In This Issue:
Feature 1 - A Job on Taxpayers
Feature 2 – On the Ball in Greensboro
Feature 3 - Leftists Wail Against War
A Job on Taxpayers
General Assembly expands corporate socialism
As one of their last acts in the extended “short” session, lawmakers gave final approval to the N.C. Economic Stimulus and Job Creation Act on Thursday. The bill appeared dead until Gov. Mike Easley lobbied key lawmakers to come up with a compromise that would pass both chambers.
The main component of the bill, the Job Development Investment Grant Program, allows selected companies to get annual cash grants based on the amount of state withholding taxes paid by the companies’ employees. The grants are limited to 15 companies and $10 million per year. Up to 75 percent of the withholding taxes could be returned to the company.
The awards will be made by a five-member committee made up of the secretary of commerce, the secretary of revenue, the director of the Office of Budget and Management, a representative appointed by the House, and a representative named by the Senate. Since the first three are political appointees serving at the pleasure of the governor and the law only requires an award decision made by three of the five members, the governor essentially controls all the awards.
While the value of initial grants is limited to $10 million a year and the program is scheduled to run for two years, the cumulative cost to taxpayers could run much higher. Assuming a 4 percent annual growth in wages and withholding, the initial $10 million becomes a cumulative total of $150 million at the end of the 12th year. So the two-year program may cost as much as $300 million, unless the committee decides to include additional eligible positions beyond the base years. If the committee chooses to do so, the total cost of the program could soar far higher than $300 million.
Before entering into an agreement with a company, the committee must certify that several conditions are met. The conditions include that a “grant under this part is necessary for the completion of the project in this State.” So the committee must determine that without the grant, the company would not be establishing a new operation in North Carolina.
Since the authority of the committee to enter into new agreements will begin Jan. 1, Easley and state Commerce Department officials must wait three months to claim any new job announcements as a result of the program.
The cash grant program was recommended and promoted by the North Carolina Economic Development Board. Easley appoints 23 members to the 37-member panel. According to the statute that established the board, the primary function of the board is to develop and annually update a Comprehensive Strategic Economic Development Plan. The plan was last updated in the Summer of 1999. A spokesperson for the Economic Development Board told Carolina Journal a new plan will be released in November.
Ahead of the Curve
• After the General Assembly approved a one-half cent local-option sales tax two weeks ago, county commissioners across the state are hurrying to vote on the measure. The Wilmington Star-News reported Sept. 30 that Brunswick County was the first in the area to adopt the tax increase, effective Dec. 1. The newspaper also said Pender County officials were expected to vote for the measure. The Roxboro Courier-Times said Person County commissioners would likely approve the new tax. Other reports said Randolph, Surry, Forsyth, and Stokes counties planned to increase the tax. Meanwhile, The Charlotte Observer reported Mecklenburg County commissioners were considering a plan to raise the sales tax and simultaneously cut property taxes for residents. The newspaper said some Republican-run counties, such as Cabarrus, may not levy the tax.
• Meanwhile, The Observer also reported that because of the new state budget, Charlotte-Mecklenburg schools would receive $8 million to $11 million less than expected from the state. The school district also will receive $10.5 million less in county money. School leaders are in the midst of the cutting process.
• Despite the state’s money woes, officials plan to purchase land for Eno River State Park in Orange County and Elk Knob in Watauga County, which have an estimated value of $11.2 million.
On the Ball in Greensboro
Guilford County approves land swap for stadium
The Guilford County commissioners Thursday approved an innovative plan submitted by a nonprofit organization that sets the stage for construction of a new stadium for the Greensboro Bats minor league baseball team.
Under the proposal, an organization called Action Greensboro will swap land with the county, build the new baseball field, and help the county pay for replacement office space. The proposal reportedly came at little or no cost to county taxpayers.
