A recent NC Policy Watch article about the Covid-19 relief bill introduced this week in the NC legislature fails to reflect the most basic of economic understanding. Much of the article was spent lamenting that the bill doesn’t spend enough, which of course is completely unsurprising because no amount of government spending will ever satisfy the far-left Policy Watch.
But what I found more interesting was this statement and what followed:
Years of underinvestment have left us playing catch-up during this public health and economic crisis. The Band-aids in HB 1105 would not be as necessary if we have been truly funding public services for years. It turns out that there are harsh consequences to cutting taxes for the rich and big corporations:
The “consequences” referenced of course involved less spending on their preferred government programs. The list of “consequences” also played loose with facts while ignoring any consequences of taxes on “the rich and big corporations.” Day one of any basic Econ 101 course teaches about scarcity, and that any decision-making involves trade-offs. The Policy Watch piece fails this basic test.
- Policy Watch: Legislators in 2012 could have chosen to invest $500 million in building affordable housing. Instead lawmakers gave a tax break on pass-through income. (The provision subsequently repealed due to bipartisan agreement that it was poorly targeted). Had lawmakers used the money for housing, communities would have had more affordable rental options.
Consistent with the rest of the article, Policy Watch ignores opportunity costs and trade-offs. They pretend that taxing job creators in the private sector an additional half a billion dollars is costless, and thus building more affordable housing via government subsidies is all benefit. But how many jobs would be destroyed or never created by the higher tax rate Policy Watch prefers? How would that money have been invested if left in the hands of actors in the market economy? These are questions Policy Watch doesn’t want you to ask.
But there are other problems.
Advocating for government subsidies for affordable housing assumes the market wouldn’t provide if government regulations preventing such production were eliminated. Policy Watch’s answer is always more government intervention. And when developers are more responsive to government subsidies than consumer preferences, quality suffers because there is less incentive to please the customer. Also, when affordable housing is added to a community, the property values of that community decline, which discourages any additional housing construction and decreases the housing stock available.
- Policy Watch: If legislators had chosen in 2013 to drive dollars back into public school budgets rather than cut taxes for the rich and big corporations, schools would have had technology budgets and infrastructure that could support remote learning in this pandemic.Schools would also have health and support personnel on staff to support children’s recovery from the trauma of this pandemic.
This is wishful thinking at best, intentionally misleading at worst. Again, Policy Watch conveniently ignores the negative consequences associated with high taxes. For instance research shows that higher corporate taxes are borne mostly by workers in the form of lower wages. The author ignores the negative consequences of making workers poorer, pretending that there are no costs but only benefits to their proposals.
Furthermore, increasing school budgets since 2013 would not have guaranteed increased technology budgets and infrastructure that could support remote learning right now. Who could have seen this coming? Does Policy Watch really think that even a significant share of increased school budgets would have been utilized in such a way as to properly prepare schools for a remote learning plan that nobody was talking about before March 2020? The notion is absurd.
Additionally, as my colleague Bob Luebke revealed recently, 94 percent of state public education dollars go toward paying employee salary and benefits. Any additional funding would no doubt have gone toward personnel, not technology infrastructure for a remote learning plan nobody anticipated.
- Policy Watch: In 2013, had legislators raised the minimum wage and boosted the pay of every educator from early childhood through post-secondary education fewer North Carolina families would be living paycheck-to-paycheck. Instead, lawmakers cut taxes for the rich and big corporations.
Nonsense. Government mandating higher minimum wages would have put more low-skilled people out of work. And of those retaining their jobs, most would have either seen their hours reduced or other non-salary benefits cut. Instead of reducing the number of North Carolinians living paycheck-to-paycheck, this move would have forced more to live without a paycheck at all.
Furthermore, according to the NEA, the legislature has provided public school teachers the third highest pay increase in the country since 2014; a fact Policy Watch doesn’t want you to know.
- Policy Watch: If legislators in 2013 hadn’t reduced access to, and cut the value of unemployment insurance, so that employers didn’t have to pay higher taxes to address their debt, state unemployment insurance would more fairly compensate workers who have lost their job due to COVID-19. The benefits would have lasted longer (and) would have been more accessible.
But it’s the tax reductions made possible by the unemployment insurance reforms in 2013 that saved job creators billions and boosted employment in North Carolina in the subsequent years. Indeed, a University of Pennsylvania study concluded “The evidence in the figures suggests that North Carolina stands out among its neighbors in the improvement in its labor market performance since its unemployment insurance system was reformed.”
How many more North Carolinians would have suffered prolonged bouts of joblessness without the 2013 reforms? Policy Watch again ignores such tradeoffs.
Nevermind the $600/wk supplement many received from the federal government during the worst of the shutdowns, and the additional state UI payments passed by the legislature this week.
- Policy Watch: If legislators had expanded Medicaid in 2014, more people would have had access to affordable health care and prevention to manage chronic conditions that make some North Carolinians more at risk for COVID-19. Expansion would have drawn down federal dollars; instead North Carolina has a patchwork of charitable care to meet the health needs of the state’s uninsured, people who are essential to our collective recovery from this pandemic. Because of job losses thus far, an estimated 825,000 North Carolinians would benefit from Medicaid expansion.
Medicaid expansion advocates continue to ignore the fact that Medicaid coverage does not equal access to care. With an already overcrowded program seeing more enrollees chasing fewer providers, an additional 800,000 more Medicaid recipients would be a disaster. Doing so would only crowd the more needy traditional Medicaid population from access to care.
Not to mention, the estimated $2 billion tax on hospitals that would be needed to fund the state’s share of expansion costs would be devastating to hospitals at a time when so many are begging for bailouts and facing bankruptcy.
Conclusion
In a world of scarce resources, tradeoffs are necessarily involved in all public policies. When it comes to government programs, however, NC Policy Watch wants you to believe in magic fairy dust that somehow eliminates scarcity.
Always be skeptical when someone sells you a policy they claim to be all benefit and no cost. They are either woefully ignorant of basic economics or willfully trying to mislead you. Either way, they should not be taken seriously.
