- Hundreds of thousands of North Carolinians find themselves out of work due to the forced government shutdown of the economy
- Gene Nichol exploits this hardship by slinging false accusations at Republicans
- His latest screed just happens to coincide with the release of his new book. Coincidence?
The forced economic shutdown to limit the spread of Covid-19 has thus far forced more than half a million North Carolinians to file for unemployment benefits. That’s half a million households dealing with extreme stress and anxiety. The uncertainty over when things may return to “normal” can cause mental anguish. Taking away the sense of purpose from hundreds of thousands of our fellow citizens can lead to despair. Research shows that as the unemployment rate rises, so too do rates of suicide and substance abuse.
So how does self-proclaimed moral superior Gene Nichol react?
By politicizing the suffering of our newly jobless friends and neighbors with another swipe at state Republican legislators in the News & Observer.
In the article, immediately after pointing out that North Carolina has the second biggest increase in unemployment due to the coronavirus shutdown, Nichol asks if Republican leaders are “still boasting about crushing our (unemployment) compensation scheme?”
Per usual, Nichol’s screed is long on bluster but short on facts.
Unemployment changes enabled the state to handle current influx of claims
Because of changes to the state’s unemployment insurance (UI) system in 2013 to which Nichol refers, North Carolina was able to pay off about four years early the $2.5 billion it borrowed from the federal government during the Great Recession. The early payoff allowed North Carolina to subsequently build up a $3.9 billion reserve fund in the UI system. Of course, that’s a fact Nichol completely ignores.
Would Nichol feel better if the state did not have enough funds to cover the rising tide of unemployment claims? How would that make the current situation better?
Changes to UI helped create countless jobs
The UI changes in 2013 and the early repayment it enabled also meant a major tax cut for employers. If the state had not made any changes and followed the longer, slower original re-payment plan, businesses in North Carolina would have been burdened with an estimated extra $2.5 billion in UI taxes over those few years. According to the legislation’s fiscal note, absent the early repayment, job creators would have been forced to pay three times as much in UI tax per employee.
The higher UI taxes would have made it significantly more expensive to hire and employ workers, meaning far fewer jobs would have been created.
When Nichol laments “We were the only state to give Washington back its money rather than allow it to go to poor residents,” he is clueless. The money was required to be paid back. Paying back D.C. for the loan was not optional.
The choice, instead, was between paying the loan back early and in the process help create thousands of jobs, versus paying the loan back slowly which would have imposed billions in tax hikes on employers and extended the unemployment of far more North Carolinians (mostly low-income).
UI changes have little impact on actual benefits
Nichol writes “As a result of H.B.4, by 2019, only 8.6% of NC jobless workers were receiving unemployment compensation.” House Bill 4 did indeed place some modestly more stringent restrictions on the granting of benefits, but that was largely to reduce fraud.
In 2012, the U.S. Department of Labor determined from a random sampling that only 12% of unemployment benefit recipients in NC were actually legally eligible. By June of 2015, two years after passage of HB 4, that number had increased dramatically to 58%.
Nichol seems unconcerned about millions of taxpayer dollars being wasted on fraud.
Moreover, the 8.6% rate Nichol sites tells us very little. This in not a measure of those who applied for UI benefits and actually received them. Rather, it’s a measure of the total number of jobless not receiving UI benefits, whether they applied for the benefits or not. Bureau of Labor Statistics research shows that nationally, three-fourths of all jobless people never bother to apply for UI benefits.
Nichol also writes “Our average duration of benefits, 8.6 weeks, had sunk to the country’s lowest. We now provide (on average) just $264 a week.”
A closer look at HB 4, however, reveals that the bill’s changes would have very little impact on these figures.
The bill lowered the maximum allowable benefit to $350 per week, well above the average Nichol cites of $264 per week. The new maximum would be binding on only a very small percentage of UI beneficiaries.
The only change to how weekly benefits are calculated included in HB 4 is changing “from a formula based on the high quarter wage in the claimant’s base period to the average of the last two quarters of that period.” Such a change would have a negligible impact on benefit amounts at best.