Action Greensboro is an economic development group formed by six local foundations that aims to redevelop and revitalize Greensboro. Shirley Frye, a leader of Downtown Greensboro Inc., a nonprofit working closely with Action Greensboro, told the News & Record of Greensboro, “Our master plan for revitalization is built around the concept that downtown must be Greensboro’s nucleus for entertainment, cultural events and recreation. A baseball stadium located downtown is pivotal in creating this nucleus.”
Under the proposal, Action Greensboro will acquire part of the county’s Health and Social Services Center on Eugene and Bellemeade streets, demolish it, and build the baseball field on the site. In exchange for the land, Action Greensboro will provide $4.5 million toward the county building a replacement building at a different location. The county’s share of the cost of the new building is also estimated to be $4.5 million.
More than 600 county social service and health workers will switch offices as part of the swap. About 340 of those work in the current office complex. Most of them would move to the new building, along with employees from other county offices in Greensboro, the N&R reported.
The plan offers substantial benefits for the county and team. While serviceable, the 30-year old existing health center is not regarded as a state-of-the-art facility. The county will receive the fair market value of the building.
For the Bats, a New York Yankees class A farm club in the South Atlantic League, the proposal is a welcome development. The team’s current home, War Memorial Stadium, dates to 1926 and is the fourth-oldest ballpark in use in the minor leagues. While, again, being serviceable, it lacks many of the amenities for both fans and teams of more modern facilities.
The proposed ballpark will also be large enough to accommodate a Class AA baseball team. The Bats’ ownership has no current plans to pursue obtaining a team in the higher classification. The Bats averaged 2,662 spectators per game during the 2002 season; the proposed new stadium would seat 6,000 to 6,500.
The heavy private involvement comes in marked contrast to many other new baseball stadiums being built at both the major league and minor league level. In Charlotte, for example, the Class AAA Charlotte Knights are trying the get city help for a new ball field near downtown. The Knights currently play across the state line, near Rock Hill, S.C. The Knights’ proposal involves the city putting up $25 million and purchasing land.
The funds would come from Charlotte’s hotel-motel tax receipts, which must be used for tourism-related projects. With the city also pursuing an expansion NBA team to replace the recently departed Hornets, the city has been noncommittal. If the NBA returns to Charlotte, finding funding for a new stadium for the Knights as well as building a new basketball arena would likely prove difficult.
• “The argument, really, was the money. I think a lot of people saw it as a Mecklenburg bill.”
— Rep. Mickey Michaux, D-Durham, speaking to The Charlotte Observer about the proposed Tourism Development Act. The bill, which received an unfavorable report before a House committee, would have allowed a portion of sales-tax revenues from tourist-related projects to be returned to the locality where it was generated. The proposal, put forth by several Mecklenburg legislators, would have helped the City of Charlotte pay for an new arena for an expansion NBA team. The city and the NBA are in secret negotiations about a replacement franchise for the recently departed Charlotte Hornets.
• “As it is right now, we stand to get 100 percent of nothing. This way, we may get 85 percent of something.”
—Larry Potts, chairman of the Davidson County commissioners, commenting to The Dispatch of Davidson County on his county’s decision to join a lawsuit against the state seeking the return of funds withheld by Gov. Mike Easley. Davidson County joins seven other counties and three municipalities that are plaintiffs in the suit. Under the contingency agreement with Boyce & Isley PA, the county would pay $1,000 and receive 85 percent of any funds recovered.
• “It is our intention after consultation with the speaker that we stop this madness and go home Thursday at 4 o'clock. Hopefully, that will stick.”
— Senate President Pro Tem Marc Basnight talking to the Winston-Salem Journal about when he hoped the General Assembly’s four-month-long “short” session would finally rap up. With 170 legislators, the daily cost when the General Assembly is in session is about $65,000. To date, the session has cost an estimated $3.8 million. The General Assembly did meet his schedule.
Leftists Wail Against War
One-sided ‘teach-ins’ return to UNC-CH
The fall semester has started. The war on terror is reportedly about to extend to Iraq. And “teach-ins” have returned to the University of North Carolina at Chapel Hill.
