NC Budget and Tax Center

Raleigh, we have a problem

There are some who are championing the latest data from the US Census Bureau as further evidence of some unique experience in North Carolina driven by policy changes that dismantled and restricted many of our best income- and economy-boosting tools.

The John Locke Foundation erroneously claimed that North Carolina had the fastest growing median household income in the country this week from 2013 to 2015 using the survey not designed anymore to answer over time questions.  The data from the U.S. Census best suited to the question at hand actually shows that North Carolina’s median household income grew at the third slowest rate over the period cited by the Locke Foundation.  That rate 2.4 percent for NC was half the rate of the national average (4.9 percent).  Those data are more in keeping with the experience of the many North Carolinians who everyday still aren’t feeling the benefits of the national recovery.

And of course the claim that there would be some connection between economic outcomes and the policy choices made by the Governor or General Assembly—which has never been supported by any rigorous tests of a causal relationship—received an additional blow this week.  The same Census data release demonstrated many of the very tools—EITCs, unemployment insurance, food assistance—eliminated or reduced by elected leaders have effectively lifted millions out of poverty across the country.

Those touting the policy changes made by the Governor and the General Assembly as causing an economic improvement that hasn’t reached many often select years to make their case that tell us little about whether we have made progress from the lowest point in the recession or since the expansion began.

In doing so, they can show improvements that are important but not sufficient to undo the damage of years of recessionary conditions or capable of setting the state on the trajectory needed to capitalize on the national expansion.

But again, North Carolina is not leading on the critical measures of wages and income even under these time periods. Looking at the period since 2012, North Carolina’s median household income has grown by 2.6 percent, half the national growth rate—a pattern that continues if you move the year forward to 2013 as noted above.  In fact, North Carolina had the slowest meaningful growth in median household income over the period 2012 to 2015 and third slowest since 2013 when the national economic expansion appears to have taken hold.

So here are the data on median household income for North Carolina:

  • When compared to other states, North Carolina ranks 41st for its median household income level of $47,830 in 2015.
  • North Carolina’s median household income is roughly $3,200 lower than it was in 2007 when adjusting for the rising costs of goods and services.

The failure of the income of the median NC household to fully recover means that households can’t cover a very modest household budget for a family of four for an entire month in a year.  More than likely it means that throughout the year households are curtailing their spending, taking on more debt, working more hours and dipping into savings that are supposed to build assets and that hurts the broader economy and us all.

A renewed focus on what the Census Bureau data shows us works to lift Americans out of poverty and deliver strong income gains should be the top priority in North Carolina.

NC Budget and Tax Center, Uncategorized

Bipartisan agreement to address persistent poverty

The persistence of poverty in certain regions and communities across the country and within North Carolina has long held back the broader economy from performing at full capacity and delivering the greatest benefit to the most people.  In North Carolina, there are still 10 counties where poverty rates have remained above 20 percent for more than three decades.

That is why the emerging bipartisan consensus on setting a reasonable target to direct federal funds to these communities is encouraging.  The plan states that at least 10 percent of a federal program’s funds should go to counties where at least 20 percent of the population has lived in poverty for at least 30 years.  In the upcoming months, there may be several opportunities for the plan to be incorporated into the guidelines for funding the federal government.  In the meantime, from this Politico article, it is clear that a broad swath of the country could stand to benefit and that those affected by persistent poverty are diverse.

Nearly 500 counties across the United States suffer from the kind of persistent poverty that would make them eligible for the plan’s targeted funding, [Representative] Clyburn says — and it would give more Republican lawmakers something to brag about to constituents than Democrats. In 2009, Clyburn likes to note, 84 Republicans represented those counties, compared with 43 Democrats. The GOP held 311 counties and Democrats represented 149. (In terms of total population, the parties were more evenly split, with Republicans representing 8.3 million people from those counties and Democrats representing 8.8 million; another 14 counties with 5.3 million people were split between Republicans and Democrats.)

NC Budget and Tax Center

Three key points in assessing the Carolina Comeback

Our annual State of Working North Carolina report will be out next week and detail the ways in which the national recovery has yet to reach all North Carolinians and every North Carolina community. In the meantime, a debate playing out on the pages of the News & Observer deserves attention today

As Labor Day approaches, it is clear that a more careful consideration of the state’s economic well-being is needed instead of declarations of a “Carolina Comeback.”

