A look at North Carolina’s comeback

I recently listened to an audiobook of J.K. Rowling’s “Casual Vacancy.” While I strongly recommend the Harry Potter series, I would not recommend this book because the plot is a string of depressing topics — drug addiction, rape, parental physical abuse, underage drinking and so on.

Still, it serves as yet another example of the failure of governmental social services to lift people from poverty. In the 1800s, Thomas Chalmers made a study of the needs and responses to the poor in Glasgow, Scotland. He was perhaps the first to conclude that government assistance can never work because it breaks the ties of kinship, “quenches the affections of family,” and suppresses the desire for self-reliance and self-respect.

This is what happened to the Terri Weedon character in “Casual Vacancy,” which takes place in modern day England. She was given governmental housing, food, day care, drug addiction treatment and the other basics to sustain life, but all of that support simply enabled her to stay trapped in a lifestyle of drug use, rape and neglectful parenting, robbing her of her human dignity.

On the other hand, charitable organizations dole out these support mechanisms, but with a large dose of compassion. The compassion extends to inviting the person in need to join support networks, such as becoming part of the church community, where the person can rediscover her human dignity and lift herself out of destructive patterns. Ironically, government employees are often prevented by policy from being compassionate. They typically cannot be called outside of work hours and they cannot be in personal relationships with clients. Paradoxically, and completely unintentionally, handouts and government services delay, often for a lifetime, an individual finding human dignity.

This dynamic is something we should fix at the federal level, but North Carolina did what it could in reducing a historically unprecedented payout of unemployment benefits. Once this excessive payout ended, North Carolinians did what they should — they went to work. North Carolina changed political strategies in 2013 and the results have been dramatic.

North Carolina has had an employment growth rate of 5.8 percent compared with 4.9 percent nationally. The most meaningful measure of unemployment, U-6, has dropped in the most recent two years from 15.6 percent to 11.5 percent in North Carolina while the national rate went from 14.3 to 10.8.

From the second quarter of 2013 to the second quarter of 2015, North Carolina posted the 12th-highest GDP growth rate in the country. We paid back $2.5 billion, plus accrued interest, to the federal government, one year ahead of schedule, for our extended-period unemployment payments. Per-capita income in North Carolina has also exceeded the national rate.

In recent years, legislators have restored more than $2 billion to various rainy day and capital funds that were raided by previous administrations.

Now here is the really exciting news: When a state changes policies, the results do not appear overnight. Companies that make investment decisions, for example, may need to wait years for a lease to run out or for new equipment to become worthwhile. So we can expect even better news a few years down the road if the same policies that help human dignity can be continued.

This fall, we have the first glimpse of that great news. Through November 2014, state tax revenues were running more than $100 million behind projections, which are notoriously unreliable before Christmas sales and April tax returns. However, that $100 million deficit eventually became a $446 million year end surplus.

Through this November, state tax revenues are exceeding last year’s by $420 million, a staggering turnaround. We still don’t know what Christmas sales will be like and that is determined more by federal than state policies, but if North Carolina can maintain the same track as last year, we could see a future combination of lower tax rates and even more state services next summer.

North Carolina’s experience nicely illustrates that when tax rates are too high, reducing the rates may increase overall revenue.

Eric Dent is a business professor at Fayetteville State University who lives in Lumberton.


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