Guest Post by Anthony Dent: Why North Carolina Needs Reform Conservatism

Anthony Dent, a graduate student at the University of North Carolina, writes in to share his thoughts on recent controversies in North Carolina, where conservative Republicans have been pursuing an ambitious agenda that has met with intense resistance from public sector workers, liberal activists, and a growing number of moderate, middle-income voters. Dent argues that while North Carolina Governor Pat McCrory, a former mayor of Charlotte with a pragmatic reputation, was well-positioned to be a leader among reform conservatives, the McCrory administration has needlessly antagonized potential allies, thus putting the GOP coalition in the state at risk.

North Carolina’s governing class has a history of trying to strike a balance between economic growth and maintaining a social safety net, and Gov. Pat McCrory intended to continue in that tradition. He sought to reform the state tax system to create jobs and keep the state competitive while fortifying the state’s community college system to better serve vocational students. To achieve his goals, however, McCrory needed to build and sustain a coalition of middle- and working-class voters — the kind of coalition envisioned by reform conservatives. But McCrory’s tax reform proposal has proven controversialas have new abortion and voter ID regulations. Had McCrory’s middle- and working-class coalition remained intact, he’d be in decent shape. A new PPP survey of North Carolina voters demonstrates that it has not. I think this outcome was avoidable—if the GOP hadn’t dropped the federal unemployment benefits and had reframed the debate over public education, this coalition could have stayed together. However, that would have required recalibrating the agenda to focus on the needs of working and middle class families along the same lines as the reform conservative proposals for the party writ large. While GOP elected officials may not be open to the policy prescriptions from the reform conservative camp, it’s worth rethinking the key decisions that led to Wisconsin-like protests and overwrought New York Times editorials.

Unemployment benefits: The first shoe to drop was the expiration of federal unemployment benefits July 1st in an effort to start paying off the third-highest unemployment insurance debt in the country. (The John Locke Foundation has a great summary of the background and justifications for the reform here.) Approximately 170,000 people This caused a firestorm across the state. I think a reform conservative agenda would be hesitant to end benefits since the reality on the ground is so complex. North Carolina is an example of the divergence Enrico Moretti observed between communities with concentrations of highly-educated workforces employed by innovative companies (Raleigh-Durham or Charlotte) and the rest of the state which is less educated , less densely-populated, and older. County-by-county unemployment data bear this out. The underperforming regions are largely still grappling with the departure of textile mills and other manufacturing jobs , possible victims of the mortgage crisis when the housing boom was temporarily able to employ former manufacturing workers meaning workers didn’t have to receive retraining or vocational degrees. But the housing boom proved to be a mirage and only temporarily masked the dramatic changes in the manufacturing sector since the 1990s. Basically, this suggests that the current prolonged unemployment is structural, not cyclical. From that standpoint, on net, the federal unemployment benefits were worth the short-term, per employee cost of the UI tax burden on businesses (especially since the state legislature will most likely cut funding for community colleges), since other jobs may simply not exist in certain communities.

K-12 education: And while no final budget for 2013 has been passed, both budgets moving through the General Assembly include cuts to public education public education. Opponents have protested everything from the reforms to teacher pay to the introduction of school choice to cuts in preschool.

For the teacher pay and school choice reforms, Republicans have been unable to articulate the positive consequences of either measure. With the reform conservative framework in mind, Republicans should point to the evidence evidence that strongly indicates that neither advanced degrees nor seniority are correlated with teacher effectiveness. Republicans could then implement a proposal proposal by Duke economist Jacob Vigdor to front-load teacher pay to compensate early gains in expertise and expedite the amount of time it takes for teachers to reach their “peak pay” (which currently lags one to two decades behind doctors and lawyers). This reform would reward teacher effectiveness and better attract top talent to educate the state’s children.

I was disappointed that the General Assembly didn’t make school choice a priority because the evidence suggests that introducing school choice—coupled with increases, not decreases in funding for pre-K education—would improve educational outcomes and address weakened social mobility from the bottom.

Higher education: Since 2008, the 17 campus UNC system has experienced more than $1.5 billion in &sessionYear1=2007&sessionYear2Operator=operating cuts and reversions and is set to face another $96 to $150 million in cuts for the next fiscal year (depending on which version of the budget gets passed). The depth of these cuts led a few senior Republicans to consider campus closures or consolidations.

A reform-minded conservative should recognize that a college education is still the dream for most working and middle class voters—and I know first-hand that threatening to close a nearby campus will not endear the GOP to voters in that region. Nor do these cuts address the one concern on parents’ minds: rising tuition costs. The primary driver of these rapid increases is administrative bloat. At UNC-Chapel Hill, for example, the number of administrators grew 48.4% from 1993 to 2007 (above the 39.0% average growth for all public institutions). By 2009, UNC-Chapel Hill’s organizational chart was ten layers deep with over 50% of supervisors managing one to three employees. From 2009 to 2012 , the number of administrators only declined by 2.5% in the face of $235 million in cuts over a four-year period and through implementation of modest reforms (i.e., reducing the number of organizational layers to seven and ensuring that each supervisor had three or more reports).

Yet none of the GOP’s proposals touch the out-of-control administration. The GOP could even explore privatizing UNC-Chapel Hill and devoting that money to the other UNC system schools that serve the students most in need of those resources.

It’s clear that those three policy decisions forced McCrory and state legislators to expend valuable political capital which could have been otherwise been employed to credibly defend the tax reform package that McCrory wanted to be his administration’s signature accomplishment. The conceptual framework behind the reform acknowledged the trade-off between volatility and regressivity—analysts on the right and left wanted to avoid a repeat of the Great Recession when North Carolina’s tax receipts plummeted by over $1.5 billion from 2008 to 2009 . By shifting away from the corporate and individual income taxes to a tax portfolio more reliant on consumption (and equal treatment of services and physical goods) , McCrory and state legislators sought to stabilize revenues and craft a more growth-friendly tax policy. Given the evidence, the GOP will accomplish both tasks when the final package passes. Although necessary items like groceries are still exempt under both reform proposals, the administration’s critics are right when they argue that consumption taxes are inherently regressive.

The GOP did have opportunity to more than offset the increase in the tax burden on families in the lowest 40% of incomes by making the temporary earned income tax credit permanent. Instead, legislators chose to let that provision sunset which increased the tax burden on approximately 900,000 low-income taxpayers, a decision that only saved the state $105 million.

With the governor’s office and both houses of the General Assembly for the first time since Reconstruction, the North Carolina GOP had an opportunity improve governance in North Carolina which I think, on net, it has. But certain policy decisions have robbed the GOP of long-term credibility in the eyes of the very North Carolinians who elected them in the first place: working and middle class families. Going forward, I hope McCrory and the state legislators adopt that reform conservative mentality to avoid electoral defeat—and because it’s the right thing to do.

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

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