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Updated: 2 hours 47 min ago

Another chance to tout the zero tax bracket

Tue, 2019-04-23 04:02

North Carolina continues to attract national attention for the success of its state-level tax reforms. That means new opportunities to promote key elements of the reform agenda.

This observer touted one of the least-publicized pieces of that agenda during a recent trip to Baton Rouge.

It’s no surprise that Louisiana policymakers might look to the Tar Heel State for ideas. “As I travel around the country, people say, ‘I want to be Texas. I want to be Florida. But I want to do it like North Carolina.’” Grover Norquist, president of Americans for Tax Reform, shared that observation during his latest conversation with Carolina Journal Radio. “What North Carolina has done is [it has] been a model for other states.”

The N.C. tax model certainly generated questions from Louisiana reformers. Taxes topped the list of items tackled during a March 28 policy summit sponsored by the Pelican Institute. That New Orleans-based think tank focuses on free-market, limited-government solutions to state-level public policy challenges.

Sitting alongside a top tax economist from the American Legislative Exchange Council, your author helped field 90 minutes of questions about taxation during the summit’s opening session. Afterward, one lawmaker took me aside to share details about his plan for reforming Louisiana’s personal income tax.

The Pelican State has a three-tiered tax system now. Taxable income up to $12,500 faces a 2 percent tax rate. The rate jumps to 4 percent for income earned up to $50,000. Beyond that threshold, the rate climbs again to 6 percent.

Republican state Rep. Jerome “Zee” Zeringue of Houma wants to simplify that structure. (His is one proposal circulating in Baton Rouge. Another bill incorporates a group of tax reforms mirroring Pelican Institute priorities.)

Just as North Carolina collapsed a three-tiered personal income tax structure into a single flat tax in 2013, Zeringue wants to eliminate all but one rate — 4 percent — for Louisiana. Though he would get rid of the lowest tax rate, no one would see a tax rate increase.

Rather than raise the rate from 2 percent to 4 percent on taxable income up to $12,500, Zeringue would eliminate state taxation completely on income of up to $12,500. In other words, he sets a zero tax bracket that extends up to the existing threshold for the 4 percent rate.

Our brief discussion in a Baton Rouge hotel ballroom did not delve into other details of Zeringue’s 16-page proposal. Nor did this layman attempt to offer the lawmaker detailed analysis. I did suggest that he consider highlighting the impact of his proposed zero tax bracket. That change could get lost in the debate about scrapping the top marginal rate of 6 percent.

The zero tax bracket recurs frequently during discussions of North Carolina’s flat-rate income tax. Those concerned that a flat tax forces low-income and high-income earners to pay the same tax rates tend to ignore the zero tax bracket. That bracket has a much more significant impact on tax burdens at the lower end of the income scale.

Individual taxpayers in this state will pay a flat 5.25 percent rate on this year’s income. An individual enjoys a standard deduction of $10,000, while a married couple filing jointly can deduct $20,000. That standard deduction effectively sets a zero tax bracket. For a childless married couple with no other deductions or credits, that means an income tax bill of $262 (an effective tax rate of roughly 1 percent) for $25,000 of household income.

The bill jumps to $5,250 (4.4 percent) for a similarly situated couple earning $120,000. A couple earning $1 million pays $51,450 (5.1 percent). In addition to the increase in effective tax rates as income level rises, the $120,000 household pays 20 times as much tax as the $25,000 household while making 4.8 times as much income. The $1 million household earns 40 times as much income as the $25,000 household and pays nearly 200 times as much income tax.

It is undoubtedly true that other exemptions and credits change those ratios. But if those changes benefit higher-income households or hurt lower-income households, then policymakers ought to consider changing the exemptions and credits — not the basic structure of the flat tax.

A zero tax bracket linked to a standard deduction helps individual taxpayers as well, although the effect is not as pronounced. An individual earning $25,000 would pay $787 (3.1 percent), as opposed to $5,775 (4.8 percent) for the $120,000 single earner and $51,975 (5.2 percent) for the single million-dollar earner.

Let’s apply Zeringue’s rate and zero tax bracket proposals to the same taxpayers used in the previous example. The individual with $25,000 in income would owe $500 (2 percent), the $120,000 earner would pay $4,300 (3.6 percent), and the million-dollar single taxpayer would face a tax bill of $39,500 (just under 4 percent). The $120,000 earner would pay more than eight times as much tax as the $25,000 earner. The million-dollar earner would pay nearly 80 times as much.

I reminded the Louisiana lawmaker that his zero tax bracket would ensure higher earners pay progressively higher tax rates. That’s true even though taxpayers would see only one flat rate. That fact could help him counter flat-tax critics’ standard argument that higher earners ought to “pay more” than those at the lower end of the scale.

One final observation: If Louisiana lawmakers adopt Zeringue’s ideas, that state’s flat tax rate will be roughly 25 percent lower than North Carolina’s. Its zero tax bracket will be 25 percent higher. The Tar Heel State might need to play catch-up.

Mitch Kokai is senior political analyst for the John Locke Foundation.

Categories: Public Policy

Excessive debt slows economic growth

Mon, 2019-04-22 01:01

New research by two North Carolina State University professors has brought into stark relief the following facts: America is in a debt crisis, our economy is suffering as a result, and politicians of both major political parties bear responsibility.

Economists Thomas Grennes and Mehmet Caner worked with a third author, Qingliang Fan of China’s Xiamen University, to produce the paper. Published by George Mason University’s Mercatus Center, it examines decades of fiscal and economic data for the United States and several other developed countries.

Their key finding is that when the level of indebtedness in a country reaches a certain level, it becomes a drag on economic growth. Low levels of debt don’t necessarily have this effect. If institutions borrow in order to finance valuable investment — to build or expand plants and equipment, improve infrastructure, etc. — that enhances productivity. The resulting gains can more than offset the cost of the debt.

But investments contain built-in uncertainties. Not all capital projects pay off. We generally borrow to fund the best bets at first, then the next-best gets, and so on. The more we borrow and spend, the less likely the spending will be worth it. What’s worse, we don’t always borrow to invest. We use credit to buy things for immediate consumption.

That’s not a big deal in small amounts. And it’s not necessarily disastrous even in large amounts if the good we purchase lasts a long time and has resale value, such as a house. But large-scale borrowing to fund large-scale consumption is foolish.

The temptation is particularly strong, and the consequences particularly grave, in government. Those who make the initial decision, the politicians, can get credit for what gets funded without getting personal blame years or decades later for the taxes or foregone expenditures required to pay off the resulting debts. And because governments don’t face the same competitive pressures that private institutions do, they are more likely to use borrowed funds either for questionable capital projects or for expenditures that are unquestionably consumption.

Generally speaking, states and localities are less guilty than Washington is. Their rules require that operating budgets be balanced every year, which limits (but does not fully preclude) the use of public debt for consumption. Moreover, bonds that pledge the full faith and credit of state and local governments often require voter approval by referendum, which again serves as a brake, however imperfect, on reckless borrowing.

The federal government lacks these precautions. Even so, Grennes and his colleagues found that for most of its history, the federal government used debt sensibly. “During wars, spending increased, the government borrowed, and the debt ratio increased,” they observed. “After wars, the debt ratio gradually reverted toward the prewar ratio, without a clear long-term trend.” There may have been no formal constraints, but there was an “implicit contract that functioned as a coherent debt policy.”

That ended in the late 1960s, as the federal government took on new spending obligations, most involving immediate consumption rather than investment. Each new obligation had a powerful constituency, and often gained popular support (think Medicare). But the total effect was to boost federal spending above projected revenue. Rather than resolve the problem, Washington borrowed. What’s worse, during the same period federal tax and regulatory policies incentivized an increase in private borrowing, too.

The bill is now due. According to the new study, the annual rate of economic growth in the United States from 1995 to 2014 was more than a percentage point lower than it would have been in the absence of America’s debt explosion. That’s a very large effect.

What can be done about this? Previous attempts to use moral suasion or legislative pressure, such as the Simpson-Bowles Commission and debt-ceiling shutdowns, have fizzled. Another N.C. State University professor, Andy Taylor, advocates an intriguing set of federal budgeting reforms that may help. Or we could try devolving federal programs to the states, trusting that their preexisting safeguards will hold. As Johnny Mercer put it, something’s gotta give.

John Hood (@JohnHoodNC) is chairman of the John Locke Foundation and appears on “NC SPIN,” broadcast statewide Fridays at 7:30 p.m. and Sundays at 12:30 p.m. on UNC-TV.

