McCrory, Obama, and the General Assembly's experiment in class warfare | Citizen | Indy Week
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McCrory, Obama, and the General Assembly's experiment in class warfare 

Persistently high unemployment means discouraged workers are dropping out of the labor force all over the country. But nowhere is the problem worse than in North Carolina in 2013.

Photo courtesy of FRED (Federal Reserve Economic Data)

Persistently high unemployment means discouraged workers are dropping out of the labor force all over the country. But nowhere is the problem worse than in North Carolina in 2013.

Perhaps you've heard that the national debt—the amount owed by the federal government—is $17.2 trillion. A scary number, especially when your brother-in-law, say, drops it as evidence that the country is headed for hell. But it's not so scary when compared with what we're worth.

According to the Credit Suisse Research Institute's Global Wealth Report, personal wealth in the U.S—what we own minus household debts—is now $72.1 trillion. Thanks to a booming stock market, that figure increased by $8.1 trillion in 2013.

Feel better? You should, especially if you're one of America's 13 million millionaires. No, that's not a typo. Credit Suisse tells us, further, that 45,650 Americans are ultra-high-net worth individuals—UHNWs for short—with a net worth of $50 million or more.

We're rich. So why do we feel so poor?

One reason is that we've just marked the 50th anniversary of Lyndon Johnson's 1964 War on Poverty. Yet, 50 million Americans today live on incomes below the federal poverty line.

This has sparked a great, often absurd, debate over whether the "war" succeeded or failed.

Democrats who defend it cite a Columbia University study showing that the poverty rate would be 26 percent, not 15, but for food stamps and other transfer payments to the poor. Their position: We should've done more.

Republicans, meanwhile, rip into the war. They claim that anti-poverty spending traps the poor in a cycle of dependence while draining resources from "job creators" who would employ more people if they only could.

Thus, for example, Sen. Rand Paul of Kentucky, a presidential hopeful, unveiled an amazing recovery plan for the bankrupt city of Detroit. Paul wants tax cuts for the wealthy and corporations—along with waivers so they can pollute—if they do business in Detroit. And not just Detroit, Paul said. These tax havens should be created wherever jobs are lacking. Not a bad idea, except the cost would be borne by local governments, not the federal government. "It can't be the same old prescription," Paul said, "because that hasn't worked."

Here in North Carolina, Gov. Pat McCrory and the Republicans who control the General Assembly are using the same trickle-down approach to give tax cuts to the rich. And in mid-2013, they slashed unemployment benefits; we became the only state in the nation where the long-term unemployed were ineligible for extended weeks of benefits from the federal emergency unemployment program.

For the last six months of 2013, some 70,000 people who should've qualified for extended benefits didn't—at a cost to the state's economy of about $600 million, according to the N.C. Budget & Tax Center.

McCrory has tried to argue that this punitive policy was tough love because the state's unemployment rate dropped in 2013 by 2 points, to 7.4 percent. Unfortunately, the main reason it dropped was that the long-term unemployed, unable to find work and ineligible for benefits, simply dropped out of the labor force and aren't counted any more.

In fact, job growth in North Carolina during McCrory's first year in office slumped to its lowest level since the Great Recession ended in 2009.

Nobel Prize-winning economist Paul Krugman, a columnist for The New York Times, reviewed the state's numbers in a post titled "The Raleigh Experiment." His conclusion: "[T]here is no sign at all that North Carolina's harshness has done anything except make the lives of the unemployed even more miserable."

McCrory has a penchant for saying things that sound good, regardless of whether they're true. Sure enough, in a TV interview last week he offered this total whopper about why the Republicans were forced to slash benefits: "We were having a lot of people move here, frankly, from other areas to get unemployment."

No, governor, they weren't. People who weren't formerly employed in North Carolina are not eligible to collect benefits from North Carolina.

PPresident Obama is in Raleigh today for two reasons. The first is that Congress let the national program of emergency unemployment benefits expire Dec. 28, despite continuing high joblessness. Obama wants the program renewed. Even if he never mentions McCrory, being in North Carolina makes Obama's point that the nation must not repeat the disastrous "Raleigh experiment."

Still, talking about benefits for the unemployed won't rouse the passions of Americans who worry that our economy is in long-term decline. Middle-class incomes are stagnant or falling, and even after four years of recovery, jobs remain scarce and too many new jobs pay lousy wages.

Obama, in his weekly address Saturday, promised "a year of action" on jobs. That leads to his second reason for coming to Raleigh: to showcase "companies and colleges"—science and tech schools like N.C. State—"and take action to boost the high-tech manufacturing" that yields good jobs.

Proving the Republicans wrong about benefits is easy. The GOP has no intention of helping the poor, but ironically, that's the party's underlying appeal to middle-class voters: We'll protect your bacon by cutting off the people below you.

The hard job for Democrats is to describe a future American economy that employs everyone who wants to work at wages sufficient to support themselves and their families without pulling the middle-class down.

Forget a year of action, because congressional Republicans won't allow it. Obama's task is explain to voters how $72 trillion, if put to its most productive uses, can become $100 trillion and more—with the middle-class doing better because the poor aren't so poor any more. Explain it and win the 2014 elections.

There's plenty of work to do and infrastructure to build. The key is to get the ultra-rich, those UHNW folks, to invest some of that $8 trillion in America—or pay higher taxes and let the federal government invest it for them.

Right now, we have an economy that's a windfall for the rich and a drag for everyone else.

This article appeared in print with the headline "Rich State, Poor State."

Bob Geary is a columnist for INDY Week. He can be reached at rjgeary@mac.com.

—>
  • Obama at N.C. State and Research Triangle Park to showcase tech and science economy

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