A Sept. 23 event, hosted by three left-wing campus groups (including the Progressive Faculty Network), drew 250 attendees to “teach” students about “the ethics and politics of an invasion of Iraq.” Two days later, a more official forum, cosponsored by two UNC-CH agencies — the General Alumni Association and the Curriculum on Peace, War, and Defense — offered up little in the way of varied opinion.
UNC-CH history Professor Richard Kohn served as the moderator for the latter event. “The panelists had varying perspectives and disciplines,” he told the Daily Tar Heel. “Overall, they expressed deep skepticism of whether it is in the national interest of the United States to engage in a pre-emptive war against Iraq without congressional and (United Nations) sanction.”
The teach-in featured Rania Masri, “on the effects of war on the Iraqi people”; Stan Goff, “on the U.S. military”; Ajamu Dillahunt, “on race, war, and needs at home and abroad”; Ganesh Lal, “on the global wartime situation”; and Lenore Yarger, “on religious conscience and civil disobedience.”
Masri is coordinator of the Iraq Action Coalition. She has told UNC-CH students that the United States has killed half a million children in Iraq since 1991. She blamed the United States for the U.N. sanctions, conveniently ignoring the fact that the sanctions don’t prohibit food and medicine, and exculpating Saddam Hussein, who has reportedly given $10 million to families of Palestinian terrorists.
Goff’s message is that the “military-petroleum regime” of the Bush administration planned before the Sept. 11 terrorist attacks to invade Afghanistan to tap oil reserves there and exert U.S. control over South Asia.
Dillahunt is a member of the socialist group Black Workers for Justice. At a June 19 rally at the State Capitol, she compared the plight of workers in America today to the plight of antebellum slaves. Dillahunt is also a member of the Black Radical Congress, serving on its organizing committee. This group holds that America maintains “control over black people” by “state repression and police violence in the form of racial profiling, police brutality and murder, and the public assault on workers rights’ to maintain and improve job pay, benefits, and security.”
Lal, of the International Socialist Organization, is another Marxist who posits that the United states concocts hoaxes to legitimize war. In the July-August 2002 issue of the International Socialist Review she writes that reports of al Qaeda forces in Kashmir “have likely been planted in the media by the Indian and U.S. governments. India seeks to undermine Musharraf’s credibility, and the U.S. seeks legitimacy for extending its war on terror…”
Yarger, of the Silk Hope Catholic Worker, wrote in 1999 that “I had reached my tolerance for young, white, warmongering males in fast cars screaming, ‘Kill ‘em all!’” She spoke at UNC-CH at a teach-in last year where she decried what over the years the United States’ “peace and security means for the rest of the world: It means poor neighborhoods destroyed by U.S. troops in countries like Panama, and Palestinian homes wrecked by U.S.-backed bulldozers; it means local South American and African economies decimated by unforgiven debt from multilateral lending institutions controlled in part by U.S. financiers…”
On The Cutting Edge
Equities and Demographics
• Equities have historically been a successful form of investment, earning 6 percent more interest over cash investments and 5 percent more interest than bonds. However, this may not be the case in the future. Some analysts argue demographic trends portend a weakening of equity returns.
Equity investments have been highly profitable over the course of the 20th century. The long-run annual real return on equities in the United States was 6 or 7 percent. At this rate, the invested money would double in 10 years.
Equity returns come from two main sources: the dividend yield itself and the growth of dividends. Dividend growth depends on growth in profits, or “world output.” Over the course of the 20th century, world output skyrocketed, rising 3 percent a year instead of 1 percent annually as in previous centuries. This is what accounted for the high returns of equities.
However, demographics may end this trend. In the 20th century, population growth was rapid. Despite the millions killed in two world wars, the population of the advanced industrial nations was higher in 1945 than in 1914.
By contrast, in the 21st century, populations are expected to decline in industrial nations. The populations of Japan and Europe will fall by one-fourth in each generation if current fertility rates continue.
As the working-age population shrinks, world output will stagnate and weaken equities’ profitability. There is, however, one hopeful possibility. If immigrants were to replace those aging workers, world output need not stagnate.