Categories: Public Policy

A ballooning federal debt no one is talking about 

Fri, 2019-04-19 04:00

The only thing more worrying than the federal government’s recent announcement that the debt had reached $22 trillion, or 104 percent of GDP, was that it generated such little attention.   

In the 1980s and 1990s, by contrast, the issue was a central feature of the national conversation. Congressional leaders from both parties crafted a series of procedural innovations designed to keep the debt in check. These included the 1985 Gramm-Rudman-Hollings plan that triggered automatic cuts and the George H.W. Bush budget — famous for his “no new taxes” line — that increased revenue and established a pay-as-you-go requirement to any proposed new spending.   

Ross Perot thrust the topic to the center of the 1992 presidential campaign. The debt was then around $4 trillion, but Perot, despite finishing third, received 19 percent of the popular vote and forced the next president’s hand on fiscal issues. President Clinton pursued cuts in defense and domestic spending and increased taxes on high earners, corporations, fuel, and Social Security.  In concert with his sworn enemy, Republican House Speaker Newt Gingrich, the president pushed through Congress a budget that enjoyed a surplus between 1997 and 2001.   

Presidents George W. Bush and Obama were interested in other matters —prosecuting the War on Terror and health–care reform among them. But at least they periodically discussed deficits and the debt. Bush reduced the deficit to just $161 billion in 2007 — less than what it had been in 1983 — despite Iraq and Afghanistan. Then the financial crisis hit. Still, by the time he left office Obama had reduced the deficit by two-thirds from the huge $1.4 trillion level it attained in 2009.    

Now we have given up. Democrats are uninterested in the fiscal policy of the Clinton years. The Committee for a Responsible Budget estimates Medicare for All, a policy wildly popular among the party’s 2020 presidential candidates, will cost around $3 trillion annually.  That is roughly 75 percent of the current budget. The estimated price tag of the Green New Deal — a grab bag of quasi-socialist policies loosely related to environmental concerns and sponsored by Sen. Edward Markey of Massachusetts and Rep. Alexandria Ocasio-Cortez of New York — is astronomical. American Action Forum calculates it will blow a $50 trillion- to 90 trillion-dollar hole in the federal budget over 10 years — and that excludes the plan’s pernicious effects on the broader economy.       

Worse, the Democrats seem to have come up with an economic model to justify their ambitions. Modern monetary theory asserts the magnitude of debt doesn’t matter because countries print money and can therefore always pay creditors. Policy makers just need to be cognizant of inflation. To prevent overheating they can tax and issue bonds.   

The Republicans used to check Democratic profligacy. President Eisenhower helped produce two years of surpluses during his presidency. Known traditionally as fiscal conservatives, Republicans became less concerned with debts and deficits during the 1980s. Even President Reagan, however, despite his commitment to winning the Cold War and embrace of supply-side tax cuts, periodically touched the brakes on the deficit. He signed strategic tax increases into law in 1982, 1984, and 1987. 

President Trump has absolutely no inclination to worry about debt and deficits. The 2017 tax bill has assisted economic growth a little, but in the short term at least has reduced revenue. He also lacks discipline on the spending side. In a purely symbolic gesture, the president has asked his cabinet secretaries to reduce their departments’ expenditures. The large cuts he has proposed to agencies like the EPA and State department in his 2020 budget are unrealistic. 

Trump has increased military outlays significantly. He wants a border wall with Mexico that will cost about $60 billion. In the meantime, he will not even contemplate desperately needed reform to Medicare and Social Security. Left untouched, the big entitlement programs will cripple the budget over the next several decades. 

Trump is running the country as he ran his original business. Real estate relies on debt, not equity. Borrowing permitted the president to accumulate properties in the expensive and generally healthy New York City market. So long as their paper value continued to grow, all was good.   

Unfortunately, the American economy doesn’t work that way — at least it has not for the past decade. We are in a prolonged period of slow growth and meager increases in productivity. As the size of our obligations to creditors grows, so our ability to pay them cheaply and with promises of future benefits diminishes. Debt service costs are currently 10 percent of expenditures, and in 2023 they will be larger than the defense budget. Every one percentage-point loss in GDP growth costs the government about $10 billion. As U.S. interest rates decline, foreign investors look elsewhere for returns. We are slowly falling into a fiscal death spiral. 

 Andy Taylor is a professor of political science at the School of International and Public Affairs at N.C. State University. He does not speak for the university. 

 

              

 

Categories: Public Policy

Arguments for Prohibition in 1917 hold no place for lawmakers today

Thu, 2019-04-18 04:00

As I listened Tuesday to a N.C. House committee discuss an alcohol bill, I thought about how America debated the 18th Amendment.

In 1917, and for years after that.

I thought about how we spoke to each other — those influenced by the Women’s Christian Temperance Union and the Anti-Saloon League. Those from worlds where alcohol was an inherent part of their culture, and the entrepreneurs whose hard work and brilliant formulas were just starting to matter.

I imagined what people were thinking when they voted to prohibit alcohol, in their states and then in their country. I wondered how lawmakers overrode a presidential veto to pass an enforcement act with claws so sharp as to leave a deep, festering gash that took years to heal.

The way North Carolina governs alcohol, particularly liquor, is broken. I’ve said this many times, as have my colleagues at the John Locke Foundation.

Such meetings with liquor as the focus, including this one of the House Alcoholic Beverage Committee, seem almost formulaic in nature. The same people make the same arguments, both for and against. At one point Tuesday, as the House members debated House Bill 91, I became disheartened, wondering aloud whether North Carolina would ever realize the potential of our craft distillers, and the potential tourism dollars they could bring, if only our laws would allow.

H.B. 91 is a product of a study by the Program Evaluation Division, which suggested merging ABC boards in counties with multiple boards. Brunswick County, for instance, has nine ABC boards. Wake and Mecklenburg counties, the state’s most populous, have one apiece.

Carol Shaw, the PED’s principal program evaluator, told lawmakers merged boards are more likely to be profitable, that operating costs are lower, and they are typically more efficient.

Language in the original bill would have the boards merge, but, through an amendment proposed by Rep. Pat Hurley, R-Randolph, the provision was removed. Rep. Jamie Boles, R-Moore, suggested capping the number of boards in the state, at 170.

The ABC boards are problematic for myriad reasons. They are politically entrenched entities that operate independently and with little state supervision. They hold immense political sway, which, say critics, can very well lead to favoritism, cronyism, and, ultimately, corruption.  

Yet many of the boards generate money for their respective communities, which, board proponents argue, can’t possibly be replaced. I would disagree, but there’s little point in debating this because — save a bold legislative move — the board system isn’t going away.

Hurley, let’s understand, opposes any move that, she deems, promotes alcohol or makes it easier for people to buy it.

Here I began thinking about the arguments for Prohibition.

Amendments from Boles to allow consumers to special order a single bottle from an ABC store — now you have to order by the case — and to make it easier for businesses to transport liquor sans the ABC, were successful. H.B. 91 now heads to the House Finance Committee, so there’s reason for optimism, albeit ever so cautious.

Hurley also proposed Tuesday an amendment that would remove from the bill tastings at liquor stores and the possibility of Sunday sales, reminding another lawmaker of the old “blue laws.” She says people have six days to buy liquor, and that’s enough.

Thing is, it’s not for her to decide. It’s up to the market, an idea reflected in West Virginia’s decision this year to allow Sunday sales, and for Virginia to open ABC stores beginning Sunday at 10 a.m.

Both of Hurley’s proposals failed badly.

Maybe, I thought, North Carolina is truly making progress toward reforming its arcane ABC laws. Maybe we’ve moved far enough beyond the failed experiment of Prohibition that arguments for Prohibition from 1917 proposed today are no longer debated but rather summarily cast aside and forgotten.

Maybe.

Categories: Public Policy

Train and pay principals wisely

Wed, 2019-04-17 01:01

I believe that the leadership ability and management practices of school principals have a large effect on how well teachers teach and students learn. But I admit to being biased on the matter: my late father spent most of his career as a principal in the Charlotte-Mecklenburg school system.

Still, I base my belief on more than just filial piety. Although there aren’t as many formal studies of principal effectiveness as there are of teacher effectiveness, most of the research to date supports the following propositions: 1) the quality of principals is measurable and variable, 2) quality isn’t simply a reflection of how long principals have been on the job, and 3) principal quality is linked to educational outcomes.

