Fiscal Death Spiral in the Palmetto State?

December 5, 2012 11:34 AM0 commentsViews: 697

Fiscal Death Spiral in the Palmetto State?The Palmetto State caught-up in a fiscal “death spiral.”?

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Like many of you, I was surprised this week to hear that our great state was listed on a Forbes Magazine list of states caught-up in a fiscal “death spiral.” While those of us who deeply love South Carolina, as I do, have an immediate response of incredulity, this classification should make us stop and ask the question: Why?

While I certainly disagree with any categorization that would attempt to lump California and South Carolina into the same camp, I do believe there are merits to this Forbes report that ought to guide public policy in the Palmetto State in the years to come. In fact, many of the pro-growth policies folks like Governor Mark Sanford, Senator Kevin Bryant, Senator Lee Bright, Senator Larry Grooms, yours truly, and others, have been advocating for years would go a long ways toward reversing these negative trends.

First, let’s look at two of the primary criteria pointed out in the Forbes report that classifies a state as in a “death spiral.” The first is high levels of dependency on government programs for personal income, and the other is high levels of state debt that threatens the state’s sovereign credit rating.

Both are true in South Carolina, but largely for the same reasons, and they aren’t the same reasons that California is on the cusp of an outright implosion. While states like California and Ohio are in the “death spiral” due to collectivist economic tendencies, like heavy unionization of both the public sector in addition to the private sector, South Carolina has high dependency due to high unemployment. This unemployment is the direct result of two critical issues:

  1. a failing public school system characterized by too much bureaucracy, too little accountability, and too little choice for parents and children
  2. a misguided policy of targeted tax incentives that don’t achieve the economic results so often promised.

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