federal government would do so on its behalf.

S.L. 2013-5, however, affirms that North Carolina will not expand coverage to the over-500,000 uninsured adults residing within the state and prevents state agencies from establishing a health benefits exchange or participating in a federal-state exchange partnership without the approval of the General Assembly.

In North Carolina, the cost of Medicaid per enrollee is over $6000 – a cost substantially higher than the national average. This – along with state legislators attributing the inefficiency of the program to impending budget cuts to several government sectors, including the UNC system – leads many to believe that the General Assembly made the right decision. Even so, rejecting Medicaid expansion has imparted dire consequences upon a third of all state hospitals, which will likely have smaller operating budgets in years to come. Additionally, the North Carolina Justice Center reported earlier this year that the legislature’s decision will divert 25,000 jobs and $15 billion in federal funds from the state within three years.

Tax Proposals:

In 1921, Gov. Cameron Morrison enacted a progressive income tax rate that assisted the state in its development of roads, infrastructure and the university system, thereby ensuring that North Carolina would lead the South in economic advancement for decades to come. A rewrite of the state’s tax code, however, would reduce personal and corporate income taxes, eliminate the estate tax, raise the sales tax and expand it to encompass currently untaxed items.

This session, House and Senate leaders have introduced their own versions of tax reform: H.B. 998, which would reduce personal income tax, corporate income tax and business franchise tax rates while expanding the sales tax; S.B. 677, which would also reduce the personal and corporate income tax rate; and S.B. 394, which would reduce personal income and corporate tax rates, replace the business franchise tax with a lower business privilege tax and reduce the sales tax rate while expanding its base.

Following negotiations, the House and Senate ratified H.B. 998 in party-line votes of 77-36 and 32-17, respectively. The final version of the bill, soon to be signed into law, reduces the state’s three personal income tax brackets — 6, 7, and 7.75 percent — to a flat rate of 5.8 percent in 2014 and 5.75 percent in 2015, reduces the corporate income tax rate from 6.9 percent to 6 percent in 2014 and 5 percent in 2015, eliminates the tax currently levied on estates with values greater than $5.25 million, and expands the sales tax base on electricity, movies, and some service contracts.

One effect of the bill is that the government will have $2.4 billion less to spend over the next five years. Additionally, a family of four with an annual income of $40,000 will save $100 per year, while those earning $150,000 and $250,000 would save $750 and $2,400 per year, respectively. Though the upper-middle class will save more money than the low- and middle-class and the government will have less money to spend in the long term, Gov. McCrory contends that such reform will improve the state’s tax competitiveness ranking from 44th in the nation to 17th.

Repeal of Earned Income Tax Credit:

In 2007, Gov. Mike Easley, along with the support of the Democrat-majority legislature, enacted legislation establishing the Earned Income Tax Credit, which provided a refundable tax credit to nearly 900,000 low-income workers. Altogether, these workers received refunds of about $105 million. Recently, though, the House introduced a repeal of the tax credit that was soon enough signed by Gov. McCrory as S.L. 2013-10, thereby ensuring that hundreds of thousands of North Carolinians will not be able to receive such credit after December of this year.

Reduction in Education Spending:

With previous delays in concurrence on a tax proposal, neither of the two chambers were able to pass their budgets before the current fiscal year began on July 1st. Though it is uncertain whether a final budget will be passed prior to the expiration of a stop-gap spending measure on July 31st, it is worth taking into consideration the various proposals that make up both chambers’ budgets.

Firstly: In 1941, Gov. Mel Broughton signed into law a piece of legislation that granted public school teachers with a master’s degree or higher a 10 percent pay increase. Though the Senate’s budget proposes the elimination of this pay increase, the House proposes its preservation. In a state with the 46th lowest average salary for teachers, such a measure will likely persuade many of the state’s instructors to seek employment in other states.

Secondly: During Gov. Jim Hunt’s first two terms in office – between 1977 and 1985, two programs, the Primary Reading Program – which assigns a teaching assistant to every classroom from Kindergarten through the third grade – and the Smart Start Program – an early childhood initiative in which the government and local organizations team up to assist young children who are unprepared to learn at their grade level – were introduced. Gov. McCrory and the Senate’s budget proposes the elimination of teaching assistants in the second and third grade, but maintains them in Kindergarten and first grade. Such a decision will undoubtedly affect school districts in which class sizes warrant the need for teacher assistants in primary grade levels. The Senate also wants to hand responsibility of Smart Start over to the Division of Social Services – a transition that would reduce funding for the program by a third, despite Gov. McCrory retaining current funding for the program in his proposed budget.