I don’t work in K-12 education but I have spent many years training leaders for public service. In my experience, leadership is a bundle of knowledge, skills, practices, insights, and behaviors. Some of these can be learned in formal settings. Others can be mastered only by practice. And some of the required capabilities can’t really be learned by aspiring leaders at all — they either come naturally or are acquired in childhood.

Few missions will be as important, and as challenging, as preparing the next generation of principals to lead North Carolina’s schools. It should begin with active recruitment of promising candidates, rather than settling for whoever walks in the door. The training should be rigorous and relevant. It should include a full-time residency. And once principals are trained and placed, they should be carefully evaluated and compensated based on performance, not longevity.

As it happens, I have just described North Carolina’s emerging strategy. In 2015, the General Assembly enacted legislation to identify and fund high-quality principal-preparation programs. There are now five regional programs, each tied to a campus: North Carolina State University, the University of North Carolina at Greensboro, UNC-Pembroke, Western Carolina University, and High Point University. When fully implemented, they’ll be turning out about 250 new school leaders every year.

BEST NC, an education-reform group comprising business leaders across North Carolina, has championed this new Transforming Principal Preparation program (TP3) as well as other components such as raising principal pay and tying it closely to performance. It argues that the next step should be to consolidate TP3 and the state’s other investment in this area, the Principal Fellows program — leveraging the best practices of each, expanding the number of candidates served, and further strengthening the principal pipeline.

Naturally, there are critics. Some don’t like setting high bars for either principal candidates or principal-preparation programs. Others dislike performance pay. These are big changes, so it’s no surprise to hear objections. But the previous system was manifestly ineffective. It didn’t serve the needs of students, particularly those in chronically low-performing schools.

In all candor, we should not expect any one set of policy changes to transform North Carolina education. It is a massive, complicated enterprise. Principals matter, to be sure, but so do lots of other factors. And even the studies revealing statistical correlations between principal quality and student success should be interpreted with care.

For example, a study published last year in the journal Education Economics looked at the effects of principals on outcomes in North Carolina elementary schools. It found that principals had “a large effect on students’ math and reading test scores.” However, the effect got smaller when the researchers took the performance of individual schools into consideration. In other words, “much of the principal effect we observe might be related to the match between principal and school, rather than an effect that principals can carry from one school to another.”

The authors didn’t conclude that improving the overall principal quality would have no effect on educational outcomes. It would boost those outcomes. What the study shows, however, is that it is also important to study and replicate effective matches between specific principals and schools.

Sounds like a job for school superintendents — another set of leaders whose effectiveness is of critical importance.

John Hood (@JohnHoodNC) is chairman of the John Locke Foundation and appears on “NC SPIN,” broadcast statewide Fridays at 7:30 p.m. and Sundays at 12:30 p.m. on UNC-TV.

Categories: Public Policy

New instruction could help people get more month out of the money

Tue, 2019-04-16 04:02

Just one out of every four millennials demonstrates basic financial literacy.

That statistic from a recent legislative news conference helps explain a lot. Support for the Green New Deal? Positive impressions of socialism? Demands for more goodies from government?

All of these ideas might make sense among those with limited command of basic financial principles. The more one knows about such terms as scarcity and trade-offs, the less excitement he’s likely to feel about political promises that carry high costs.

Millennials’ relative ignorance about financial issues helps bolster the case for Senate Bill 134, the Economics and Financial Literacy Act. Filed in February, the bill has cleared the Senate’s main education committee and now sits in the hands of the chamber’s budget writers.

“We’ve got kids that are graduating from high school that don’t know how to balance a checkbook,” said Sen. Jerry Tillman, R-Randolph, a lead sponsor of S.B. 134. “They don’t know how to handle credit.”

“They don’t know how banks work,” Tillman added. “They don’t know how interest works.”

Despite limited preparation, many of these recent high school graduates enter an adult world of work, marriage, and family. That world requires basic financial knowledge. For that reason, Tillman backs teaching financial literacy “as a required course for the first time ever in the history of this state.”

The measure would require the State Board of Education to find the best way to squeeze new financial literacy instruction into the existing N.C. high school course of study.

It should surprise no one that supporters of a financial literacy requirement cite plenty of numbers to bolster their case. Forty percent of Americans today can’t afford an unexpected $400 bill, according to Lt. Gov. Dan Forest, a vocal S.B. 134 supporter. Half of Americans have more credit debt than savings, Forest added. The average N.C. household carries a debt of $8,683.

One in five Americans has saved nothing for retirement. Only 15 percent of them have enough savings to cover one year of retirement. “We have some work to do,” Forest said.

“In our country, we have almost a quarter of our families that have no money in their retirement accounts,” said Sen. Jay Chaudhuri, D-Wake, another primary sponsor. “If you look at the median family holdings today, they only have $5,000 in their savings. We cannot meet our retirement security unless we educate and empower our young people about the importance of money.”

Chaudhuri hopes the new course will help high schoolers learn about credit scores and credit cards, along with planning for paying for college, “including what a monthly debt payment might mean after graduation.”

Along with the low percentage of financially literate millennials, “nearly half don’t believe they can come up with $2,000 if an unexpected need arose in the next 12 months,” Chaudhuri said. “More than half of them carried a credit-card balance in the last year.”

“I wish I had a course like this when I attended high school back in Fayetteville,” he added.

The specifics of S.B. 134 could generate substantive debate. Supporters of the existing social studies curriculum might object that a new financial literacy course could squeeze out important instruction in other topics. Some might suggest that financial issues have a better home in a math class. And, as Carolina Journal’s Lindsay Marchello has reported, some experts urge lawmakers to move financial instruction to earlier grades — perhaps even elementary school.

Regardless of the current legislation’s fate, it makes sense to focus additional attention on financial instruction. A student who understands savings, credit, and budgeting will make better sense of recurring political debates. Tax rates, bond referendums, and “rainy-day” savings reserves should be easier to understand.

Plus the educated student might avoid the fate Chaudhuri described while quoting a once-popular country song.

“I paid the bank note, the car note, and, yes, I paid the phone bill, too,” the senator said as colleagues chuckled. “And then I turned around and found that the house note’s due. Well, I’d love to take you out like I said I would, honey, but there’s too much month at the end of the money.”

That relic of 1980s radio might seem ancient to millennials and the current crop of high school students. But many understand the sentiment. Most would prefer to sing a different tune.

Mitch Kokai is senior political analyst for the John Locke Foundation.

Categories: Public Policy

Manufacturing jobs on the rise

Mon, 2019-04-15 01:01

Did you know that manufacturing employment in North Carolina has gone up more than 10 percent since 2010? I didn’t either, until I took a recent dive into economic statistics.

In February 2010, there were about 431,000 jobs at manufacturing enterprises in North Carolina. By February 2019, that number had grown to about 476,000. What makes that notable is that during the preceding decade, from 2000 to 2010, manufacturing employment in the state had fallen by 44 percent.

North Carolina’s experience is hardly unique. Something like the same trend is evident for the nation as a whole: manufacturing employment fluctuates within an overall downward trend during the 1980s and 1990s, drops like a rock during the first decade of the 21st century, then recovers a bit since 2010.

Of course, manufacturers don’t exist to create jobs. They exist to make and sell products. It’s wonderful to see companies form or expand, hiring North Carolinians along the way. But the health of the sector is best measured by output, not employment.

By that measure, North Carolina manufacturers are doing well. Over the last 20 years of available data (through 2017), their output rose by about 28 percent in inflation-adjusted terms. That’s faster than for other goods-producing industries in our state but not nearly as fast as the now-dominant service sector.

These are two of the three basic divisions of the economy. The private goods-producing sector — think manufacturing plus food, fiber, mining, and construction — is about 23 percent of North Carolina’s gross domestic product. The private service sector is about 64 percent. The government sector (at all levels) accounts for the remaining 13 percent.

The distribution of jobs in North Carolina doesn’t precisely track economic output. That’s because the production of services, both private and public, tends to be more labor-intensive than the production of goods. While goods industries represent 23 percent of the state’s GDP, they account for 16 percent of total employment — which is the same as government’s share of total North Carolina jobs.

By the way, the government sector is about the same today, as a share of GDP and employment, as it was 20 years ago. The goods sector is smaller. The big story is the rise of services.

Keep in mind that the service sector encompasses a wide variety of enterprises and occupations, from finance, education, and health care to leisure, hospitality, and retail. There is nothing alarming or even surprising about a shift from goods to services. It’s quite literally the oldest story in our collective economic history. As we learn how to produce more food, clothing, shelter, and other goods at a lower cost, including labor costs, that allows us to improve our standard of living by producing and consuming services that make our lives longer, safer, more fulfilling, and more enjoyable.

