- The NC Justice Center recently declared that the N.C. House budget proposal “falls short of N.C.’s needs”
- But no amount of spending will ever satisfy the Justice Center
- Their latest criteria includes budget-busting spending and unrealistic growth estimates
The NC Justice Center recently panned the N.C. House FY 2019-20 budget proposal, declaring that it “falls short of N.C.’s needs.”
Spoiler alert: no Republican-written budget will ever spend enough to satisfy the far-left activists at the Justice Center. And when they say “N.C.’s needs” they really mean “government wants.”
With that established, the Justice Center attempts to “prove” the inadequacy of the $24.6 billion proposal by simply pointing out that it would fall below the 45-year average of budget spending as a share of the state’s economy.
Why a 45-year average is established as the gold standard in state budgeting is never explained as anything other than completely arbitrary.
Moreover, three major issues from this chart reveal why this measure is a poor metric by which to evaluate the level of state spending.
Long-Term Spending Binge Was Unsustainable
The bulk of this 45-year chart is captured in the period of 1975 to 2009, a time of unprecedented and out-of-control spending hikes. The massive growth of the state budget during those years established a high-water mark and had a disproportionately large impact helping to raise the 45-year average to unrealistic levels.
You will notice that after 2009, state budgets have consistently fallen short of the outsized portions of the economy established in the previous three decades.
The chart below shows the massive disconnect in state spending growth compared to population growth from 1979 to 2009.[i] As you can see, North Carolina’s state budget grew at a rate three times as fast as population growth during these years, even after adjusting for inflation.
Yet the Justice Center doesn’t mention this unrealistic and unsustainable spending binge in its analysis, a spending binge that was revealed to be wildly irresponsible when the recession hit in 2009.
Expecting state budgets to maintain the same level of growth that led to historic budget shortfalls is equally irresponsible.
Does the Justice Center Want Another Recession?
Another noticeable trend reveals itself upon closer inspection of the Justice Center’s chart. A few of the expenditure years furthest above the 45-year average were times of recession. In short, state budget spending was a larger share of the economy because the economy was shrinking.
The chart below shows national real GDP annual growth rates between 1975 and 2018. A notable number of the years showing negative growth (meaning recession) coincide with the years the Justice Center’s chart shows as featuring state spending among the largest share of the economy.
Specifically, among the years with the highest spending rates as a share of the economy are 1975, 1991, and 2009. Each of these years coincide with recessionary years as marked by negative GDP growth.
In sum, several of the years that help to raise the average that the Justice Center thinks should be a goal for state budget writers were the result of recessions and not of any particularly aggressive spending increases in those specific years.
Does the Justice Center really think that recessionary years are the ones we most want to emulate?
The Good ‘Ole Days of Double-Digit Annual Budget Increases
There are two windows of time that stand out in the Justice Center’s chart. These two periods of explosive, unsustainable growth help to drive up the 45-year average to unrealistic levels.
The first is 1985 to 1991. A look at spending growth during these years finds that in that six-year span, the state budget exploded by 63 percent. Annual increases topped double digits multiple times, and yearly increases averaged roughly ten percent during those years. Per capita spending grew by 31 percent, even after adjusting for inflation.
Similarly, the years from 1994 to 2000 saw explosive spending growth, swelling a whopping 53 percent in just six years overall, and likewise featuring multiple annual percentage increases in the double digits. During this period, per capita spending jumped by 35 percent, after adjusting for inflation.
In other words, it took historically massive spending hikes during the last half of the 80s and 90s to bring up the average percentage of state spending as a share of the economy to where the Justice Center wants to use as a barometer of meeting the state’s “needs.”
Taken at face value, such thinking could easily be interpreted that the Justice Center thinks that nothing short of annual spending increases of 10 percent or more is enough.
No amount of government spending will ever be enough to satisfy the liberals at the NC Justice Center. In clamoring for ever increasing budgets, they have developed many different arguments for why state spending is “insufficient.”
Their latest measure – namely state spending as a share of the state’s economy – is revealing, in that it shows just how insatiable is their desire for government to spend more of your money.
In this analysis, I’ve shown that in order to measure up to the Justice Center’s expectations, spending growth at levels three times the rate of population growth (inflation adjusted), or a consistent diet of double-digit annual spending is required.
Such wildly irresponsible and unsustainable spending demands would impose crushing tax burdens on North Carolina workers and job creators, resulting in economic stagnation or worse. The consequences of economic decline hit the state’s low-income population hardest, the very group the Justice Center claims to champion.
The Center’s continuous calls for bigger state budgets should fall on deaf ears.
[i] Sources: General Fund appropriations for FY 1979 through 2007 from the 2006 Post-Legislative summary produced by Fiscal Research, subsequent appropriation numbers taken from each year’s budget bill, population estimates for July that begins each fiscal year from the Office of State budget and Management, and GDP deflator levels taken from the Federal Reserve Bank of St. Louis