Finally: In 1986, the General Assembly proposed the Teaching Fellows program in an effort to persuade students to pursue a career in public education. The program provides college scholarships to exceptional high school students who agree to teach in North Carolina public schools for a minimum of five years. Since the program’s inception, thousands of students have taken advantage of such an opportunity. Currently, there are 4,443 teaching fellows working in 99 of the state’s 100 counties. Due to the legislature’s gradual elimination of funding, the program is set to end by 2015. Though the House budget would reinstate funding for the Teaching Fellows, the Senate’s budget would not do so. Eliminating the program will make it much more difficult for aspiring teachers to fund their college educations.
—–
Gov. McCrory concludes his letter to the editor with the following statement:

“My reforms have stepped on the toes of the political right and the left who are vested in the old ways of doing business. But in my 14 years as mayor of Charlotte, I learned that it didn’t matter whether a good idea came from a Republican or a Democrat. What mattered was whether it solved a problem and did so at a cost taxpayers could afford. (…) This focus on pragmatic problem-solving is now fueling North Carolina’s comeback to prosperity as well.”

Cuts to unemployment benefits, the rejection of Medicaid expansion, the repeal of the earned income tax credit and a reduction in education spending, however, truly beg the question, “Is North Carolina really on a comeback to prosperity?”

Ultimately, the answer to that question is up to you.




There are 16 comments

Add yours
  1. Michael A. Seymour

    Dear Mr. Alshanteer,

    This is a remarkably well-written, unbiased and fairly explanatory summary of the General Assembly’s proposals that I learned a lot from by reading. It is hard to stumble upon such an evenhanded analysis of state policy, especially due to the bias rampant in many of our state’s newspapers. Here’s hoping that your writings will inform many of the upcoming generation on the actions – some good and some bad – of our General Assembly.

    Sincerely,

    Michael Seymour, a fervent fan of your writing.

  2. Nikolai Pollack

    Ultimately, it is for each person to decide for themselves whether North Carolina is on “a comeback to prosperity,” yes?

    Begging your pardon, but that seems to me a rather gross capitulation to subjective opinion, over empiricism.

    • Allen

      Considering that there are those who overwhelmingly support the legislature’s decisions – Republicans – and those who overwhelmingly disagree with the legislature’s decisions – Democrats – I think the author is correct in relaying that it is up to us to decide whether NC is on a “comeback to prosperity.” Many Republicans believe that limiting government to the extent that it negatvely affects the poor is the right thing to do. Many Democrats, on the other hand, think it’s the wrong thing to do. Political parties differentiate themselves over subjective opinions – what is moral/immoral, etc. Empiricism, unfortunately, has no place in modern politics, especially not modern politics.

      • Nikolai Pollack

        Now you will excuse me, sir. Politics has always been a show of rhetoric, hyperbole, and partisanship. Political polarization has indeed grown steadily over the past forty years, so to this extent empiricism plays a particularly small role in modern politics.

        The legislature’s decisions have tangible results, however: on the state’s GDP, on college graduation rates, on deficits, on cities’ finances, on crime rates – everything. There are thousands of empirical figures that indicate how a state is doing, which only an ideologue would reject. Therefore no, it is not for each person to decide how they “feel” about their state’s prosperity.

        • Allen

          With all due respect:

          Sure, there are ways to measure prosperity, as you have indicated; however, these measures are ultimately varied based on whosoever is measuring.

          What I mean is the following: one may use the state’s high GDP, low crime rates, and high graduation rates to indicate that the legislature’s policies have brought prosperity.

          On the other hand, one may use the fact that there are 700,000 citizens without unemployment benefits and 500,000 without health insurance,that we spend significantly less on education; and that we have the twelfth highest poverty rate in the nation to indicate that the legislature’s policies have ruined the state’s prosperity.

          It’s ultimately based on what you consider prosperity – a higher GDP, higher graduation rate, and/or lower crime rate; or more citizens being insured, employed, and out of poverty.