At the same time North Carolina’s economic mix was changing, we welcomed millions of new residents to our state. Overall output grew in real terms. We didn’t experience a decline in the quality of jobs. The ratio of total compensation per job in North Carolina — that’s wages and salaries plus benefits — stayed in a narrow band of 89 percent to 90 percent of the national average. Some businesses contracted or disappeared, primarily because of changes in technology, trade patterns, and consumer preferences. But other businesses started up or expanded.

I don’t know if the current upswing in North Carolina’s manufacturing employment will continue. If it does, I hope it is accompanied by an even-faster rise in output so that the productivity of our manufacturing industries goes up, not down. In the long run, productivity gains makes us better off. The people who make things receive healthy increases in compensation. And the rest of us receive more and better goods at lower real prices.

Politicians couldn’t do much to arrest these economic trends even if they wanted to. Their focus should be on productivity, as well — getting more value for every dollar we spend on public services.

John Hood (@JohnHoodNC) is chairman of the John Locke Foundation and appears on “NC SPIN,” broadcast statewide Fridays at 7:30 p.m. and Sundays at 12:30 p.m. on UNC-TV.

Categories: Public Policy

Teen girls face myriad challenges, pressure from many sides

Fri, 2019-04-12 04:00

It’s tough to be a teen girl today. Youth depression has risen significantly over the past decade, the uptick coming primarily from girls. The mother of a 17-year-old girl, I know pressures are high. Smartphones and social media fuel constant connection and comparison. Achievement expectations and perfectionism raise academic stakes, creating stress and burnout. Days are long; nights are short. Girls need lots of adult perspective, at home and school, to cope with it all.   

First, those numbers: 41 percent of teen girls nationwide experience persistent feelings of sadness or hopelessness. That’s nearly double the number of boys voicing similar symptoms, according to the latest Youth Risk Behavior Survey. Angst peaks during junior year, when 44 percent of girls are depressed. Many adults, then, know a girl who’s sad and stays that way for weeks at a time.    

New data buttress worries about social media. A large-scale study from University College London, evaluating almost 11,000 14-year-olds in the U.K., found girls were “twice as likely to show signs of depressive symptoms linked to social media use compared to boys.” Social media use was associated with a “stepwise increase” in depression. That’s concerning, given girls’ proclivities: 43 percent spent three or more hours daily on social media.       

Perfectionism creates another pressure point. A recent study in Psychological Bulletin, comparing nearly 42,000 American, British, and Canadian college students to earlier generations, found greater perfectionism today. Socially prescribed perfectionism — striving for perfection to gain others’ approval— increased most. Researchers cite cultural and economic change and competition, along with greater parental anxiety and control, as possible causes.  

In top high schools, striving can reach toxic levels. Attending a high-achieving school, while conferring academic benefits, raises depression and perfectionism risks, according to Arizona State University psychologist Suniya Luthar’s research. Kids internalize this exhausting ethos: “I can, therefore I must.”   

School counselor Nartarshia Sharpe sees myriad pressures for girls. The High School Member Services Representative for the N.C. School Counselor Association, Sharpe says social media is “first and foremost” among girls’ external pressures. “They feel a lot of times in their mind that they don’t measure up.”     

Disconnecting daily for some period of time helps kids decompress. “I remind parents that, yes, it’s important that your child feels a part of their peer group,” Sharpe says, “but they also need to unplug when they come home. Everybody needs to unplug.” Family connection builds kids up, enabling them to face the world again.     

Since she began working in Wake County in the mid-1990s, Sharpe has observed growing perfectionism and a need for recognition. It isn’t just student-driven, “a lot of parents get caught up in it as well,” she says. At the mall or grocery store, Sharpe hears “comparison conversations” between parents, discussing the number of AP classes kids are taking, or colleges’ expectations. “It’s great if it’s what that child truly wants to do,” she says, “but I’m thinking, ‘How is that child really feeling internally?’”  

Sometimes therapeutic intervention is needed, of course. But parents can help kids reframe perfection pressures by sharing times they messed up or weren’t prepared, Sharpe says: “Children don’t think that adults fail.” Learning they do shows kids they can recover from failure too. 

Girls are competitive about grades, scores, college acceptances, Sharpe affirms; rethinking comparison helps. She tells students, “You are your own competition. Do your best and that’s what matters the most.” About admission to prestige colleges, Sharpe challenges prevailing all-or-nothing thinking. She says, “It doesn’t matter where you start, it just matters where you finish.” 

Words to live by, at any age. 

Kristen Blair is a Chapel Hill-based education writer. 

 

Categories: Public Policy

Questions justices could have asked about N.C. gerrymandering

Thu, 2019-04-11 04:02

U.S. Supreme Court justices peppered lawyers with plenty of questions during the latest arguments over North Carolina’s congressional election map. This observer would have liked to have heard even more queries.

The unasked questions could have added valuable context to the ongoing debate over partisan gerrymandering.

Justices jumped quickly into question mode during March 26 oral arguments in Rucho v. Common Cause. Former U.S. Solicitor General Paul Clement spoke for just 47 seconds before the first question interrupted his argument. Clement defended the map North Carolina used for congressional elections in 2016 and 2018.

Justices offered even less deference at the outset of the opposing argument. Emmet Bondurant, representing lead appellee Common Cause, delivered 32 seconds of his opening monologue before a question cut him off.

In contrast, Allison Riggs enjoyed more time to offer an opening statement. Arguing on behalf of the League of Women Voters, the other lead plaintiff challenging the N.C. election map, Riggs spoke for nearly 2 ½ minutes before facing her first query.

This observer would have liked to have heard at least one justice push back against Riggs’ first sentence.

She claimed her clients had sued the General Assembly because “its leadership essentially bragged to these voters and the public at large that, by enacting a 10-3 plan, it was punishing voters who supported Democratic candidates and it was going to create districts that would not allow voters in those districts any meaningful ability to use normal democratic processes to redress infringements on their individual constitutional rights.”

It would have been nice to hear a justice ask any of the following questions: What evidence suggests that legislative leaders were bragging? Weren’t legislators simply stating as fact that they had drafted a map designed to elect 10 Republicans and three Democrats to North Carolina’s congressional delegation? Didn’t they say that map’s political factors were designed to distinguish it from a previous map that courts had tossed out because of racial gerrymandering? Weren’t they simply asserting that political — not racial — factors had motivated their actions?

The questions could have extended beyond Riggs’ claim about “bragging.” How exactly does an election map punish voters? Do they lose their right to cast a ballot? Do they lose their right to urge friends and neighbors to cast ballots for their preferred candidates? Do they lose the right to work with their preferred political party to put forward the best possible candidate to win a majority of votes in the district?

Since the answer to each of these questions clarifying voter “punishment” is “no,” how has the election map blocked voters in any “meaningful” way from engaging in “normal democratic processes”?

If Riggs had responded that none of these activities would have made a difference, that the map itself guaranteed a 10-3 Republican advantage in the N.C. congressional delegation, a justice could have asked this follow-up: Did you not follow the 2018 election cycle?

Those who had paid attention to recent electoral news know that Democrats made concerted efforts to flip at least three Republican-held congressional seats. In the Second District, the GOP incumbent won with a margin of just 18,000 votes out of 330,000 total ballots cast. In the 13th District, the margin was slightly more than 17,000 out of about 285,000 total votes. And in the 9th District, just 905 votes separated the apparent Republican winner from his Democratic foe. (Democrats still have a chance to flip that seat this year because of absentee ballot irregularities that prompted criminal charges and a new special election.)

With an extra infusion of campaign cash here, an unexpected scandal there, or a series of damaging political gaffes on the campaign trail — in other words, the standard electoral process at work — Democrats could have cut the Republican advantage in North Carolina’s House delegation to 7-6. With a map designed to elect 10 Republicans.

Actual elections with real candidates — “normal democratic processes” — challenged Riggs’ assertion that N.C. Democrats had no “meaningful ability” to elect more than three members to the U.S. House.

Chief Justice John Roberts came close to making this point during the oral arguments. “What do you do with the fact that partisan identification is not the only basis on which people vote?” he asked. “Do you see electoral results change dramatically depending, for example, on the particular appeal of individual candidates, turning on who’s at the head of the ticket rather than down ticket? And how do you deal with that — those factors that depart from the arguments about the inevitability of electoral results based on partisan identification?”

