In response to my article last week in the N&O regarding the state’s budget situation, a worker from the NC Justice Center penned this response, weakly labeling the numerical perspective I provided as “flawed.”
Predictably, the letter-writer includes the laughable claim that North Carolina’s current budget deficit is a revenue problem rather than a spending problem. A quick look at this graph should end any confusion.
Also included in the letter is the claim that state spending now is “lower relative to the state’s economy than all but one year since the Nixon administration.” (emphasis mine)
This claim was taken from this Justice Center paper. But closer examination of the paper’s findings reveals a major flaw of its own.
The Justice Center paper actually defines the “states economy” as total personal income, and sources Bureau of Economic Analysis data as the measure of total personal income for North Carolina for the last several decades.
For the Justice Center’s analysis about state spending shrinking relative to personal income to be correct, then, the state’s personal income must have risen more rapidly than state government spending.
Thirty seconds of digging into the BEA data, however, shows us that personal income includes government workers (including federal) as well as “transfer payments” (i.e. government social programs) received. From that, we can calculate the drivers of the BEA’s total personal income from 1974 to 2009 (the time frame examined by the Justice Center). Here are the results:
- Private sector wages total growth: 949%
- Government wages growth: 1,124%
- Growth of transfer payments: 2,516%
From this, we can see that driving the growth of “personal income” in North Carolina is government entitlement and welfare payments along with government wages. A sizable majority of those funds are coming from the federal government for social programs and federal workers (including military).
In other words, the primary factor underlying the claim that state spending is so low relative to “the state’s economy” (i.e. total personal income) is that federal spending on federal employees, entitlements and welfare programs has risen so dramatically.
This reality hardly squares with the Justice Center’s fear mongering about NC being starved for government-funded programs or services.