In case your News & Observer didn’t arrive at your doorstep or got buried in the snow last Thursday, be sure to check out John Quinterno and Dean Baker’s take on the false claims about a Carolina Comeback.  In detail, they lay out just why the idea that unemployment insurance cuts have led to an improved economic picture for North Carolina’s economy has no support in the data.

It’s true that the statewide unemployment rate has in fact fallen sharply since the cuts were implemented, dropping from 8.8 percent in June to 6.9 percent in December.

The drop, however, did not come about because people rushed out and found jobs. Employment as measured by the household survey used to determine the unemployment rate rose by 41,364 persons (1 percent) between June and December, far too little to explain the sharp drop in the unemployment rate. According to the household survey, only 13,414 more persons (0.3 percent) were at work in December 2013 compared with a year earlier.

If people weren’t finding jobs, why did the unemployment rate fall? It turns out that the legislature’s prescription for lowering the unemployment rate worked through a different channel. Nearly 52,000 people were reported as “leaving the labor force” between June and December, meaning that they were no longer employed nor actively seeking work.

In fact, North Carolina ended 2013 with a labor force that had 111,000 fewer participants (-2.3 percent) than was the case a year earlier.

Rob Christensen had a great piece yesterday on just why the Governor and policymakers didn’t raise teacher pay and claim to not have the funds to do more than their modest proposal that impacts just a third of teachers. The tax cuts passed by the General Assembly and signed by the Governor have reduced the availability of revenue for teacher pay raises, state employee pay raises and a whole host of other important investments that could strengthen the state economy.

McCrory said he would like to give a larger pay raise to teachers – and to other state employees as well – and may recommend doing so if money becomes available.

As a rationale for not giving larger raises, McCrory cited cost overruns in Medicaid, the health insurance program for the poor.

But to govern is to choose. McCrory ran for governor in 2012 on the platform of cutting taxes, not raising teacher salaries.

And coming out of the recession last year, McCrory and GOP lawmakers made tax cuts rather than teacher raises the priority.

Of course, policymakers have the ability to ensure money is available for these important investments.  They could stop further income tax rate reductions from going into effect in 2015.

As Chuck Marr, an economist with the Center on Budget and Policy Priorities, recently wrote there is one anti-poverty initiative that both sides of the aisle agree on: the Earned Income Tax Credit.

In one sense, conservative support for strengthening the EITC isn’t surprising.  This tax credit has enjoyed broad bipartisan support over the years — President Ford signed it into law, and President Reagan lauded the credit and proposed, and signed, a major expansion of it — because the EITC helps low-income people struggling to make ends meet while encouraging work and personal responsibility.

As Richard Burkhauser of Cornell University and AEI said recently, “I’m not exaggerating when I say, look, I’ve been doing public policy since the 1970s, and this program worked.” [8]  Leading conservative economist and Nobel laureate Gary Becker of the University of Chicago has made similar, highly laudatory comments about the EITC, noting that it “increases the labor force participation and employment of people with low wages.”[9]

The evidence is very clear that the EITC has powerful impacts on workers and their children.  In 2012 the combined impact of the EITC and Child Tax Credit lifted 10.1 million people out of poverty in the country.  Children benefit from the additional income and have been shown to do better in school and earn more as adults.

It is therefore disturbing as we reflect on the evidence supporting the power of the EITC to achieve better economic outcomes that policymakers in North Carolina took the unprecedented step of eliminating the state tax credit for 900,000 families in our state.  A move that will make the path to the middle class that much steeper, a move that should be undone this session.

The delays in processing applications for the Supplemental Nutrition Assistance Program (SNAP) are making it more difficult for struggling families to put food on the table.  But it is also having an economic impact too.

SNAP benefits are spent immediately and locally at retailers and grocery stores on the very basics that a family needs to get by.  As of January 21, 2014, the USDA reports that 23,000 households are being affected by the backlog at NC DHHS.  Delays in processing very often mean households do not receive benefits.  This in turn reduces the dollars spent at businesses and thus those businesses’ ability to meet payroll, spend or invest.

The USDA finds that in the Great Recession and recovery every $1 in SNAP benefits, which are paid for entirely by the federal government, generates $1.79 in economic activity.

What has North Carolina lost as a result of the delays in processing applications?

  • Those 8,327 folks who have been waiting for 3 months represent a loss of $1.8 million in economic activity because benefits have not been paid.
  • Assuming the remaining 14,673 households with applications pending were just delayed a month (and it appears likely that that is an underestimate), the loss to the economy is $3.2 million.
  • A conservative estimate then is that the total impact would be roughly $5 million in economic activity lost at a time when the recovery is very fragile indeed and needs consumers spending to sustain progress.

For families, missed meals can’t ever be made up.  And for North Carolina, lost economic activity from ongoing delays in the processing of SNAP applications can’t be easily undone.

Yesterday, agreement was announced on the proposed farm bill conference legislation.  The outcome is being called a reasonable compromise by many including Robert Greenstein from the Center on Budget and Policy Priorities who writes:

The proposed farm bill conference agreement announced today represents a relatively favorable outcome for SNAP and most of the millions of low-income Americans who rely on it, especially in light of what might have occurred or what may occur if Congress rejects this agreement and leaves it to the next Congress to write its own farm bill.

To be sure, the conference agreement does include $8.6 billion in SNAP cuts over the next decade.  Yet it stands in sharp contrast to the nearly $40 billion in SNAP cuts in the House-passed bill of September, which contained an array of draconian provisions and would have thrown 3.8 million people off SNAP in 2014, according to the Congressional Budget Office (CBO).  The conference agreement includes none of the draconian House provisions — and it removes virtually no low-income households from SNAP.

The entire statement is worth reading here  as is the summary of the Farm Bill Nutrition title here.