          The legislature’s policies do have tangible results, and there are always positive outcomes and negative outcomes. Some of us think the positive outcomes outweigh the negative and that N.C is on a “comeback to prosperity”, and some of us think the negative outcomes outweigh the positive and that N.C is less prosperous than before.

          Therefore, yes, it is up to each person to decide how they feel about their state’s prosperity.

          Sincerely,

          Allen

  3. Nikolai Pollack

    Once again, I must disagree. You can use different metrics to gauge prosperity, and legislative action does produce both positives and negatives.

    There is however an aggregate shift in the mean number of positive vs. negative outcomes. Moreover, some metrics are clearly more pertinent to discussion of “prosperity” than are others. And comparison with other states serves to provide an idea of how NC is performing, given the plethora of aforementioned metrics.

    As of yesterday for example, North Carolina ranked 47th in unemployment in the United States (according to the Bureau of Labor Statistics). Now, one might shrug this off and counter by suggesting that North Carolina’s GDP was among the nation’s top ten in 2012 (according to the Bureau of Economic Analysis) – but North Carolina is also the nation’s 10th largest state. It is traditionally fueled by innovation powerhouses like the Research Triangle, and this longstanding asset is not due to any recent legislative action.

    North Carolina has one of the lowest median incomes in the country. Its poverty rate is among the tenth highest. It has edged its way up among the top ten states with fewest residents covered by health insurance. During my study at Duke University last year, I participated in an extensive study of the state’s public, and charter school systems for three months: we found a dire situation, whereby the state’s education is being commercialized through charters, at the expense of the poorest students. Cities across the state have lost the ability to effectively finance themselves, purely because new zoning laws have seriously undercut their tax bases (to the enrichment of the state’s most wealthy, suburban residents).

    To suggest that there is no objective evaluation of a state’s progress in “prosperity” is facile. It is easy to shrug and say, “Well, everyone will believe what they want to believe.” Far harder to conduct a serious analysis of the available data, and form a conclusion that is not rooted in one’s political partisanship. This article’s conclusion suggests that there is ultimately no truth to be found: absolutely ridiculous. By your reasoning, people in Mississippi can credibly consider themselves to be living in one of the more prosperous states in the country.

    “Ultimately, the answer to that question is up to you – to research, and assess given a holistic analysis of the available facts.”

    For shame, Alshanteer.

    http://www.huffingtonpost.com/2011/09/15/americas-poorest-states-_n_964058.html
    htmlhttp://quickfacts.census.gov/qfd/states/37000.html

      • Allen

        I agree with your statement: “Ultimately, the answer to that question is up to you – to research, and assess given a holistic analysis of the available facts” I think that the statement: “ultimately, the answer to that question is up to you” doesn’t hint at a resolution due to personal partisanship, but at a resolution due to personal research, as you have assessed. Criticizing the whole article based on a seemingly vague closing statement seems a bit ridiculous to me; and knowing Mr. Alshanteer personally, I don’t think that he means for people to arrive at conclusions based on their political partisanship. I strongly believe that he would want people to conduct their own research and analysis of the facts, as you have stated. Your disrespect of him in your final statement, “for shame, Alshanteer” hints to a personal resentment that I cannot attest to, for I know nothing about the relationship, or lack thereof, between you two. Perhaps you should get to know him better, as I thankfully have. Your a smart man, Mr. Pollack. Please do not waste that intelligence on wrongfully directed resentment. In fact, I think Mr. Alshanteer would rather enjoy a lengthy debate on this matter.

        I should know. He is an aspiring attorney.

        Sincerely,

        Allen A. Samuelson II

  4. Ashley Reid

    I would love to know why you think it is “difficult to justify” the reduction in unemployment benefits.

    It’s simple. The federal government gives the state $2.5 million to increase benefits, that money ran out, and now it’s time to pay it back. That’s how those things work.

    Additionally, when someone receives increased and extended benefits what’s the incentive to actually find a job? Why would someone go work at a minimum wage paying job when they can just receive benefits from the government?

