The state now has an economic policy. Lower taxes and less regulation. There are asterisks all over that. The lower taxes part may vary depending on your income and the skills of your accountant. The less regulation part applies to some industries and not others, such as abortion clinics.
But in general, in the wake of the legislature's adjournment, you can see the general trend.
Realistically, it's probably more important who President Obama selects to be the next chairman of the Federal Reserve, and whether Congress can refrain from scaring the daylights out us with talk of shutdowns and defaults. Assuming we get a Fed chairman in the mold of Bernanke (reasonably easy money, even if the Fed rachets back its quantitative easing), the stock markets will continue to rise. That will produce a nice wealth effect as people see their portfolios continue to recover from the depths of 2009.
Also contributing to the wealth effect will be the recovery of home prices.
So these larger forces will probably tend to have a bigger impact on North Carolina's economy than what happens on Jones Street.
Still, the ship of state has definitely turned in a different direction in North Carolina, and at the margins that can have consequences. We will be on the lookout to see a smaller regulatory footprint, which typically translates into a more business-friendly climate, spurs more economic activity. Economists are generally pessimistic about the impact of tax reduction, but we shall see there, too.
There is an ongoing debate about what is more important to economic growth, spending more to improve the education and skills of the workforce or shaving a few points of tax rates. Republicans make the point that this is a false debate: We already spend a lot of money on education, but we aren't getting enough value because our public education system hasn't been well-manged. The education system needs to be reformed so the money will be better spent, they say.
This Republican position drives some people crazy, and angry letters to the editor have been rolling in. But as long as the Republicans remain in charge of the legislature and the governor's mansion, the education establishment in North Carolina had better be prepared for questions about whether it is doing a good job.
In Chapel Hill today, Gov. Pat McCrory told a business audience that "At $7.8 billion, this is the largest K-12 budget in North Carolina’s history.....In all, 56 percent of our state tax dollars will go to pay for education."
What this means is, aside from tax cuts and regulatory tweaks, the governor is looking at $7.8 billion in checks that he's writing, and thinking that that's probably the most important lever for revitalizing North Carolina's moribund economy. If that dough is being spent more efficiently and doing a better job of educating kids, there's your real economic program. That's not a crazy idea. As he and the legislative leaders cast around for ways to kick-start North Carolina, they're sure as heck not going to see 56 percent of the state taxes as off-limits to their ideas, no matter how many people demonstrate in Raleigh.
They were elected to try to pull this state out of the ditch, with one of the highest unemployment rates in the country. Our 8.8 percent is higher than Michigan's, for God sakes. That didn't start when the Republicans took over state government. The status quo has not been working for quite a while.