Last updated: August 21. 2014 11:50PM - 291 Views
John Hood Contributing columnist



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Gov. Pat McCrory and some Republican lawmakers in the General Assembly say they need more “tools” for economic development in North Carolina — by which they mean targeted tax breaks and corporate subsidies. They often point to South Carolina, Georgia, Virginia, Tennessee, and other states in our neighborhood that, they say, are more aggressive in using economic incentives to recruit or retain businesses.


I disagree with incentive advocates on policy grounds. Governments should be service providers, not venture capitalists or central planners. But there’s another problem with the stance taken by the McCrory administration and pro-subsidy legislators: it requires talking down the very economic recovery they ought to be touting.


North Carolinians have no need to look north, west, or south for advice on how to recruit businesses or promote economic growth. Should a sports team with the best record in its division toss out its playbook and borrow one from a less-successful team? Of course not. Nor does North Carolina need to junk up its budget or tax code in order to compete effectively with our regional and national peers.


The U.S. Bureau of Labor Statistics just released its jobs report for the month of July. As most experts expected, the preliminary June figures for North Carolina, which were surprisingly weak, were revised upward by thousands of jobs (there was probably a quirk in the seasonal adjustment). While unemployment ticked up slightly in July according to the household survey, the broader survey of employers showed strong job growth across many industries and business sectors.


From July 2013 to July 2014, North Carolina added about 94,000 private-sector jobs, an increase of 2.8 percent. That surpassed the growth rates in Tennessee (2.4 percent), Georgia (2.3 percent), South Carolina (2 percent), and Virginia (0.8 percent). Broadening out to the Southeast statistical region, the average rate of private-sector job growth from July 2013 to July 2014 was 2 percent. Among the 12 states that make up the Southeast region, only Florida’s rate (3.2 percent) exceeded North Carolina’s. The national average was 2.2 percent.


The story looks similar if we consider total economic activity as measured by gross domestic product. North Carolina’s real private-sector GDP grew by 2.9 percent in 2013, much higher than the Southeast average of 2.1 percent and the national average of 2.3 percent. How did our neighboring states fare? The private economy grew last year by 2.6 percent in Georgia, 1.3 percent in South Carolina, 1.1 percent in Tennessee, and 0.4 percent in Virginia.


It would be exceedingly odd to conclude from these trends that North Carolina is on the wrong track when it comes to economic policy. I know why liberal lawmakers, activists, and journalists are trying to make that argument, anyway. They have fervently opposed the past four years of conservative policy reforms in Raleigh that reduced the size and cost of government, replaced a rickety tax code with a modern Flat Tax, and reduced both the sales tax burden on consumers and the regulatory burden on employers. Many liberals also opposed structural changes in education and transportation policy that, conservatives believe, will pay economic dividends in the long run. To admit that North Carolina’s business climate is rapidly improving and its private economy is outperforming the regional and national averages would be rhetorically challenging for the Left, to say the least.


But for Republican policymakers, the unmistakable momentum in job creation and economic growth should present an opportunity to market their policy successes to North Carolina voters. Instead, some are muddying the waters by seeming to envy the ineffective policies of slower-growing states and to backtrack from the principles of fiscal conservatism.


There’s a difference between momentum and position. Too many North Carolinians remain unemployed or underemployed. Even for those who have full-time jobs, wage growth has been weak. These are national trends, however, not ones unique to our state. The national economic recovery has been anemic by historical standards. But North Carolina is doing comparatively well. We don’t need new subsidies or tax gimmicks. We need to continue our successful agenda of conservative reform.


John Hood is president of the John Locke Foundation.

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