Put another way: Regardless of the General Assembly’s plans, voters have the final say.

“It turns out that a lot of the predictions in this area … prove to be very, very wrong very often,” Roberts said, before citing a 2004 Pennsylvania redistricting case. “You have the famous example in the Vieth case where the argument was … the method under challenge would never allow the election of Republican judges. And 15 days after the opinion came down, all the judges were Republican.”

Roberts and his colleagues should decide in June whether North Carolina’s congressional map will withstand a constitutional challenge. This observer hopes Roberts’ comments — along with important questions never asked during oral arguments — will help guide the high court’s final ruling.

Mitch Kokai is senior political analyst for the John Locke Foundation.

Categories: Public Policy

Rail transit doesn’t fit state

Wed, 2019-04-10 01:01

If you live somewhere other than the western side of North Carolina’s Research Triangle region, you may not have thought that a long-planned light-rail line between Durham and Chapel Hill had much to do with you. So, when the $3 billion-plus project met its demise a few weeks ago, you may not have taken much notice.

The truth is that even if you live in Durham and Orange counties, the proposed 18-mile transit line would primarily have affected your wallet, not your daily commute or lifestyle. That the project was incompatible with the basic facts on the ground was its fatal flaw — a flaw that was only revealed, not caused, by skepticism from federal officials, state lawmakers, and such affected parties as Duke University and the North Carolina Railroad.

North Carolina is a populous, fast-growing, and urbanizing state. But that doesn’t mean our settlement patterns are friendly to large-scale rail transit, or likely ever to become so. Our “urban” counties are really suburban places for the most part. Most people still opt for homes in low-density developments. Most don’t work, live, or shop in downtowns.

There are, of course, counterexamples. Markets accommodate a variety of consumers preferences. There are smart business people serving those needs and making good money doing so. Good for them — and governments ought not to stand in their way by imposing onerous land-use restrictions.

But there is no evidence of mass abandonment of lifestyles built on decentralization, dispersal, and automobility. North Carolina policymakers shouldn’t pretend otherwise, or try to engineer a different outcome by expending billions of dollars and issuing thousands of regulations to cram North Carolinians into boxes, literal and figurative, that don’t reflect their revealed preferences.

What are those basic “facts on the ground”? I’ll offer you two sets of data. One is from Smart Growth America, a group that advocates pro-density, pro-rail policies. It computes a “sprawl index” for metropolitan areas across the country, taking into account such factors as density, street grids, walkability, and the proximity of employment centers to residences.

In the most recent study, North Carolina contained a disproportionate number of metros at the low end of the “smart growth” spectrum: Raleigh-Cary (ranking 155 out of 221 places evaluated), Wilmington (180), Asheville (183), Durham-Chapel Hill (191), Charlotte-Gastonia (197), Fayetteville (203), Greensboro-High Point (208), Winston-Salem (209), and Hickory-Morganton-Lenoir (dead last at 221)

Our state’s dispersed settlement patterns aren’t simply the result of zoning laws or road-building guiding residential development. They reflect the dispersal of employment. People don’t just live on the outskirts of cities and work downtown. Maps of daily commuting patterns within and among North Carolina counties resemble not so much a trunk with branches as a dense thicket.

Moreover, jobs are getting more dispersed, not less. A 2016 report from the Brookings Institution looked at the proximity of jobs to central business districts in the nation’s 100 most-populous metros. In all three North Carolina metros covered in the study — Charlotte-Gastonia, Raleigh-Cary, and Greensboro-High Point — the share of jobs within three miles of the urban core was lower in 2010 than it was in 2000. Those declines in job concentration were larger in North Carolina than for the nation as a whole.

No mix of public policies, no matter how radical or costly, could change these underlying realities very much even if such a goal were desirable. North Carolina’s communities are polycentric. They don’t look like spokes around a hub. We’ll see plenty of mixed-use developments crop up — to serve the needs of people who want to live, work, shop, play, and go to school without having to travel long distances — but those places will be dispersed as well, not clumped into central business districts. And we’ll continue to see rural places become suburban ones.

Automobility will remain the default commuting preference. But to the extent North Carolinians voluntarily give up driving, the options best suited to their needs will include buses, vans, ridesharing, and telecommuting. Railroads aren’t the future. They’re the past.

John Hood (@JohnHoodNC) is chairman of the John Locke Foundation and appears on “NC SPIN,” broadcast statewide Fridays at 7:30 p.m. and Sundays at 12:30 p.m. on UNC-TV.

Categories: Public Policy

Local governments still don’t need to get in the broadband business

Tue, 2019-04-09 04:00

In 2011, a then-new Republican majority in the N.C. General Assembly was alarmed at an expensive new trend in local government. Residents in Wilson, Salisbury, Mooresville, Davidson, and Morganton were being hit with higher taxes and even electricity and water rates as their cities were bleeding money. Why?

To pay for their cities’ decision to enter into a private market service, namely to offer broadband services. In 2009-10, the John Locke Foundation cautioned Salisbury and Wilson against the boondoggles, and subsequent events proved us right.

By 2011, Wilson was borrowing from its municipal electric and gas funds to make up for an over $11 million shortfall in its Greenlight network. Mooresville and Davidson’s MI-Connection had posted consecutive losses of $5.6 million, $6.8 million, and $6.4 million. Salisbury was borrowing millions of dollars from its water and sewer fund to support its Fibrant network, saw its bond rating downgraded, and last year easily passed a voter resolution to lease the network.

In response, the new Republican majority passed the Level Playing Field Law in 2011. Among other things, it stops (some) unfair competition, requiring new local government broadband systems to comply with the same federal, state, and local laws binding their private competitors. It prevents required subscribership from individuals or developments and ends the use of cross-subsidization to cover losses and price services below cost. It also forbids local governments from using bonds not approved by voters to fund the services.

Allowing competition and removing government obstacles

The Level Playing Field Law passed with the understanding that the private sector, featuring competing enterprisers seeking new opportunities and innovations, is best suited to solve difficult market problems. One such problem is how to connect relatively sparse rural populations to high-speed broadband.

For example, WUNC reported on April 3 about how smaller companies were sprouting up across North Carolina to bring rural broadband services. These enterprises are using their own resourcefulness to get around the infrastructure problem, such as posting transmission equipment on grain elevators, water towers, even sweetgum trees.

In 2017, the Mercatus Center at George Mason University offered three recommendations to North Carolina policymakers seeking greater broadband access in underserved areas of the state:

First, rely on the private sector. Public networks are inherently risky, pricy, and likely to take users away from and depress development of private networks. Second, lessen state and local regulatory obstacles to building wireless infrastructure on public property and public rights-of-way. Finally, consider direct vouchers to underserved residents to buy their own broadband and services at a discount, since vouchers would induce private investment more effectively without saddling locals with redundant public networks many won’t use.

Allowing tax increases, removing safeguards against government intervention

But has the current General Assembly forgotten about its concern back then? House Bill 431, which has several dozen co-sponsors, would allow a local government to build broadband infrastructure and service to lease to a private company. It would expressly allow the local government to use property taxes, revenue bonds, and other unrestricted funds to fund it. It would create an exemption in current law so that the lease could extend up to 25 years, and it would even exempt the system from the Level Playing Field Law.

Are legislators less worried than they used to be about governments getting intertwined in private markets and raising taxes and costs on their own citizens? That would be a shame if so. Especially if the real costs of the service were hidden in property tax hikes instead of direct service costs. This sleight-of-tax is exactly the sort of cross-subsidization problem the General Assembly of 2011 sought to prevent.

Who would compete against a company awarded such a lease? The local government would build the company’s infrastructure, charge the locals for it in their involuntary role as taxpayers (not as voluntary consumers), and lease it to a chosen “winner” company.

It’s unlikely a small innovator would take on a propped-up competitor. But maybe a new entrant with a next-generation idea could. Either way, local taxpayers would still be paying for the infrastructure on lease, obsoleted or not.

Another bill, House Bill 398, would appropriate $15 million from the State Capital and Infrastructure Fund to the “Growing Rural Economies with Access to Technology” Fund the General Assembly created last year. The fund received $10 million last year, but broadband advocates complained the fund was too small, focused only on rural poor, and could fund broadband speeds starting at 10 megabits per second, considered too slow to support more than one connection in a house.

