Leslee Kulba

A great primer on healing the economy

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By Leslee Kulba –

It has been argued that America was once very close to being a free country, but it gradually became a welfare state. The new rhetoric claims it is instead a transfer state, as the redistributions don’t help disadvantaged populations so much as they boost income for bureaucrats, lobbyists, and politicians. These days, to use the power of government to get your man some dough, all you need do is make up some numbers about how the “investment” will create jobs and add to the economy. Colored pie charts are a plus. Then, you pick from the wealth of contradictory studies a few to put in your footnotes.

John Hood, chairman and president of the John Locke Foundation, took a different tack in his book, Our Best Foot Forward: An Investment Plan for North Carolina’s Economic Recovery. Hood performed a study of studies, analyzing which could be eliminated for unrealistic data, misapplication of algorithms, or disregard for parameterizations and boundary conditions. Then, he compared studies on similar topics to see how predictions varied. Lastly, he looked around the country and in the rest of the world to see what programs were effecting economic change for the better.

The objective was to do something about North Carolina’s dead last ranking in Bloomberg’s 2011 “Economic Evaluation of the States.” Hood argues the best way for North Carolina to accomplish this is by transferring more power back to the people and keeping more trade in the private sector. The benefits of real-time, value-based, and unfettered transactions in promoting the efficiency and motivation essential to a growing economy are obvious to free marketeers. Yet a good half of the population mocks the thought as preposterous and/or greedy.

Toward the end of the book, Hood backs a claim stating, “I know this because none of the ideas I champion is purely theoretical. Each already exists in some form in other states or countries.” For those new to the concept of constitutional republics, and there are many, Hood felt it necessary to provide a disclaimer about the anticipated anarchist straw man that would be put up to dis his work anyway. Hood is very supportive of proper roles of government in protecting individual liberties and keeping the peace. He even goes further than most libertarians in arguing government has a rightful place providing sound infrastructure and appropriate education for all constituents.

Hood’s problem is the way government throws massive sums of money in crazy directions while the state’s economy remains unacceptable. “The fact that so many advocates of big government have abused the concept of public goods doesn’t mean that they don’t exist,” he stated. Infrastructure is essential to a sound economy, but the highway department, for example, rather than allocating dollars to facilitate people in getting from place to place as efficiently as possible, has a tendency to divert funding for legislators’ low-impact pet projects while continually postponing those that would do the most for the most.

Thomas Jefferson argued an educated populace is fundamental for government by the people, and North Carolina is among the best at funding, but Hood says the dollars must be directed more intentionally. He accuses the state of cheating on its tests of student achievement by awarding inflated grades for lowered standard attainment. One way to fix this would be to recruit and retain, through a number of suggested reforms including firing the deadwood, teachers that are more engaged and more knowledgeable in their subject areas.

For immediate economic changes, Hood recommends restructuring the state’s tax system. The General Assembly is currently working on a tax plan that would phase in, to greater and lesser degrees, a number of Hood’s recommendations. Hood is in accord with the conclusions of, among others, the Tax Foundation, in recommending the elimination of taxes as a penalty for productive activities. The Tax Foundation compares the wildly divergent methods of collecting revenue across the fifty states using 118 weighted variables. The group of economists then publishes an annual “State Business Tax Climate Index.” North Carolina ranked 44th this year, but economist Elizabeth Malm argued the proposed reforms, as currently drafted, would bring the state up to the 17th position.

Hood argues a Fair Tax would be better than the current system, but he would much prefer what is called a USA Tax. It stands for “unlimited savings allotment.” To minimize disincentives to work like double-taxation through corporate taxes, and avoid reams of unnecessary paperwork, the USA Tax would apply only to that portion of personal income that does not go toward savings or charity. It is therefore, for all intents and purposes, a consumption tax that is much easier to calculate and harder to evade, for now.

Business would also be spurred by reductions in regulations that serve no purpose. Hood commended Governor Beverly Perdue for launching a direct attack against the same. He believes the state has a “tendency to enact environmental policies with lofty goals, questionable assumptions, and large costs.” One recommendation to reduce the folly, which was actually drafted into a recent bill, would be to require legislators to present a cost-benefit analysis for any new regulations they want to impose.

Hood wants to promote the old notion of “liberty and justice for all,” not just those groups that are wealthy and organized enough to support an influential presence in Raleigh. “The current tax code,” he says, “retains so many exemptions, credits, redundancies, and inefficiencies because individuals, firms, or interest groups perceive those deviations from tax-policy ‘perfection’ to benefit them.” He therefore opposes corporate welfare, which credible analyses conclude is not working.

In all, Hood presents a manifesto of ten multi-faceted planks to get the state more seriously on the road to economic recovery. The book, whose surface has barely been scratched by this review, is highly recommended for those wanting to advocate for sensible shifts in public policy.

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