The Money Flow And The State Of The Economy

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Connecting the Dots On Promised Biotech “Bonanza”

The recent jobs conference in Concord called in the wake of the huge Pillowtex layoffs accomplished at least one thing. It made it clear that biotech wouldn't do much for most of the people of North Carolina despite the glowing promises of its promoters.

Buried at the end of the Associated Press wire story was a quote that should be required reading for anyone contemplating hopping on the biotech bandwagon that will be rolling through Raleigh soon.

“The region is not well-suited to attract lucrative industries such as biotechnology and pharmaceuticals because of a lack of workers who are trained in those fields along with infrastructure problems.”

In other words, the Concord area, despite proximity to a major metropolitan area, a major University, and interstate highways, isn't going to see much benefit from biotech. If it isn't going to benefit them, it isn't going to be of much benefit to the rest of the state either, despite the glowing promises. Instead, money that could be spent to develop jobs throughout the state will be sucked into Raleigh and most will stay within that general area . . . A classic case of the rich getting richer because they have friends in Raleigh.

Of course the University system and the Community College system leaders support the plan; they get additional funding, not just in the short term but more funds will be required every year to sustain the planned effort. Of course the manufacturers who will be the beneficiaries of the plan think it is a great idea, as do the many people who will get a piece of the action, including those who plan to make money by selling the bonds to underwrite part of the project. (Check the January Raleigh Report for more info.)

Unfortunately, resources spent favoring this industry are resources diverted from whatever enterprise the market would favor absent government intervention.

We can do more to create jobs by dropping marginal tax rates than by favoring one industry and one region. If we really want to encourage entrepreneurs, we would phase out the capital gains tax. That would attract biotech jobs, but it would also attract all types of entrepreneurial enterprises. Why limits ourselves to just one industry? More is better.

Alligators Interfere With Swamp Drainage Report

You've heard how hard it can be to drain a swamp when you're busy fighting alligators. Well it is even harder to find time to report on swamp drainage, which is why there have been fewer Raleigh Reports this year than usual. This has been the most challenging year since I came to the legislature.

The big news of course is the budget, and it is a lot bigger than most of the press reported. After the Charlotte Observer reported only $400 million roughly in increased spending and that we only budgeted $15 million for repairs, I sent the reporter an email suggesting that we were increasing spending far more than the $400 million he led the public to believe but that it was hidden by the way we keep the books.

For example, the budget actually provided for borrowing $300 million for repairs and renovations, which is quite a bit more than the $15 million mentioned in the story. The $300 million doesn't hit the budget though until the debt is repaid. That is how you spend more money without increasing spending, an interesting trick with very negative long-term consequences. Normal businesses would be horrified if they took on long-term debt to pay normal costs of operations, but that's what NC is doing.

The Senate passed the budget on a party line vote, with all of the Democrats voting for it and all of the Republicans voting against it. The increased taxes were part of the reason for the Republican opposition, but there also was a great deal of concern for the way the funds were being spent, the lack of willingness to actually scrutinize spending, and the absurdity of the revenue estimates used to make the budget “balance.”

When Governor Easley calls the budget unbalanced and threatens a veto, you'd better believe it is unbalanced. He backed off on his veto threat, but I think he could have sustained a veto because Senate Republicans agreed that the budget relied on unrealistic estimates of revenue growth.

Speaking of the budget, earlier this year I reported on the refusal of the party in power to support a budget amendment requiring accountability on state grants of $15,000 or less. Well, thanks to some fine reporting by the Carolina Journal ( ), we now know a possible reason for their reluctance. It seems there is significant evidence that Congressman Frank Balance financed his congressional campaign in part with grants from the taxpayers of NC arranged through the legislative committee he chaired.

Writing Test Finally Useful As A Bad Example - Helps End Portfolios – But Flaws Remain A Secret

The press conference called to gain support for over-riding Easley's veto of the portfolio-ending bill opened with documentation on student scores on the mechanics of writing in each chair. The chart above was at the front of the room and I read the press accounts of rising writing scores reported by various papers around the state during the nineties. I told the reporters I didn't blame them for misleading the public by reporting writing scores were rising. They just reported what they were told by the “experts” at the Department of Public Instruction (DPI).

The point I was making was that DPI had experts who were willing to mislead the public by reporting rising writing scores when their own tests showed competence in grammar and spelling, the mechanics of writing, was dropping.

Given that history, why would anyone want to entrust DPI with deciding a testing system much like the writing test system, graded by “experts” controlled by DPI? Fool me once, shame on you.

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