Finally, House Bill 387 would address the issue more along the lines of Mercatus’ second recommendation. It would allow electric membership corporations to apply for federal grant funding to install broadband infrastructure along their easements and rights-of-way.

In December 2018, the U.S. Department of Agriculture announced a $600 million grant program to be used by “telecommunications companies, rural electric cooperatives and utilities, internet service providers, and municipalities … to connect rural areas that currently have insufficient broadband service.” HB 387 would remove state impediments to electric membership corporations from being able to participate in this program.

Streamlining permitting and removing regulatory roadblocks to building wireless infrastructure is a more straightforward way of connecting rural customers to high-speed internet service. Going back to the well of having local governments tax their citizens to build it themselves, even to lease it to a handpicked “winner” company, is a known budget-buster.

That’s true even if the legislature decides to build budget-busting into the bill. If it was a problem in 2011, why isn’t it now? This General Assembly should remember its history of fiscal and regulatory responsibility. Encouraging competition, removing obstacles to enterprise, and smoothing the path are better ways to see a market need being met without tax increases.

Jon Sanders  is director of regulatory studies at the John Locke Foundation.

Categories: Public Policy

Coerced funding bad for politics

Mon, 2019-04-08 01:01

After Durham businessman Greg Lindberg, state Republican Party Chairman Robin Hayes, and two of Lindberg’s business associates were indicted in an alleged bribery scheme, advocates of government-funded campaigns scurried to restate their argument. But the latest incident doesn’t make it any more persuasive.

Lindberg is accused of offering Republican Insurance Commissioner Mike Causey money in exchange for favorable regulatory treatment of Lindberg’s sprawling insurance businesses. According to reporting by the Wall Street Journal and other media outlets, Lindberg has been acquiring insurance companies and then using their funds to invest in other Lindberg ventures or to acquire assets such as mansions and yachts for his personal use.

Causey is a hero in the story, not a conspirator. When Lindberg and his associates came calling, shortly after Causey’s election in 2016, the insurance commissioner went to law enforcement with his suspicions. He ultimately helped run the sting operation that nabbed Lindberg.

The money Lindberg allegedly offered to pay for Causey’s favor would not have consisted of personal cash under the table. Rather, he would have given $2 million in contributions to aid Causey’s expected 2020 run for re-election, going beyond just “hard money” (individual gifts to Causey’s campaign) to include large-dollar gifts to other entities to expend on Causey’s behalf.

Money can flow into politics in a variety of ways beyond direct gifts to campaigns. Donors can give money to political parties, to party committees, to political action committees (PACs) that in turn give to candidates, to so-called super PACS that don’t make contributions but instead conduct independent expenditures on behalf of candidates, and to nonprofit forms such as 501(c)(4) social-welfare organizations, 501(c)(5) labor organizations, or 501(c)(6) trade associations that can engage in some kinds of political speech but can’t treat politics as their primary activity.

This kind of giving is subject to varying restrictions and disclosure requirements, depending on the organizational form and the state where it operates.

Advocates of government-funded elections argue that large-dollar gifts by wealthy individuals or powerful interest groups are inherently corrupting. They want to dramatically reduce or eliminate “soft money” in all its forms, and to lower the cap on hard-money gifts to candidates.

In a free society, however, there is no way to stamp out large-scale expenditures used to express opinions about candidates, parties, legislation, or political causes. Unless we repeal the First Amendment — and similar protections of the freedom of speech, press, petition, and assembly in state constitutions — individuals will always retain the right to express their own views, to give money to others to express those views on their behalf, and to form voluntary associations that have as one of their roles the collective expression of such views.

Political contributions aren’t used to pay people for votes, at least not legally. Political expenditures fund the transmission of messages via publication, broadcast, direct correspondence, or face-to-face communication. As long as government makes critical decisions with big consequences for our personal and professional lives — in other words, forever — we will try to populate the government with like-minded officials and to sway the decisions of those officials.

If individuals or the associations they form can give money directly to candidates and parties, in sums large enough to communicate effectively with voters, they’ll do it. As government obstructs that flow, the money will divert into independent-expenditure groups that are less transparent — and removed, by law, from the control of the candidates who are their intended beneficiaries.

Both effects harm the political process. Voters ought to know as much as possible about those who seek to wield the coercive power of government. And candidates ought to be able to control their own political messages, and to be held accountable for what those messages contain.

We can combat political corruption without further expanding the coercive power of government. It shouldn’t fund political speech. And it shouldn’t forbid the private funding of political speech. What it should do is investigate and punish bribery schemes like the one alleged in the Lindberg case.

John Hood (@JohnHoodNC) is chairman of the John Locke Foundation and appears on “NC SPIN,” broadcast statewide Fridays at 7:30 p.m. and Sundays at 12:30 p.m. on UNC-TV.

Categories: Public Policy

Thanks to solar power deals, your electric bill is higher

Fri, 2019-04-05 04:00

Roughly $1.25 billion. That’s how much Duke Energy customers will be overpaying for electricity over the next 10 to 15 years. We can thank North Carolina law — and Gov. Roy Cooper — for the higher bills that come with long-term solar energy contracts Duke has been forced to accept. That’s not only bad for Duke’s customers, it puts the utility at odds with a different state law that obligates Duke to seek the lowest-cost electricity and to maintain the reliability of the electric grid.

For nearly two years, Duke officials have warned about the root cause of the higher bills, which stems from North Carolina’s interpretation of a federal law known as PURPA. The law requires the utility to buy solar power at old, high rates even though costs for other types of energy have dropped significantly since the old rates were negotiated. States have considerable discretion with PURPA, and because of North Carolina’s very favorable interpretation, our state now has more PURPA contracts for solar power than any other state in the nation.

In April 2017, Kendal C. Bowman, Vice President Regulatory Affairs and Policy for North Carolina for Duke Energy Carolinas and Duke Energy Progress, characterized solar power growth under North Carolina’s generous interpretation of PURPA as “uncoordinated and unrestrained.” She told utility regulators they should be concerned about two adverse impacts.

First, Bowman noted that under PURPA contracts, Duke was forced to buy any and all power generated by the qualified plants, whether the utility needed it or not, and at prices significantly higher than the cost at which Duke could generate electricity. Duke customers, she testified, are already on the hook for $1 billion in overpayment for electricity to be purchased over the remaining term of existing contracts.

Second, Bowman explained that the more solar power is added to the grid, the more difficult it becomes to maintain stability. The reason is simple. Solar power is intermittent. When the sun shines, power is generated, and Duke is required to buy it and quickly see-saw from one source to another.

The good news is that the General Assembly listened to Duke’s concerns. The result was House Bill 589, passed in July 2017. While the legislation included concessions to both the utility and the solar lobby, it amended North Carolina’s interpretation of PURPA. That change would have reduced significantly the number of solar contracts and the price paid by Duke as of Sept. 1, 2017. That change would have translated into an estimated $850 million in savings on the cost of future solar power.

The bad news is that WBTV reported that, months later, Cooper pressured Duke to sign a settlement with the solar industry that gutted much of the customer relief included in H.B.589. The pressure was applied after the solar industry claimed Duke’s interpretation of the new law was preventing many projects from being grandfathered under the old over-priced rate. In other words, the industry wanted as many projects as possible to be exempt from the new law, even though the law would reduce the bills for Duke customers.

As WBTV reported, records show the CEO of North Carolina’s largest solar company, Markus Wilhelm, reached out to Cooper, asking him to call “Duke leadership” to bring about a settlement of the dispute. According to WBTV, Cooper then used a critical permit that Duke needed for the Atlantic Coast Pipeline as leverage in the deal between Duke and the solar companies.

Under the Cooper-brokered solar settlement, Duke must allow about 240 more solar plants to interconnect and receive the older, higher rates. Based on overpayments in the past, these 240 projects could cost customers more than $250 million in additional bills. Translation: higher mandated profit margins for the solar industry equal higher electricity rates for us.

So, now we wait for results of the legislature’s investigation into questions surrounding both the solar settlement and the $57.8 million discretionary fund attached to the ACP permit. If the solar settlement was signed under duress, the legislature should nullify the agreement. In the meantime, Duke should be thanked for resisting efforts to unnecessarily raise our electricity rates.

Donald van der Vaart is a senior fellow at the John Locke Foundation. Formerly, he was secretary of the North Carolina Department of Environmental Quality and the state’s Energy Policy Advisor.

Categories: Public Policy

Momentum builds toward ABC reforms, but don’t get cocky

Thu, 2019-04-04 01:25

Talk of momentum is mostly an exercise in mysticism. Unless measured physically — as it relates to velocity and mass — momentum is figurative, nothing more than idea, a feeling.