HB 4 also shortened the maximum duration of benefits from 26 weeks to a sliding scale ranging from 12 to 20 weeks based on the seasonally adjusted total unemployment rate. The better the economy, the shorter the maximum duration of benefits. Nichol himself, by revealing the average duration of benefits in North Carolina of 8.6 weeks, shows that the maximum duration would affect very few UI recipients.
Wrong on taxes
After falsely claiming that North Carolina sent money back to Washington rather than give it to poor people, Nichol furiously writes “And to make sure everyone got the point, Republican lawmakers also dramatically cut the state’s corporate income tax rate. They proclaimed, with gusto, that they knew where their bread was buttered. Then they cut the corporate rate again.”
The underlying assumption here is that corporate tax cuts only benefit evil, faceless entities known as corporations.
But its well documented that corporate taxes mostly harm workers. Corporations don’t pay taxes, people do.
And the research has been made crystal clear, workers bear the burden of corporate taxes.
An October 2018 study released by the National Bureau of Economic Research found that “increases in corporate tax rates lead to significant reductions in employment and wage income.”
Approximately 56% of North Carolina’s workforce are employed by establishments of 500 or larger – a fairly reasonable proxy for corporations. In other words, when Nichol sneers at a corporate tax cut, he is objecting to wage improvements for more than half of the state’s workers.
Indeed, a 2019 academic report co-authored by a High Point University economist and her economic consultant partner and released by the Civitas Institute, found that eliminating North Carolina’s corporate income tax would create 43,000 more jobs over 10 years. Furthermore, the state could expect overall average salaries to increase by more than $1,500 during that time.
Nichol then makes the highly misleading claim that North Carolina is “the only state ever to abolish its earned income tax credit (EITC) – raising the tax bill of impoverished families.”
This statement is misleading and downright wrong in several respects.
First, Nichol seemingly wants to give readers the impression that North Carolina is the only state without an EITC. That’s false. According to the National Council of State Legislatures, only 29 states currently have an EITC. Twenty-one do not.
Second, in the context of his article, Nichol clearly is trying to place exclusive blame on Republicans for ‘abolishing’ the EITC. But the GOP legislature did not ‘abolish’ the EITC. The EITC was included in the 2007 state budget and supported by the Democratic majority, which included a sunset date of Jan. 1, 2013.
In 2013, Republicans passed legislation extending the EITC one more year, albeit at a lower rate, allowing another year of the credit before its final sunset in 2014.
Furthermore, the sunset of the EITC did not “raise the tax bill of impoverished families.” The majority of people receiving benefits from the EITC did not pay any taxes – rather they received a check for the refundable portion of the EITC. They may have received less government money, but their tax bill did not increase.
If Nichol was so worried about the tax bill of low-income households, one would think he would laud the Republicans’ efforts to significantly increase the state standard deduction, exempting more low-income workers from having any state tax liability at all. “More than 1.5 million working families in North Carolina owe no income tax on their earnings now that the state’s standard deduction has tripled,” reported House Speaker Tim Moore’s office in April 2019.
But Nichol pens nary a word on the subject.
Nichol ignores NC’s strong economy
Finally, in a not-so-subtle case of irony, the short duration of UI benefits cited by Nichol can also be interpreted as a sign of a healthy economy, indicating that the jobless are returning to work more quickly.
Nichol of course would never acknowledge any positive economic news coming as a result of conservative reforms over the past several years.
As the former head of the UNC Poverty Center, Nichol is eerily silent on the fact that the state’s poverty rate has steadily declined from 17.4 percent (9th highest in the nation) in 2010 when his preferred policies were still in place to 13.1 percent today under the leadership he continues to bash.
And household income is up. From 2013 to 2018, North Carolina’s median household income grew by 29.5%, significantly outpacing the national average of 21.6% and the southeast region’s average of 23.1%.
Plus, prior to the coronavirus shutdown, North Carolina’s unemployment rate had fallen to just 3.8%, nearly identical to the national 3.6% rate, and only 17th highest, compared to 10.6% and 8th highest back in 2010.
Now Nichol has sunk to a new low: exploiting a health pandemic scare to score some cheap political points. That his latest published screed just happens to coincide with the release of his new book is mere coincidence, right?