    • Michael A. Seymour

      It is difficult to justify unemployment benefit reduction, because unemployment benefits are not meant to permanently replace employment. Working a minimum wage job will undoubtedly earn you more than solely receiving unemployment benefits. In the economy that we currently live in, employment, however, is very hard to come by. It’s easy, from a privileged standpoint, to tell someone – who has not received the education and who has a different set of priorities than you likely have – to get up and get a job. I recommend not only that you conduct more research on the matter before making a cliche, oft-repeated and oversimplified statement, but that you also put yourself in the shoes of the unemployed. If you are a single mother without a college education and two or more kids at home – a constituency that represents 27% of those living in poverty in N.C. – how easy would it be to accept a minimum wage job when: 1) that job does not provide enough for your family, and 2) you are not able to leave your children so that you can work? That’s where unemployment benefits come in. Such benefits help people, temporarily, so that they can set their priorities, get on their feet, and secure permanent employment. To assume that people live off unemployment, again, is fairly ignorant. Only one out of every five North Carolinians on unemployment benefits has been recieving benefits over six months; whereas, a majority secured employment before the end of six months.

  5. Nikolai Pollack

    Back.

    This article purports to be informative, yes? I think that this would be fair to say. Mr. Alshanteer – and I am glad for your relationship with him sir, though I am afraid that I have none – lays out a few of the controversial measures that have been taken, sequentially. On the face of it, this all seems non-partisan and purely informative. However.

    “Though these measures are beneficial in some regards, they are also highly consequential in their effects on many of our state’s citizens.” Now, Mr. Alshanteer notes that the measures are “beneficial,” but also “consequential.” I hope that you see where I am getting at: the former term is clearly positive, the latter – not so clearly negative.

    “Though enacted for a noble reason, the law reduces unemployment benefits for 700,000 workers and eliminates benefits for another 100,000. In a state with the fifth-highest unemployment rate in the nation, however, it sees difficult to justify such legislation.”

    The law that many “see” as “difficult to justify” – abhorrent, to speak plainly – is “enacted for a noble reason.” As another visibly informed and intelligent fellow, Mr. Samuelson, I am sure that you will notice the trend towards which I drive.

    Beneath a veneer of informative neutrality, Mr. Alshanteer’s article is subtly suggestive. It is written so as to acknowledge the undeniable protests levied against the GOP in control of NC, while gently skewing towards support of the Republicans’ measures.

    It is with this context that I read the last sentence. It is with this context that I write, “For shame”: by all means, express your political views; but don’t please couch them in a false, ‘purely informing the public here’ front. It’s very hard to suggest that NC is making a comeback to prosperity – unless you’re trying to square the data with your support for the Republicans who now completely control it.

    • Allan

      Dear Mr. Pollack,

      I do not believe Mr. Alshanteer suggests that North Carolina is making a comeback to prosperity. He merely uses to term, from McCrory’s letter in the New York Times, so as to pose the question to the audience.

      Moreover, I do believe that this article is written in a non-partisan and purely informative light, for if Mr. Alshanteer were not aiming to criticize the state’s legislators, he would not have written a post detailing their most controversial measures.

      With regard to the following sentence:

      “Though these measures are beneficial in some regards, they are also highly consequential in their effects on many of our state’s citizens.”

      You forget to mention that Mr. Alshanteer deems some legislation “highly consequential”, not just “consequential”.

      With regard to the next sentence:

      “Though enacted for a noble reason, the law reduces unemployment benefits for 700,000 workers and eliminates benefits for another 100,000. In a state with the fifth-highest unemployment rate in the nation, however, it sees difficult to justify such legislation.”

      I am unaware of how repaying the $2.5 billion the state owes the federal government for previous benefits is not a “noble reason,” because I — and I am a lifelong Democrat — believe that it is. Governor McCrory and the bill’s original sponsors contend that the reason for the bill’s enactment is to repay the state’s debt.

      From my standpoint, I believe that the author does a fair job of presenting such horrendous measures in a non-partisan light, for if he leaned to the left, he would be ridiculing such measures from the onset; and if he leaned to the right, he would not bring them up in the first place.

      I’m not sure what Mr. Alshanteer’s political affiliations are, but I wouldn’t assume him to be a Republican based on his beliefs that the legislature’s measures are “benefical” in some regards but “highly consequential” in others, or that attempting to repay billions in debt is “noble”.


Leave a Reply to Allan Cancel reply