Aug. 19 (Bloomberg) -- North Carolina is channeling Alabama and South Carolina when it comes to the best economic, social and political model for a U.S. Southern state.
For more than half a century, North Carolina has been progressive on education and public investments, and pro-business -- witness the celebrated Research Triangle between Raleigh, Durham and Chapel Hill and the financial center in Charlotte -- with less racial strife than other Southern states.
As Republicans took full control of the state government in Raleigh, there has been a shift to the right. Taxes for the wealthy have been slashed, and spending for education and programs that benefit the poor have been cut. Abortion has been restricted, and guns rights expanded.
At the end of the legislative session in July, in a state that has enjoyed relatively good race relations -- which the business community both encouraged and benefited from -- voting privileges for blacks were targeted.
Governor Pat McCrory, a Republican elected last year, says the turn to the right is necessary and is paying off.
“We’re getting tremendous positive feedback from the business community,” he said in an interview. His state had “lost its focus,” and needed to be “shaken up.”
To critics, this conservative agenda -- much of it orchestrated by Art Pope, the governor’s budget director and the multimillionaire retailer who is the Tar Heel State equivalent of the Koch brothers -- threatens the state’s legacy.
“We’re turning back everything that made us different from other Southern states,” said Jim Goodmon, the chairman of CBC New Media Group LLC and owner of the Durham Bulls Minor League baseball team. “With this shift, economic development is broken.”
Ronnie Bryant, the chief executive officer of the Charlotte Regional Partnership, the area’s top economic development recruiter, recently complained to the Charlotte Observer that all the efforts of recent years to promote Charlotte as a business center “have been negated in the last few weeks.”
He said business leaders elsewhere are asking: “What the hell are you guys doing?”
Ann Goodnight, a powerful advocate for higher education in the state whose husband is CEO of the giant technology company SAS Institute Inc., wrote a letter to the Raleigh News and Observer charging that cuts in education funding were a “grievous mistake.”
The places that succeed in economic competitiveness, she wrote, “are investing in education and using the playbook we once embraced.”
The biggest firestorm erupted when the legislature changed voting procedures, requiring a state-issued photo ID, limiting early voting and ending same-day registration -- practices used disproportionately by blacks.
“They are extremists, and are playing the race card,” said the Reverend William Barber, head of the state’s chapter of the National Association for the Advancement of Colored People, which is organizing multiracial coalitions around the state, and turning out thousands to protest these changes.
On taxes, the Republicans cut the corporate rate, ended the progressive personal income tax and eliminated the estate tax, which affected, on average, fewer than 75 families annually and will cost the state $300 million in lost revenue over the next five years. The legislature also decided not to continue the earned income-tax credit for the working poor.
North Carolina requires a balanced budget, and new expenses must be offset elsewhere.
“They put in place tax cuts that overwhelmingly benefit millionaires,” said Alexandra Sirota, director of the left-wing North Carolina Budget and Tax Center, “while choosing not to extend a tax credit for the working poor.”
The governor, who is as moderate in demeanor as his previous record as mayor of Charlotte suggests, denied that he’s been captured by the right. The tax cuts were essential, he said, because North Carolina was falling behind economic competitors such as South Carolina. He points out that spending for kindergarten through 12th grade increased (though not enough to keep up with inflation and population growth) and that funding for community colleges was cut because enrollment is down. Asked about support for the world-class University of North Carolina, the 56-year-old governor replied, “They can’t be satisfied with the status quo.”
Goodnight, he said, is a Democrat. Besides, he added, her husband supports him. When asked about the alleged voting fraud that mandated the changes in procedure, he offered no specifics: “It’s like insider trading; you don’t know until you look.”
The governor bristled at claims that Pope is the real kingmaker. “When he made Pope the budget director,” Goodmon said, McCrory “became a puppet.”
Pope’s political contributions, the governor said, are no different from Goodmon’s giving to Democrats. He depicts his budget director as a fiscal conservative, a benign libertarian with no racial animosity. Pope declined a request for an interview. The governor said he has headed off some right-wing moves, vetoing a bill subjecting welfare recipients to drug tests and killing a measure that would have created an official state religion.
Yet, Goodnight points out she’s a registered Republican. Goodmon’s contributions -- mainly, though not exclusively to Democrats -- pale next to the millions of family wealth that Pope has given to the Republican Party through his political action committee, foundations and personal contributions.
As for the competition with South Carolina, the two states last year had roughly identical, strong economic growth and both have jobless rates worse than the national average. Multiple surveys have long rated North Carolina’s one of the best business climates in the U.S., its higher education system is better than its neighbor’s, wages are higher and poverty less pervasive.
North Carolina, dating back to the 1960s and Terry Sanford, the country’s best one-term governor, and four terms of Jim Hunt, produced a much-envied system of higher education and community colleges, good race relations, a desirable quality of life and a healthy business climate. The debate about its usefulness today will persist. The North Carolina model, which served the region and country so well, is gone.
(Albert R. Hunt is a Bloomberg View columnist.)
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