Yet it’s an apt description of something in motion, and I can think of no better word to represent the steady progress of ideas — real legislation, even — toward fixing the busted way North Carolina stores, distributes, and sells liquor.

All involved — brewers, vintners, consumers — have reason for optimism, albeit with a healthy shot of caution.

Lawmakers this session have filed what amounts to a jumble of bills designed to ease restrictive Prohibition-era rules enacted in the first half of the 20th century. These bills, including an omnibus measure filed Tuesday in the House, would allow distillers to sell spirituous liquor directly to consumers in other states and remove limits on sales to customers visiting one of the nearly 60 craft distilleries in the state.

The bills would authorize public colleges and universities to allow the sale of alcohol at stadiums, athletic facilities, and arenas on school property. They would allow distillers to serve mixed drinks, for brewers to more freely distribute their beer, and for communities to decide whether they want liquor sold on Sundays.

But these bills, at least so far, have failed to address the rabid coyote in the corner. About 170 politically entrenched boards, which operate loosely under the auspices of the N.C. Alcoholic Beverage Control Commission, oversee the distribution, sale, and revenue from alcohol in cities and counties throughout the state. As we’ve written — again and again — these boards distribute some money from alcohol sales to another set of politicians in respective communities, though there’s really no clear formula for that distribution or uniform targets for the money. The funding has become a sort of entitlement, and communities used to that money are seeing it disturbed by what has become a steady political breeze.

They’re feeling threatened and are rallying in support of the status quo.

But, setting aside the idea of full privatization, implementing a centralized system — like Virginia, for example — is one plausible idea, and one that would include finding ways to equitably disperse alcohol money around the state.

The issue with the boards is ultra-sensitive politically, but lawmakers aren’t averse to making suggestions.

Senate Bill 87 — and its companion, House Bill 91 — would require the merger of ABC systems in a county with two or more ABC systems. There are lots of those. Brunswick County, for instance, has nine boards, which is a ridiculous number.

One North Carolina distiller who supports the status quo has more than once told me that no system is perfect. It’s true. All 50 states govern alcohol differently, and each has it strengths and its flaws.

This, too is true: Ye Olde N.C. Spirits Express has just plain run out of track.

Let’s keep in mind lawmakers are working with a stack of bills, and the result may be predictable yet positive. Or, it could be something else altogether.

While it’s OK to celebrate the progress lawmakers are making toward modernizing the antique N.C. ABC system, we may want to thinking about tempering that high-proof whiskey with a little water.

Categories: Public Policy

State voters still closely split

Wed, 2019-04-03 01:01

In North Carolina, political power is divided. Republicans control the state legislature, although without the supermajorities they once enjoyed. Democrats occupy such jobs as governor and attorney general, but Republicans control six of the 10 statewide elected offices that form North Carolina’s executive branch. Democrats form a strong 6-1 majority on the state supreme court, but the state court of appeals is roughly balanced. Republicans have majorities on 56 of North Carolina’s 100 county commissions, but six of the 10 most-populous counties have Democratic boards.

Do you find divided government frustrating or exhilarating? Either way, you might as well get used to it. North Carolina is likely to be a political battleground for many years to come.

It will be a top prize in the 2020 presidential race, for example. Right now, the share of North Carolina voters who approve of Donald Trump’s performance and the share who disapprove are within a few points of each other, according to several polls. We are also likely to witness highly competitive reelection bids by Gov. Roy Cooper and U.S. Sen. Thom Tillis, among others.

That our state’s elections have been and will continue to be so hotly contested should come as no surprise. It reflects voter preferences. Few state electorates are closer to the national average in partisanship and ideology than North Carolina’s electorate is.

On this point, don’t be misled by party registration. Some North Carolinians, disproportionately older and residing in rural areas, may be registered Democrats but actually vote Republican most of the time. Moreover, most “unaffiliated” voters are not truly neutral. They vote fairly consistently for their favored party. They just aren’t joiners in the way their parents were (many attend but never become full members of religious congregations, for much the same reason).

According to polling by the Gallup organization, 42 percent of North Carolinians are Republicans or lean that way, while 41 percent are Democrats or lean that way. The remainder are either true swing voters or don’t vote much at all. Other states where the two party bases are either tied or differ by a single point include Georgia, Florida, Wisconsin, Iowa, Arizona, and Nebraska.

Another Gallup question probes self-reported ideology. I think this procedure is less illustrative than clustering voters based on issues, but it does have the value of consistency across time and geography. About 39 percent of Gallup’s North Carolina respondents describe themselves as conservative, while 33 percent say they are moderates, 21 percent say they are liberals, and the remainder say something else or decline to answer. These results place North Carolina close to the median, at 23rd most-conservative in the nation.

Other polls produce somewhat-different results, thanks to differences in sampling and word choice. But they generally confirm the political competitiveness of the state.

The Civitas Institute’s last two monthly surveys of North Carolina voters, conducted in February and March by Harper Polling, asked “generic ballot” questions about 2020 races for the state legislature, Congress, and the state supreme court. That is, voters were asked which party’s not-yet-determined candidates they favored at the present time. For all three sets of races, the numbers of voters favoring Democrats and Republicans were statistically indistinguishable. That wasn’t the case just before the 2018 midterms, when Civitas surveys found sizable Democratic leads.

To say North Carolina’s electorate is closely divided is not to say there can’t be definitive electoral outcomes in a given year. Just don’t expect them to result in permanent realignments. In 2010, 2012, and 2014, the electorate swung Republican. In 2018, it swung Democratic. The 2016 cycle was more of a mixed bag, with Trump, U.S. Sen. Richard Burr, and Lt. Gov. Dan Forest winning statewide even as Democrats took key races for governor (Roy Cooper) and attorney general (Josh Stein).

Voters willing to split their tickets are much rarer than they used to be, representing only a few percentage points of the total vote. But in a closely divided state, they still matter — a lot.

John Hood (@JohnHoodNC) is chairman of the John Locke Foundation and appears on “NC SPIN,” broadcast statewide Fridays at 7:30 p.m. and Sundays at 12:30 p.m. on UNC-TV.

Categories: Public Policy

Placing the ‘national average’ debate in context

Tue, 2019-04-02 04:02

Much of the recent discussion about public school teacher pay in North Carolina has focused on the “national average.” To the extent that policymakers want to target that average, they ought to consider how other workers in this state stack up against their counterparts across the country.

This column will not challenge the goal of North Carolina reaching the national average. That’s a subject for another day. It’s one my John Locke Foundation colleagues John Hood and Terry Stoops have addressed — on multiple occasions — in other forums. They have revealed significant flaws in the “national average” argument.

On a related note, Terry demonstrated recently that a cost-of-living adjustment would boost North Carolina’s current average teacher pay ranking from No. 29 among the 50 states to No. 20. That adjustment suggests North Carolina needs to do nothing special this year to raise teacher pay. This observer will not hold his breath waiting for policymakers to follow that course of action.

But one can hope that state budget writers will keep another important factor in mind: North Carolina’s private sector bears the brunt of the cost of paying public school teacher salaries. Given that fact, it makes sense to consider how closely this state’s private-sector workers stack up to the national average for salaries in the private sector.

I claim no credit for this observation. Another colleague, Carolina Journal investigative reporter Don Carrington, has made this type of computation several times since the 1990s. A former staffer in what was once known as the N.C. Employment Security Commission, Don spent much of his time in that job dealing with government data related to work and pay. Several years ago, when the “national average” debate generated multiple media headlines, Don found that in 2012 the average N.C. private-sector worker earned a salary totaling 87.5 percent of the national average.

Now that the “national average” language has resurfaced, Don has updated his calculations. In 2017, the latest year in which numbers are available from the U.S. Department of Labor’s Bureau of Labor Statistics, the average private-sector salary was $48,986 in North Carolina. The national average was $55,338. North Carolina’s average stood at 88.5 percent of the national average.

There’s good news. Over the five years from 2012 to 2017, N.C. private-sector salaries grew a full percentage point in comparison with the national average. That’s no small feat. But the average salary for a private-sector worker in this state still falls 11.5 percentage points below that average.

Now let’s return to the discussion of teacher pay. The National Education Association suggests that the average N.C. teacher is paid a salary of $53,975. In comparison, the average teacher salary nationwide stands at $61,782.

