By Thom Little, Ph.D.
More than thirty years ago, as a college student at the University of North Carolina at
Greensboro, I was fortunate enough to serve as an intern in the North Carolina General
Assembly. One day while delivering something to the Office of Governor James Martin, I
overheard a conversation at a stoplight on Salisbury Street between two well-dressed
gentlemen (I am thinking lobbyists) that went something like this: First person: “Aren’t you
going to cross? The light is red.” Second person: “Don’t watch the light! Watch the cars. Have
you ever heard of anyone getting hit by a light?” Once I regained my composure (which took
several minutes), I realized that there might be a pretty good pearl of wisdom in the words of
the second person: keep in mind what really matters when making life or death decisions.
I was reminded of that again yesterday when I listened in on SLLF’s Webinar “The Coronavirus
Recession: How Bad is It and How Long Will it Last?” During the webinar Moody’s Analytics
economist Dan White and IQT biologist Dr. Dylan George offered their advice for policymakers
regarding how best to respond to the dual threats of the Covid-19 virus and the current
economic recession. As they offered tips for responding to the crises, I was once again
reminded that state legislative leaders, those making public policy during these crises, must
remember what really matters: data not politics.
Whether it is trying to write (or rewrite) your state’s budget or trying to decide how to best
“flatten the curve,” policymakers need to base their decisions on sound and accurate data. In
terms of the economy, it is imperative that the state budget authors base their decisions on
accurate economic data and realistic forecasts regarding the impact of the recession on the
state’s economy, GDP, revenues and expenditures. As the old saying goes, “garbage in, garbage
out.” If you put inaccurate or biased data in, you will get ineffective or even detrimental policy
out. Regarding whether or not to restrict economic and social activity because of the virus or
when and how to open up the schools, Dr. George reminds us that policymakers need to have
accurate data on the number of cases, the number of deaths, hospitalizations, infection rates
and the demographic nature of the spread. Policymakers who ignore such data or try to bend
the data to their will do so at the fiscal and physical peril of themselves and the people of their
state. Relying on accurate information about where and how the virus is spreading is the only
way to “box it in.”
In a similar manner, legislators writing or revising state budgets must base their decisions on
accurate information regarding the present and likely future status of the state’s economy and
the probable impact on revenues and expenditures. While painting a rosier than realistic
picture of the state’s economy might help policymakers get re-elected in the short term, it is
likely to all come crashing down when those overly optimistic expectations are not met.
According to Dan White, during challenging times, policymakers need to “Pray for the best, plan
for the worst.” Planning for the worst means examining all of the possible economic scenarios,
even those that no one wants to acknowledge as possible. On the revenue side, legislators need
to understand the nature of their state’s revenue system and tax structure. According to White,
if your state economy is heavily reliant on tourism, the public sector or energy, the “fiscal shock” of the recession is likely to be greater in your state than if your state’s economy is tied
to more diverse and stable revenue sources. He notes, for example, that tourism-reliant states
like Idaho, Alaska, Louisiana (along with energy) and New York may find themselves least
resilient during the recession. In addition to the revenue side, White notes that states must also
look honestly at the expenditures, especially those relative to Medicaid. He suggests that if
there is a “double dip” recession (quite likely according to his estimates), the costs (in lost
revenues and Medicaid expenditures) across the fifty states could be as high as $500 billion!
Not a pretty picture, but one that leaders must consider nonetheless.
So, as you make decisions regarding the opening of schools and businesses or the requiring of
masks and social distancing or proposed expenditures for the next fiscal year, remember to
base your decisions on realistic and accurate data: watch the cars not the light!
Please take a look at SLLF’s webinar “The Coronavirus Recession: How Bad is It and How Long Will it Last?” to learn what data you need and where you can find it.