Pat McCrory unintentionally flaunts his ignorance of economics
Like a smug frat boy lecturing a pointy-headed nerd, Pat McCrory likes to flaunt his economic acumen. On Twitter this weekend, McCrory “explained” that any time federal funds enter a state’s economy, the money in question is debt, and “a 101 Economy course” proves that such an influx of borrowed cash will inevitably cause inflation. Ol’ Pat’s financial soliloquy followed upon years of confused, misinformed yet utterly self-confident lectures on the way the economy works. Unfortunately for the only North Carolina governor ever to lose reelection, Pat McCrory’s knowledge of his signature subject is as threadbare as his ability to run a state.
At the beginning of his desultory single term as North Carolina’s chief executive, McCrory thought up a strategy for how to redevelop the ailing state economy. Tar Heels, he intoned, should “get back to their roots” on, reembracing agriculture and manufacturing as the pillars of their economy. They should seek this regression because “making things” and “growing things” are “sustainable.” I do not know exactly what “sustainable” means in an economic context–it surely would not appear in any mainstream textbook–but stipulating that McCrory meant the industries in question will outlast the cycle of creative destruction, McCrory was utterly, embarrassingly wrong. Since the 1930s, agriculture has fallen from 18% of the American workforce to lower than 1%. Manufacturing, likewise, has plummeted as a share of the labor force. In both cases, productivity gains (meaning technological innovation allowing for more production with less labor), drove down employment in sectors for which McCrory seemed to have a bit of an obsession.
Real economists would tell you that states and countries doom themselves to stagnation if they try to hang onto industries in which the future of employment is bleak. Instead, they should move up the Value-Added Chain. With less-developed competitors drawing away low-skilled jobs, more advanced economies, like those of an American state, should cultivate industries that require more sophistication and brainpower. Then, they can continue to grow despite increased competition for their old industries while raising productivity and, with it, workers’ living standards.
Our armchair Jim Cramer was back at his pedagogical ways in an interview over the weekend. McCrory informed us that anytime a state experiences an influx of federal money, “that is debt,” and debt automatically drives up inflation. No and no. Some federal money is paid for by tax revenue–such as the infrastructure bill that McCrory had pledged he would oppose. Besides, debt does not inevitably cause inflation. If that were the case, inflation would have been rampant during the George W. Bush and pre-COVID Donald Trump administrations, both of which gluttonously increased the national debt to pay for wasteful tax cuts. Instead, inflation remained subdued as part of what economists call the “Great Moderation.”
Read more: https://www.politicsnc.com/pat-mccrory-unintentionally-flaunts-his-ignorance-of-economics/
