Tuesday, February 19, 2013

"Southernomics" in NC with a vengeance

Michael Lind at Salon.com provides an insightful summary of the "southern" (read conservative) political economic strategy to disempower workers.
The purpose of the age-old economic development strategy of the Southern states has never been to allow them to compete with other states or countries on the basis of superior innovation or living standards.  Instead, for generations Southern economic policymakers have sought to secure a lucrative second-tier role for the South in the national and world economies, as a supplier of commodities like cotton and oil and gas and a source of cheap labor for footloose corporations.  This strategy of specializing in commodities and cheap labor is intended to enrich the Southern oligarchy.  It doesn’t enrich the majority of Southerners, white, black or brown, but it is not intended to.

... The essence of the Southern economic model is not low taxation, but a lack of bargaining power by Southern workers of all races. Bargaining power at the bottom of the income scale is created by tight labor markets; unions; minimum wage laws combined with unemployment insurance; and social insurance, such as Social Security and Medicare and Medicaid.
With the state's centrist to moderately conservative Democrats being replaced by radically conservative Republicans, North Carolina is seeing this strategy played out a vengeance.

Unemployment insurance. Gov. McCrory has just signed legislation that will drastically scale back the state's unemployment insurance program, cutting the maximum benefit from $535 per week to $350, cutting the maximum duration of benefits from 26 weeks to 12-20 weeks, and making unemployed workers wait an extra week to begin collecting benefits. An additional consequence of the legislation is that long-term unemployed people will also lose their eligibility for extended federally-funded benefit, which normally kicks in after state-funded benefits are exhausted.

The cuts compound the suffering of the unemployed. They also hurt the economy (NC will lose an estimated $780 million in federal funding). But they make for really desperate and compliant work-force. Unemployed people who are searching for work have fewer resources to draw on and are less likely to haggle over a job. Employed people will also become more compliant, as the threat of job-loss entails greater hardship.

Medicaid. The Medicaid expansion under the Affordable Care Act primarily would primarily benefit poor, working-age adults. The current Medicaid program covers poor children, destitute elderly, disabled people, and some parents; the extension would cover other non-disabled, working-age adults. Blocking the expansion (even though nearly all of it is funded by the federal government) is another way to make unemployment and low levels of work even more immiserating.

Regressive consumption taxes. Republicans' proposals for tax "reform," which appear to focus on reduce taxes on income and raising taxes on consumption will shift the responsibility for paying taxes from wealthy households to poor households and thereby also make it more costly to be poor and out of work. Not only will the loss of a job mean the loss of income but also higher expenses, including possibly higher expenses for necessities like groceries, medicine, and utilities.

Cuts to the state workforce. Cuts to the state workforce don't spur economic growth, but they do remove a source of competition for workers' talents.

NC finds itself in desperate straits; the Republican agenda is for more desperation.