By JOHN HOOD
RALEIGH – Remember when the Republican-crafted North Carolina budget passed over Gov. Beverly Perdue’s veto
last summer? Liberal activists predicted economic disaster. By failing to extend a sales-tax increase, and by balancing the state’s General Fund with budget savings rather than tax increases, the General Assembly had supposedly damaged North Carolina’s job market by shoving tens of thousands of workers into unemployment.
For the first couple of months after the new budget went into effect in July, Democratic politicians and their allies scoured the monthly jobs reports looking for evidence consistent with their dire predictions. They highlighted every statistic that appeared to confirm their Keynesian hypothesis, while disregarding the idea that smaller government might actually have economic benefits of its own.
Haven’t heard much about this lately, have you? That’s because the employment numbers have become politically inconvenient.
From June 2011 to December 2011, North Carolina experienced net job creation. During the same six-month period in 2010, 2009, and 2008, North Carolina experienced net job losses. It doesn’t matter whether you look at the raw data or the seasonally adjusted. Here are the raw numbers: 11,100 jobs created during the last six months of 2011, vs. 3,400 jobs lost during the same period in 2010, 26,500 jobs lost in 2009, and 69,700 jobs lost in 2008.
Now, conservatives who support the legislature’s policy shouldn’t get carried away with themselves and commit the same error the liberals did. They shouldn’t try to attribute all of the monthly changes in North Carolina employment to changes in state spending and taxes. There are many other factors in play here – national and international trends, weather, and other policy variables such as monetary growth and regulation.
It is also too early to draw firm conclusions, or to celebrate victory. North Carolina is still down hundreds of thousands of jobs from its 2007 peak of 4.2 million jobs (again, using the raw data rather than the seasonally adjusted figure).
My point is simply that if North Carolina’s economy had performed as poorly in 2011 as it did in 2010, Democrats, liberal activists, and more than a few editorial writers in our state would currently be blaming the GOP’s tight budget for dampening demand and eliminating too many tax-funded jobs. Now that it is evident North Carolina employment was up in 2011, after declining during past years, the Left is observing radio silence on the matter. This is no accident.
Rather than indulge in the usual partisan grandstanding, might I suggest that everyone see this as a learning opportunity. Here are some lessons worth absorbing:
• Look before you leap. Grabbing one or two months’ worth of data and making sweeping pronouncements may be politically tempting, but it’s a temptation you’d be wise to resist. There is a worse option than saying nothing – saying something that will look dumb in hindsight.
• Look for what is initially unseen. It may be easy to identify the individuals adversely affected by, for example, reducing the size of government agencies. But what of the individuals who will benefit from lower taxes that allow them to keep more of their own money to spend or invest?
The 19th century French economist Frederic Bastiat’s observation remains all too true: “There is only one difference between a bad economist and a good one,” he wrote. “The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
“Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.”
North Carolina’s new fiscal restraint is not solely responsible for our recent, slight improvement in employment. But it likely helped a bit. And the apocalyptic claims of the Left proved baseless.