Note that the average N.C. public school teacher makes significantly more money than the average private-sector worker. (This is true of the average teacher nationwide compared to her private-sector peers as well.) Second, the average N.C. public school teacher earns a paycheck much closer to the national private-sector average than his friends and neighbors working in this state’s private sector.

Now for a little math. Using the NEA’s figures (with no adjustments), the average N.C. teacher makes about 87.4 percent of the average of his counterparts across the country. Reaching the national average would require a pay increase of $7,807, or roughly 14 percent. That assumes that other states do nothing this year to increase their teachers’ pay. Pay hikes in other states would necessitate an even larger increase in North Carolina to reach the average.

But remember: The average private-sector worker in this state earns less than 89 cents for every dollar earned by peers across the country. If teacher pay reached the national average, teachers would be faring much better than their private-sector neighbors in comparisons with peers throughout the United States.

Nonetheless, N.C. teachers fall a little short of their private-sector peers in a comparison of their pay to the national average. Raising average N.C. teacher pay to 88.5 of the national average — mirroring our private-sector ratio — would require a hike of $702. That’s a 1.3 percent increase. The new N.C. average would be $54,677.

One suspects that all players in the current teacher pay debate — the state House, Senate, and governor — will support a pay hike this year of more than 1.3 percent. Legislative leaders already have signaled interest in boosting the state average to $55,000.

As they move forward, policymakers should keep in mind the private sector’s ability to foot the bill.

Mitch Kokai is senior political analyst for the John Locke Foundation.

Categories: Public Policy

Education needs choice and competition

Mon, 2019-04-01 01:01

As a policy analyst and opinion journalist, I have spent much of my career advocating the expansion of choice and competition in education. I purposefully use both of those terms, because I think that families making choices and schools competing for students are distinct but mutually reinforcing mechanisms for improving educational outcomes.

Parents and students should have as many school choices as possible because that increases the likelihood of a right “fit.” Schools vary in leadership, philosophy, culture, emphasis, and facilities. The needs of students can vary widely, too. Some thrive in large environments while others feel safer and more valued in smaller settings. For some, schools dedicated to shared religious values, or to specific academic or vocational themes, can be lifesavers. But for other kids, they’d be too confining.

Regarding what will suit the needs of a specific child, I don’t assume I know better than those who know and love that child. You shouldn’t make that assumption, either.

Education shouldn’t be structured like a public utility, serving everyone according to their street address. Water is water. Electricity is electricity. But the services that schools provide — academic instruction, socialization, discipline, and both the “hard” and “soft” skills we need to succeed as workers, parents, neighbors, and citizens — are not indistinguishable commodities. Their precise content and proportions can and should vary according to the needs of students and the preferences of their families.

What shouldn’t vary so much is the capacity to act on these preferences. Affluent families have always enjoyed school choice. They can either afford private schools or to move into neighborhoods assigned to the public schools they perceive as “best.” It is ironic that many of those who complain the loudest about disparities of income, wealth, and privilege fight so doggedly against public policies such as charter schools and opportunity scholarships that expand school choice to low- and middle-income families.

Such critics are decidedly in the minority, however. A recent Civitas Institute survey asked North Carolinians if “parents should have the ability to choose where their child attends school.” Only 6 percent said no.

The inevitable result of expanding choice is that schools will compete more intensely for students. Quite apart from the salutary effects of fitting individual students to the schools best suited for them, competition among education providers improves the quality of education provided.

No one should be surprised by this effect. We expect and rely on competition to drive quality in most fields of human endeavor, from industry and sports to government and elections. Indeed, another irony in the school-choice debate is that many who want legislation to break up business monopolies, who want lawsuits to preserve the checks and balances of competing branches of government, and who want constitutional amendments to level the electoral playing field do not also want to see schools competing for students.

If our goals are innovation and excellence in education, that’s exactly what we should want to see. According my John Locke Foundation colleague Terry Stoops, researchers have published 34 studies since 2008 that examined the effects of competition on district-run public schools. Only two found negative or no effects. In the others, competition prompted district schools to improve their performance.

For example, a 2017 paper published in the journal Applied Economics looked at education in West Virginia. As the share of students attending private or home schools rose in a county, test scores rose in the county’s district-run schools. “Our findings thus confirm that nonpublic enrollment and the competition it provides act to improve, rather than impede, public school performance.”

I don’t advocate choice and competition because I dislike district-run public schools or want to see them fail. I favor these policies because I believe an expansive, dynamic, and competitive education sector for North Carolina will maximize student success, accommodate diverse views and preferences, and make our state a better place to live, work, rear children, and build communities.

North Carolina has become a leader on school choice. That delights me.

John Hood (@JohnHoodNC) is chairman of the John Locke Foundation and appears on “NC SPIN,” broadcast statewide Fridays at 7:30 p.m. and Sundays at 12:30 p.m. on UNC-TV.

Categories: Public Policy

‘The university of the people’

Fri, 2019-03-29 01:58

Since January 2016, the University of North Carolina system has had two “permanent” presidents and two interim leaders (including current Interim President Dr. Bill Roper).

In recent months, UNC Chapel Hill Chancellor Carol Folt left in a huff, taking the Confederate memorial “Silent Sam” down on her way out. East Carolina University Chancellor Cecil Staton resigned his post after months of discussion, talks he said he didn’t initiate. Western Carolina University seemed to have a chancellor in place, but the hiring was derailed because a UNC Board of Governors member said the top candidate falsified his resume. (This is hotly disputed.)

Meantime, the system’s board has faced a barrage of negative publicity. It includes:

  • a letter signed by more than 200 supporters of Staton by a prestigious group of ECU alumni, donors, and community leaders urging the Board of Governors to keep Staton in Greenville
  • the formation of Reform UNC System Governance, a group of more than 1,600 UNC system alumni — including former trustees, Board of Governors members, and an ex-chancellor of UNC Chapel Hill — chastising the current Board of Governors’ for “meddling and micromanaging” in campus business.
  •  an op-ed in the News & Observer, the state’s largest newspaper, with former UNC President Erskine Bowles, a Democrat, and former Charlotte mayor and gubernatorial nominee Richard Vinroot, a Republican, claiming the Board of Governors is excessively partisan and exercises “heavy-handed oversight.”

Some of the shots have come from the inside. BOG member Steve Long and outgoing ECU trustees Chairman Kieran Shanahan have singled out BOG Chairman Harry Smith.

Long issued a scathing public statement saying Smith frequently harassed former system President Margaret Spellings and ran Staton out of Greenville. (Long later apologized for publicly criticizing Smith but didn’t take back the harsh language.)

Shanahan also told WITN News Smith forced out Staton, telling trustees ECU would lose state funding if the chancellor wasn’t removed.

To quote “Blazing Saddles”: What in the wide world of sports is going on here?

The UNC board and its backers dismiss any talk of turmoil. Smith admits vigorous discussions take place privately. But in public, the board speaks with one voice. Everyone’s on the same page.

We’ve heard the process described as “turning over the trash cans.” Intentional disruption. A new leadership team asserting its control.

The board and campus leaders point to a list of accomplishments. Graduation rates improving faster than the national average. Enrollment growth. Tuition freezes for incoming freshmen, caps on fee increases, and the $500-per-semester NC Promise program for in-state students at three UNC schools. Rescuing Elizabeth City State University from financial ruin.

The good news isn’t getting reported, they say. Any discord is limited to a small, noisy minority. Besides, fiscal conservatives should cheer changes that improve efficiency and keep the costs to taxpayers reasonable.

But even the good news is often overtaken by backbiting and personality clashes.

Leaders in the General Assembly seem pleased with what’s going on at UNC, appointing board members who back the current regime to new terms. Senate leader Phil Berger, R-Rockingham, recently said change always makes some people unhappy.

Still, plenty of prominent North Carolinians — not just “wacky liberal professors” or a handful of malcontents — aren’t happy.

The University of North Carolina isn’t a failing commercial enterprise requiring a hostile takeover. It’s a massive public enterprise, beloved by millions of people in North Carolina and around the world.

Its board should operate under rules of disclosure and transparency, which apply to all government entities. It should try to gain the trust and support of a much broader audience than the one on Jones Street. Faculty members. Alumni. Donors. Community leaders.

Without that trust, those supporters could set aside their frustration and anger and instead stop caring. Apathy eventually would destroy some of our state’s most venerated institutions.

In other words, those in charge of the UNC System should lead, not rule.

This editorial appears in the April 2019 print edition of Carolina Journal.

Categories: Public Policy

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