Let’s be clear: There is nothing partisan about reviewing the data and considering whether the state is experiencing a strong recovery.  North Carolinians deserve an accurate accounting of how the economy is doing and where policy choices have fallen short of supporting better outcomes.

There is no debating that the state has seen employment growth, that wages appear finally to be growing, and that productivity (aka GDP) is on the rise. The latter is a fundamental requirement of an economic expansion (at least nationally) and the growth in jobs and wages should follow suit now that we are seven years past the start of the national recovery.

The issue is not whether these things are happening, but whether they have met our expectations for what an expansion should look like. When looking at the numbers relative to our neighbors, our nation and even our past performance, the current national economic recovery is failing to live up to expectations and our state’s great potential.

Here are some key data points that should be front and center when claims of the state’s robust recovery are cited. Read more

NC Budget and Tax Center, TANF 20 Years Later

Welfare reform doesn’t reflect our best ideas about addressing poverty

This blog is the 4th post in a series that will detail how lawmakers have weakened Temporary Assistance for Needy Families (TANF) over the past 20 years, explain why TANF is a cautionary tale rather than a model for other work and income support programs, and map out a better way forward.

As North Carolina and the country continue to contend with elevated poverty levels despite seven years of an economic recovery, many have suggested that the principles of the 1996 reform of welfare (then AFDC, now Temporary Assistance for Needy Families or TANF) should serve as a model for addressing poverty in our state and nation.

The changes, made 20 years ago this week, to the way in which we ensure that people living in poverty can meet their most basic needs and have a pathway out of poverty were based on three core ideas:  that work was the pathway out of poverty, that states would know best how to meet the needs of their communities, and that services—from training to marriage counseling—could effectively replace cash assistance. While these ideas may not have been inherently wrong, they resulted in concrete policy directions:  time limits, work requirements, block granting and funding for services to agencies over direct payments to poor people.

A review of the evidence suggests that the guiding ideas behind welfare reform fail to deliver better economic outcomes across the board and have in fact increased the number of people living in deep poverty,  fallen short in times of economic distress and generated a whole host of unintended and negative consequences because poor households continue to lack income to meet basic needs.

It is these same ideas that have been suggested for every program that seeks to deliver support to low-income households, from food assistance to Medicaid.

Here are the problems with these specific ideas about poverty and the policy choices that stem from them: Read more

NC Budget and Tax Center

Recovery held back by fiscal austerity

To hear it told this election season, North Carolina’s recovery is something to behold.  Nevermind the evidence that employment levels remain depressed and hardship high. Researchers from the Economic Policy Institute released a study this weekend that suggests that were it not for the policy choices North Carolina policymakers have made (and their Congressional counterparts), North Carolina would have experienced a far more robust a recovery.

The analysis looks at various measures of the strength of the economic recovery to demonstrate the relatively slow performance compared to prior economic expansions nationally.  Josh Bivens, author and economist with the Economic Policy Institute, then turns to an analysis of public spending, which in a downturn serves an important role in filling in the gap between where employment and output should be and where it is.

And yet, the graph below from the analysis shows that cutting spending was the actual response post-2010, slowing the pace of recovery.  From Bivens:

[The graph] shows the growth in per capita spending by federal, state, and local governments following the troughs of the four recessions. Astoundingly, per capita government spending in the first quarter of 2016—27 quarters into the recovery—was nearly 3.5 percent lower than it was at the trough of the Great Recession. By contrast, 27 quarters into the early 1990s recovery, per capita government spending was 3 percent higher than at the trough, 23 quarters following the early 2000s recession (a shorter recovery) it was 10 percent higher, and 27 quarters into the early 1980s recovery it was 17 percent higher.

 

Bivens concludes that: “If government spending following the Great Recession’s end tracked spending that followed the recession of the early 1980s for the first 27 quarters, governments in 2015 would have been spending an additional trillion dollars in that year alone, translating into several years of full employment.”

The full piece is worth a read here.