Georgia On My Mind
Publisher's note: This article appeared on John Hood's daily column in the Carolina Journal, which, because of Author / Publisher Hood, is linked to the John Locke Foundation.
John Hood is chairman of the John Locke Foundation.
Because I make it a practice of reporting these trends, some critics claim that I'm overlooking bad news and putting too fine a gloss on North Carolina's recovery. I plead not guilty to the charge.
I've repeatedly said that far too many North Carolinians remain unemployed or underemployed. Income growth remains underwhelming (the preliminary data for 2014 show a 2.5 percent rise in per-capita disposable income, slightly below the 2.6 percent regional average). I've also stressed that for the country as a whole, the recovery from the Great Recession has been painfully languid. No matter what policies states employ, they can't wall their economies off from larger trends. Moreover, to observe that North Carolina is improving in most areas is not to say there aren't other states in our neighborhood doing even better.
Take Georgia, for example. It is currently outperforming North Carolina on most measures. From February 2014 to February 2015, employment grew 3.8 percent in Georgia, compared with 3.3 percent in North Carolina and 2.4 percent for the nation as a whole. On a Federal Reserve index of economic indicators, Georgia is currently showing 5.6 percent growth, higher than North Carolina's 4.3 percent and the national average of 3.4 percent. (Georgia does have a significantly higher jobless rate, however, even if you count labor-force dropouts.)
Now, those who criticize my take on North Carolina's economy are unlikely to greet my comparisons to Georgia with enthusiasm. Their rhetorical goal is to attack Gov. Pat McCrory and the General Assembly for taxing, spending, and regulating too little. They think that if we "invested" more in state programs and empowered regulators to combat perceived social and environmental ills more aggressively, our economy would be doing better.
The Georgia case doesn't help their argument. Although North Carolina's 2013 tax reform recently vaulted us ahead of Georgia on the Tax Foundation's State Business Tax Climate Index, by other indicators the Peach State is governed more conservatively than the Tar Heel State. For example, according to the latest available data, Georgia's overall state and local tax burden is almost 10 percent lower than North Carolina's.
The John Locke Foundation's new First in Freedom Index ranks Georgia fifth in the nation in overall freedom, thanks in part to its second-place showing in regulatory freedom. Georgians face fewer restrictions on what they are allowed to buy and sell, what the price may be, and what occupations or businesses they may enter. On the Pacific Research Institute's new State Index of Energy Regulation, Georgia is tied for seventh place. North Carolina's ranking is an abysmal 42nd.
Florida is another Southeastern state with both higher economic growth and a higher degree of economic freedom than North Carolina can yet boast. I don't think Florida is as good a comparison state for us as Georgia is, given Florida's rather different geography and demographics. Still, I'm certainly willing to admit that its economy is growing robustly right now — and more than willing to credit its policy mix of low taxes and limited government as one of the explanations for its impressive recovery.
Admittedly, to eyeball state-by-state growth trends and make policy assertions about them is an unpersuasive argument by itself. There are some high-tax jurisdictions growing at a rapid clip at the moment, too, albeit not very many. That's why I frequently cite the results of a 2014 JLF review of hundreds of academic studies on state economies. We found that states exercising fiscal and regulatory restraint tended to outgrow states with larger and more intrusive governments, all other things being equal.
Georgia is one of the states on the positive side of that dividing line. I'm happy to say that there is, indeed, a Carolina Comeback. But I'd be even happier if we were keeping up with the Peach State Surge.