We aren’t in an economic downturn yet, but economists marveling at the historic duration of the current national expansion are urging policymakers to prepare for one now. Key to that preparation will be smart public investments that minimize the harm to communities and families and, in turn, the long-term growth trajectory of the economy.
Unfortunately, this will be a tough sell for North Carolina policymakers who seem to believe that austerity and tax cuts for the wealthy and big companies are boosting the state’s economy. Never mind that the data over the past few years show North Carolina’s employment growth to be merely in line with regional and national averages and insufficient to get jobs to everyone who wants one or to reduce poverty and boost wages.
North Carolina’s current policy approach to public investments has kept spending so low that in the current good times our state has missed a golden opportunity to lay a foundation for stronger economic outcomes and to promote happier and healthier lives for all of the state’s residents.
- Our state budget has failed to provide the investments needed to provide every four-year-old with access to pre-K – something that would dramatically boost both the educational attainment and lifetime earnings of children served.
- Our state budget has not expanded our investments in the infrastructure of small business centers and start-up capital projects that will generate jobs outside of urban centers and stabilize main streets in communities across the state.
- Our state budget has not equitably removed barriers to post-secondary education for those who can’t afford the cost or those who need connections to transportation or child care to complete their degrees.
Let’s be clear: These are investments that we can afford to make as a state. Tax cuts that have primarily benefited the wealthy and big companies have resulted in $3.6 billion less in state revenue each year – funds that we could be investing in our communities, and state policymakers continue to pursue more tax cuts this session. Indeed, the long-term vision of current leadership, stated time and again and well on its way to final implementation, is to “get to zero” taxes on income and business.
Unfortunately, the lessons of the Great Recession have yet to be learned in North Carolina. Though far from perfect in their response, federal policymakers did well a decade ago by taking numerous affirmative steps to shorten the duration and minimize the depth of the economic losses. Simply put, smart public investments worked. And while it’s true that leaders could have generated an even greater impact by implementing a more aggressive “people-first” approach, the federal response did lead to several vitally important accomplishments. Most notably, it kept people connected to the labor market and provided food and basics to those struggling so that some didn’t get pushed into deep poverty. At the same time, states were given funding to support their provision of health care to the needy and keep teachers in the classroom.
The second lesson from the Great Recession was that while the response worked well when things were at their worst, policymakers slowed the recovery noticeably and unnecessarily by pulling back too quickly on their interventions. The result was that states across the country, including North Carolina, faced huge and unnecessary budget cuts with the loss of federal aid. In North Carolina, the pursuit of tax cuts drained the state of revenue before recovery took hold and forced deeper cuts during the economic expansion. Households across the state lost critical supports that had helped them make ends meet, stay connected to the labor market, and minimize the loss of income and assets.
As members of the General Assembly debate the provisions of a state budget for the upcoming fiscal year in North Carolina, we should all be asking whether they learned the lessons of the Great Recession so we aren’t doomed to repeat past mistakes.
The robust Rainy Day Fund, an important source of emergency dollars if accessible in times of need, can’t be the only way in which our state policymakers hope to protect us from a downturn.
We also need a state budget this year that removes as many barriers as possible to opportunity for our children, workers, and families now so that they’ll be better positioned to withstand future tough times. That means providing immediate health care to those in the coverage gap, as well as providing every child with the foundational early childhood experiences that support their success in school and every school-age child with a quality learning environment. That means identifying where infrastructure and public dollars can forge critical connections across communities currently disconnected from where job growth is concentrated and where private capital is concentrated.
It’s time for all North Carolinians to call on policymakers to explain how they squandered the current national economic recovery to benefit the few and, more importantly, to demand that they rectify the situation. In other words, North Carolinians should demand a robust plan that will invest now to minimize the harm in the next downturn. There’s no time to waste.
Alexandra Sirota is the Director of the N.C. Budget & Tax Center.