Researched by Tim Congdon, “The Century of Equity Investment,” Journal of the Institute of Economic Affairs, Volume 22, No. 2, June 2002.
Hiring Enough Teachers
• A new federal law has banned unqualified teachers, public school enrollment is growing, and Baby-Boom teachers are retiring. These factors may aggravate a looming teacher shortage, education analysts say.
However, evidence from New York City “suggests there was never a shortage, only an unwillingness of qualified teachers to work at previous pay levels,” says Richard Rothstein.
The teacher shortage mostly disappeared in New York City after teacher pay was raised. Starting teachers now receiving $39,000 a year, up from $32,000 in 2001. Since those with experience elsewhere start as high as $61,000, certified teachers have left parochial schools, the suburbs, and other professions to work for the city.
At the right price, supply grows to meet demand.
Nationwide, only about two-thirds of new education graduates take teaching jobs.
Of those who do teach, nearly one-third quit within five years.
Many teachers leave public education for the private sector, thus there is a large pool of qualified teachers “ready to re-enter the profession when the price is right.”
The shortage seems more real in some specialties: high school math and science, special and bilingual education, and schools in high-poverty communities. But teachers in middle-class areas will move to disadvantaged schools if the pay differential is big enough to compensate for the greater skill and dedication required.
And those with math and science degrees will take up teaching if salaries in education are competitive.
Impediments to this market solution include paying all teachers the same, the dependence of public schools on property taxes, and the opposition of teachers’ unions.
Reported in the New York Times, 9-25-2002.
U.S. Muslim Population
• A survey said to be the most definitive of its kind reveals there are far fewer Muslims in the United States than previously thought. The Religious Congregations and Membership Survey of 2000 is the latest of a series of 10-year surveys conducted by the Glenmary Home Missioners, a Cincinnati Catholic organization.
One of the survey’s most surprising findings was a much lower estimate of the U.S. Muslim population. While Islamic groups have produced estimates of seven million, the survey came up with just 1.6 million. But that is just the number associated with America’s more than 1,000 mosques, not all adherents to Islam.
As expected, the Catholic church has the largest membership nationally; the state of Utah with a preponderance of Mormons has the highest rate of church membership (around 75 percent), and Oregon has the lowest church affiliation (around 31 percent).
Through immigration and birth, Hispanics are largely responsible for the growth in many congregations — most, but by no means all of them, Catholic.
Religious affiliation has dropped nationally by a few percentage points in the past 10 years — with 71 percent of U.S. counties showing no gains in what the survey refers to as “claimed” people.
One reason for the census is to find out at the county and state levels how much of the population is “unclaimed” by religious groups, and thus fertile ground for religious recruitment.
Reported in the Washington Times, 9-19-2002.
• R. James Woolsey, former director of the Central Intelligence Agency, will speak at a special John Locke Foundation dinner at 7 p.m. Oct. 30 at the Brownestone Hotel in Raleigh.
Woolsey is a partner in the law firm of Shea & Gardner in Washington, D.C. He returned to the firm in January 1995 after being director of the CIA for two year. He has been a member of the boards of directors of several corporations.
Woolsey has also served in the U.S. government as: ambassador to the Negotiation on Conventional Armed Forces in Europe, Vienna, 1989-1991; under secretary of the Navy, 1977-1979; general counsel to the U.S. Senate Committee on Armed Services, 1970-73; and adviser (during military service) on the U.S. Delegation to the Strategic Arms Limitation Talks (SALT I), Helsinki and Vienna, 1969-1970.
He earned a bachelor of arts degree in 1963 from Stanford University (with great distinction, Phi Beta Kappa), a master of arts degree from Oxford University, and an LL.B from Yale Law School in 1968, where he was managing editor of the Yale Law Journal.
For more information or to preregister, contact Kory Swanson or Thomas Croom at (919) 828-3876 or [email protected].
Material published here may be reprinted provided the
Locke Foundation receives prior notice and appropriate credit is given.