Will Spending on University Campuses Cause Prosperity?

Proponents of the University of North Carolina’s huge spending program — to be financed with bonds that don’t require voter approval — have been pulling out all the stops. In a General Assembly committee hearing on the legislation, UNC President Molly Broad said that it should be approved because the late UNC Chancellor Michael Hooker wanted it. That was within hours of his death.

In committee, people advocating the bill were given the entire morning session to speak and an hour of the afternoon session. No opponents were asked to testify, and the time allowed for public comments — the only time when anyone other than legislators could raise questions about the need for and wisdom of the legislation — was kept strictly to two minutes per person.

Pulling at heartstrings and stacking the deck are bad enough, but the people backing the bond proposal have also been resorting to the most absurd substantive arguments in their efforts to get people to jump on the bond bandwagon.

Consider, for example, the argument of Senate President Pro-Tem Marc Basnight, D-Dare. When it was pointed out that the large increase in debt service would make it difficult for the state to meet other needs if an economic recession happened, Basnight argued that because of the enormous construction expenditures, “the economy would strengthen and you’ll have more revenue.”

That’s one of history’s oldest economic fallacies — the idea that prosperity comes about from having government tax people and spend the money on lawmakers’ favored projects.

Campbell University economics professor Roy Cordato had this to say about Senator Basnight’s reasoning, “He assumes that if the government doesn’t use this money, no one else will. If the state borrows this $3 billion, it will be diverting loanable funds away from private markets. The state spending will not ‘spur increases’ in economic activity, but simply reduce economic activity elsewhere. We will never know what businesses do not get started or what jobs do not get created because of the resources absorbed by this proposed bond issue.”