by Jon Sanders
Director of the Center for Food, Power, and Life, Research Editor, John Locke Foundation
Both Pres. Joe Biden and Gov. Roy Cooper seek to use government intervention to force a massive buildout of offshore wind facilities off North Carolina beaches. They justify it on the assumption that it would fight climate change by reducing carbon dioxide emissions — even though such a thing is impossible, as demonstrated in my two-part series of research briefs on how “Bad State Energy Policies Can’t Save the World, But They Can Harm North Carolinians.”
They have other justifications for it, however, and these are economic. They say it would lead to job creation and economic growth. Those promises likewise fail to hold up under scrutiny, as shown in the “Big Blow” report from the Center for Food, Power, and Life on the impacts to North Carolina of offshore wind energy development off our beaches.
As already demonstrated, government intervention for offshore wind energy development portends significantly higher costs to North Carolinians as electricity customers, from small families to large industrial users. It also would result in rearranging productive resources, capital, and labor here to other uses — and make energy poverty significantly worse.
Those facts represent steep economic tradeoffs. They’re not indicators of overall economic gains. Instead, they signify potentially large net economic losses.
With so much at risk, responsible policymakers should be very cautious. Is North Carolina so desperate to jump-start job creation that they could excuse taking such a huge gamble? Especially to be in such a rush for government to intervene on behalf of one particular industry to the exclusion and detriment of others?
Put another way, how is North Carolina doing with respect to job creation and economic growth? Really well, actually.
Screenshot from the Economic Development Partnership of North Carolina’s web site celebrating North Carolina being named Forbes’ “Best State for Business.”
Years of North Carolina policymakers choosing to cut taxes and regulations, keep the state budget in line with inflation and population growth, and add to the Savings Reserve (the state’s emergency “rainy day” fund) brought about dramatic improvements in the state’s employment and economic growth and also had the state better positioned than most other states for the economic upheaval of the Covid-19 pandemic and governmental responses to it. As tax and fiscal policy expert Joseph Coletti explained,
From the bottom of the recession in 2009 through 2013, North Carolina’s economy grew at half the rate of the nation as a whole (1.0 percent average annual real GDP growth in NC vs. 2.1 percent nationally). Spending restraint and tax reforms have brought the state (2.3 percent) closer to the national average (2.5 percent). From 2009 through 2013, private-sector employment grew an average 1.3 percent per year in North Carolina and nationally. From 2013 to 2019, however, North Carolina has outpaced the national average of 1.9 percent growth with 2.4 percent annual job growth.
North Carolina also has attracted more residents from other states, ranking sixth on this measure in 2020.
While there is always room for more growth, the simple fact is there is nothing so alarming in North Carolina’s recent job creation and economic growth numbers to justify extraordinary government intervention on behalf of any particular industry, let alone offshore wind energy.
North Carolina’s policymakers have for over a decade now actively pursued time-tested economic growth policies, and North Carolinians have enjoyed accelerated economic growth as a result. Economic growth policies include such things as “across-the-board tax cuts for individuals and businesses, the elimination of the double taxation of saving and investment, and a reduction or amelioration of the regulatory burden on all businesses, small and large.” Those policies promote faster job creation and economic growth by removing government impediments to job creators and risk-taking entrepreneurs and also by expanding the purchasing power of individuals, households, and businesses. They stand in stark contrast to government “economic development” policies featuring policy interventions and incentives favoring one industry or corporation over others.
North Carolina now regularly ranks at or near the top in economic and business climate rankings. Most recently, North Carolina ranked:
Furthermore, in outcomes consistent with pursuing economic growth policies, state revenue growth as a result of all this new economic activity has resulted in large budget surpluses annually since 2014-15.
Nevertheless, responsible policymaking requires understanding how critical and pervasive electricity is in every facet of society — it doesn’t just power our homes, it powers schools, government offices, and our workplaces, and it is a fundamental input in all our production. For those reasons, changes in electricity prices affect the economy very much like changes in tax rates. Forcing expensive offshore wind production would lead to significant electricity rate hikes, which would have harmful economic repercussions.
A decade of growth-minded policymaking lowering the tax burden of government on people and businesses has helped make North Carolina a national leader in economic outlook and business climate. Causing electricity burdens to increase significantly, however, would be like killing the goose that laid the golden egg.
The next research brief will examine that aspect and others to examine the question of how many jobs would offshore wind energy development cost North Carolina.