Up and Coming Weekly is a weekly publication in Fayetteville, NC and Fort Bragg, NC area offering local news, views, arts, entertainment and community event and business information.
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WWW.UPANDCOMINGWEEKLY.COM NOVEMBER 23 - 29, 2022 UCW 5 OPINION State is ready for potential recession by JOHN HOOD Just months ago, the housing market was blazing hot. Now median prices are dropping, even in states like North Carolina that continue to attract new residents. e Federal Reserve isn't done pushing up interest rates to com- bat inflation. Consumers are respond- ing to higher prices by cutting back on expenses. Are we on the cusp of a major reces- sion? Most economists surveyed last month by e Wall Street Journal said yes. I hope they're wrong. But I'm also glad to live in North Carolina, where legislative leaders have made it a priority to hedge against worst-case scenarios. As of September, the state had an unreserved General Fund balance of $5 billion. e dedicated savings re- serve, our "rainy-day fund," contained $3.6 billion. Another $309 million sat in two Medicaid reserves. Not count- ing other state savings accounts, these three categories alone represent nearly $9 billion in readily accessible funds — or roughly a third of North Carolina's General Fund budget for the 2022-23 fiscal year. Never before in state history have we been so well-prepared for fiscal turbulence. Most recessions produce budget deficits due to a combina- tion of factors: lower-than-expected collections of revenue from strug- gling households and businesses and higher-than-expected demand for public-assistance programs such as Medicaid. Because North Carolina is legally required to balance its operating budget, past administrations and legislative majorities have responded to recessionary deficits by raising taxes, slashing expenditures, tapping (borrowed) federal funds, and foist- ing more fiscal obligations onto local governments (which must then raise taxes, cut spending, or both). I'm no Keynesian. I don't believe government at any level should at- tempt to fine-tune the economy by artificially stimulating demand during recessions or artificially tamping down demand during booms. Such policies usually fail to accomplish their objectives. Political actors in- evitably lack the information to make the "right" decisions about all this, and it takes too long for the effects of the policies to manifest themselves. In fact, precisely because they are political actors, they rarely stick to the theoretical script, anyway. ey favor some sectors over others. And they shy away from tough decisions that might advance the public good but would anger some vocal political constituency. at being said, state leaders rarely make good decisions in a crisis. I'm all for pursuing economy in government, but in the past, governors and legisla- tors have resorted to across-the-board cuts or gimmickry to close budget gaps rather than making prudent, long-term decisions about what to fund, what not to fund, and why. As for the revenue side of the equa- tion, raising taxes during a recession makes neither economic nor politi- cal sense. And grabbing more federal money to paper over budget holes is no solution, either. e national debt has grown so large that it fuels infla- tion and inhibits growth. Projected federal expenditures already exceed projected federal revenues by trillions of dollars, primarily because of un- funded liabilities for Social Security, Medicare, and other entitlements. e best way to avoid these calami- tous decisions is to build up savings reserves. When recessions come, law- makers should still set firm budgetary priorities and be willing to eliminate programs or positions that don't com- port with them. But with $9 billion in savings, North Carolina's leaders can do so without slashing core services — and without raising taxes. Might the General Assembly's past decade of precautionary saving prove unnecessary? Yes. e old maxim still applies, though: hope for the best, prepare for the worst. JOHN HOOD, Board Member, John Locke Foundation. COMMENTS? Editor@upandcomingweekly.com. 910-484-6200 Health, Vision, Dental Insurance Property and Casualty Insurance Retirement Benefits Paid Leave, Paid Holidays Cafeteria Plan (IRS Code Section 125) Cancer - Intensive Care or Critical Care Employee Assistance Program Flexible Spending TRICARE Supplement Benefits • • • • • • • • • hr@faytechcc.edu • (910) 678-7342 • (910) 678-8378 WE ARE ACTIVELY RECRUITING! We offer an excellent benefits package to include: To view the qualifications and/or apply for these and other positions, please visit our employment opportunities at https://faytechcc.peopleadmin.com/. For assistance or questions please contact FTCC Human Resources Start your new career with SCAN QR CODE FOR MORE INFORMATION >>>>