Is this the most destructive act of NC’s current state leadership?

Is this the most destructive act of NC’s current state leadership?

- in Weekly Briefing


The war on the poor officially becomes a war on the middle class

There are a lot of competitors when it comes to listing and ranking the most hard-hearted and destructive acts of the last couple of North Carolina General Assemblies and the first year and a half of the McCrory administration. There were the cuts to education, the attacks on teachers, the attacks on voting rights, the shameless gerrymandering, the attacks on reproductive freedom, the repeal of the Racial Justice Act, the reckless disregard of our fast-failing natural environment, the absurd decisions to abet the spread of guns, the giveaways to predatory lending companies, the huge tax shift away from the wealthy and profitable corporations and toward the middle class and the poor and the cuts to the civil and criminal justice systems – just to name a few.

And then, of course, there was the truly remarkable and shameful decision to decline billions of federal dollars that would have created thousands of jobs and provided access to affordable health care for hundreds of thousands of currently uninsured North Carolinians of modest income. This is a decision that is almost certainly causing thousands of extra deaths each year. By most measures, it’s hard to think of an action that can top this one for simple and direct cruelty in the service of ideology.

And yet, as a powerful new report from the analysts at the North Carolina Budget and Tax Center reminded us yesterday, there actually is another contender – one that involved not just preventing the easy and logical expansion of the societal safety net, but that affirmatively and aggressively dismantled it.

The act in question, of course was the shredding of North Carolina’s once comparatively decent unemployment insurance system – a system that had been dragged slowly and painfully from being one of the nation’s stingiest and least effective toward the middle of the national pack over the past few decades.

Last winter, in one fell swoop, state leaders imposed unprecedented cuts to that system that may very well have been the deepest and harshest in American history. Last summer, those cuts went into effect and tens of thousands of families suffered mightily.

As an editorial in Raleigh’s News & Observer put it this past April:

It was one of the more shameful moments in the not-exactly-illustrious rule of Republicans in the General Assembly and the governor’s mansion. Last summer, GOP lawmakers cut state unemployment benefits knowing it would mean that jobless North Carolinians, many of them innocent victims of the Great Recession, would lose emergency federal benefits.

North Carolina was the only state to reduce unemployment benefits even though federal law required states to maintain benefit amounts to qualify for the extended federal payments. Gov. Pat McCrory and Republican lawmakers justified leaving thousands and thousands of families in the cold by saying that extended unemployment benefits discouraged people from going back to work.

In fact, most of the beneficiaries have been looking for work in an economy with not enough jobs. They’re not, as the GOP implies, all lying around living large on the average $300 a week people get in unemployment payments.

The cuts come home to roost

The point of the N&0 editorial was to call on lawmakers to act during the current legislative session to prevent still more disastrous scheduled cuts from taking place this July 1. Naturally, however, they didn’t act and the new cuts did take place. The Budget and Tax Center report explains where we find ourselves as a result:

The changes made to the state’s unemployment insurance system a year ago have caused pain for North Carolina workers and communities, and things will get even worse for many because of new limits to how long anyone can receive insurance that took effect July 1.

Two changes—lowering the maximum duration of weeks and a new formula that significantly reduces average weekly insurance amounts—fall most heavily on jobless workers in areas of the state’s highest unemployment, and primarily in rural counties. The cumulative effect of these changes is a double whammy for people out of work through no fault of their own – the amount of money they can collect has gone down and so has the number of weeks they can collect it.

As of July 1, North Carolinians who have lost their job through no fault of their own will be able to receive a maximum of only 14 weeks of unemployment insurance compared to the previous maximum of 26. No other state offers fewer weeks. Meanwhile jobless workers qualifying for unemployment insurance will get nearly $300 less on average each month.

The combined result will be a significant reduction in the capacity of jobless workers to afford the basics for their families, let alone put gas in their cars to get to job interviews. And the ripple effect of these policy changes suggests the potential to slow the state’s economy. As jobless workers continue to struggle to find work in a labor market with too few jobs, there will be fewer consumers for goods and services, meaning local businesses have less demand and might lay off their own workers or be unable to sustain new positions.

Worse even than it appears

That the cuts are draconian is pretty obvious. Anytime you cut the maximum duration of an insurance benefit by 46% and the average benefit itself by 25% (from a modest $301.89 per week to a truly preposterous $227.91) you’re going to wreak havoc with families who depend on it. Unfortunately, there’s even more to the story than that.

As intimated above, because of the way it’s now designed, the system makes things especially tough for people in the hardest hit, highest unemployment counties. That’s because the new calculation of maximum benefit weeks (now just 14) is a function of the official statewide unemployment rate. But, of course, that lower overall rate – itself a fiction because so much of it just reflects people giving up looking for work – does not reflect life on the ground in numerous counties at all. As the BTC reports: “Today, even as the state unemployment rate declines, there remain 11 counties with unemployment rates above 9 percent: Bertie, Bladen, Edgecombe, Graham, Halifax, Nash, Pasquotank, Robeson, Scotland, Vance, and Wilson.”

Who designs a system like that? Who tells a person laid off from a job in a poultry processing plant in a depressed part of the state that, after a dozen years cutting up chickens, he or she now has three months at a couple of hundred bucks a week to completely overhaul their life?

The most oft-stated reason for the cuts was that North Carolina had a crushing debt to the federal government as the result of the state having borrowed heavily during the depths of the Great Recession. But, of course as the BTC notes, that debt was overwhelmingly the result of inadequate taxation of business in the years leading up the Great Recession when times were good. Many businesses had, thanks to the inexcusable neglect of politicians of both parties, been paying a “zero” tax rate for years prior to the crash.

What’s more, under the current formulas, unemployed workers are paying back the overwhelming majority of the federal debt through reduced benefits while businesses are paying less than a quarter. Indeed, less than 1% of the debt is being paid back via state taxes on businesses.

A war on the middle class

For decades the political right has been justifiably criticized for waging what amounts to a “war on the poor.” The recent denial of Medicaid expansion is perhaps the best and most egregious recent example.

In recent years, however, the war has also clearly been expanded. Where once the right crusaded against “welfare” and other public structures designed to actively lift people out of poverty, now it also seeks to actively undermine the structures designed to preserve a strong middle class – things like public education, progressive taxation, consumer protection laws and unemployment insurance.

Sadly, by all indications, North Carolina is now on the front line in this rapidly expanding conflict. Let’s hope the members of the shrinking middle class decide to fight back before they’re completely overrun.

About the author

Rob Schofield, Director of NC Policy Watch, has three decades of experience as a lawyer, lobbyist, writer and commentator. At Policy Watch, Rob writes and edits daily online commentaries and handles numerous public speaking and electronic media appearances. He also delivers a radio commentary that’s broadcast weekdays on WRAL-FM and WCHL and hosts News and Views, a weekly radio news magazine that airs on multiple stations across North Carolina.
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