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Carolina Journal Radio No. 802: Rainy-day fund will help N.C. recover from Florence

Carolina Journal Radio / Donna Martinez and Mitch Kokai
The Truth Network Radio
October 1, 2018 12:00 am

Carolina Journal Radio No. 802: Rainy-day fund will help N.C. recover from Florence

Carolina Journal Radio / Donna Martinez and Mitch Kokai

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October 1, 2018 12:00 am

As North Carolina recovers from Hurricane Florence, state government leaders are happy to have access to a $2 billion “rainy-day fund.” The Republican-led General Assembly made a concerted effort to rebuild that fund in recent years. Joseph Coletti, John Locke Foundation senior fellow, explains why. Coletti also explains how the fund could help state government move more quickly to address issues arising from Florence’s damage. Amid recent controversies involving Facebook, some critics have called for increased regulation of the social media giant. Computer expert Bob Chandler, president of Macvantage, discusses Facebook’s recent woes. Chandler examines pros and cons related to government involvement in Facebook’s operations. The U.S. Supreme Court nomination of Judge Brett Kavanaugh has taken recent twists and turns. North Carolina Sen. Thom Tillis recently chided Democratic colleagues and left-of-center partisan activists for refusing to engage Kavanaugh on substantive legal issues. President Trump recently traveled to Charlotte to unveil a new program designed to help more small business employees save money for retirement. U.S. Labor Secretary Alexander Acosta, Linda McMahon of the Small Business Administration, and other national and local business leaders joined the president to tout the new program. The arrival of Hurricane Florence prompted N.C. officials to trigger the state’s price-gouging law. It allows people to complain to government when they believe vendors are charging prices that are too high. Roy Cordato, John Locke Foundation senior economist, says the law creates serious negative unintended consequences. Among them: empty store shelves and dried-up gas pumps. Cordato explains why higher prices make sense during an emergency.

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From chair to current attack from the largest city to the smallest and from the statehouse into the schoolhouse Carolina Journal radio your weekly news magazine discussing North Carolina's most public policy events and issues welcome to Carolina Journal radio I Michiko guide during the next hour, Donna Martinez and I will explore some major issues affecting our state.

This week's edition of Carolina Journal radio was brought to you by Blue Cross and Blue Shield of North Carolina working every day to transform the health system or North Carolinians. More information available at today. Facebook's recent woes of prompted some critics to call for new government regulation, North Carolina-based computer expert offers his thoughts. He waste potential pros and cons of government involvement with the social media giant. The high-profile confirmation hearings for US Supreme Court nominee Brett Cavanaugh help shine a spotlight on North Carolina's junior US Sen. hear from Tom Tillis. Charlotte served as the setting is the federal government unveiled a new program designed to help small business employees save for retirement. Learn details partial or my North Carolina's price gouging law creates more problems than it solves. Those topics are just a headfirst Donna Martinez joins us with the Carolina Journal headline just over $2 billion Sitton North Carolina's rainy day fund. Essentially, that is, the state savings account to be used for emergencies or perhaps the economic downturns, natural disasters and such.

Now, at times over the past few years.

Some have criticized the fiscally conservative lawmakers for building up this fund, but in the wake of hurricane Florence. That criticism has now subsided. Joe Colletti is a senior fellow for the John Locke foundation. He analyzes fiscal issues and is here to talk about the find Joe welcome back to be here so it seems that there was a concentrated push to build up this fund over the past few years. Give us a sense of what occurred in the Gen. assembly that really led to all of this rainy day fund or the savings reserve account as it was originally called was created back in the 90s, late 90s, and the goal then was to get up to 5%. Now I really 5% of oh sorry 5% of general fund spending the year before.

Okay, so that just like you do with your own house right you want to have that you want to set aside $1000 or something like that to get so that you can get through something and never quite made it up to that once the first recession in 2000 2001 hit and remained at very low levels throughout and so when the latest recession in 2007 to 3 2009 came about her neck up and it was just about depleted again when the Republicans came into office in 2011.

They said we need to build this backup and we need to get it to a robust amount and so just this past year and was up over 8% of general fund spending which it was the statutory goal before up until that point and and and it was in the goal was to be able to. How do we get through the next recession without having to raise taxes and without having to cut back services because you have both sides that happen in an economic downturn that you you your costs go up because you have to deal with Medicaid and you have to deal with all the other things that all the other social services that become greater need at the same time that you're running out of that that the revenues are falling down because people are earning money and not spending money. So that's what the best with the goal of it was and by being able to build it up to over $2 billion now you can use it when a natural disaster headspace of two years ago when hurricane Matthew had. There is $100 million that they were able to tap into and dads. That's the that's what they were looking to do and and and they're not done building that up because that they're looking to increase the stability of that is a very interesting chart that, by the way, is that shows over the years how the fund M has grown and definitely see at about dad 2010 2011 start to see what are clearly bigger and bigger deposit them into this fund. You mentioned a statutory goal. Does that mean that there is a requirement each year in the operating budget that a certain amount be put into the fund or is that really discretionary.

There's with the latest bill that was passed in 2017, almost unanimously.

There's only one vote against it, and Gov. Cooper signed and quickly there is now a 15% of whatever the increase in revenue is from year to year goes into savings, and there is it so that's that's in statute now in the past, legislatures went when they've had huge surpluses they had other requirements about us so much money goes into it and that they use one of the greatest words of ledges of of of legislatures.

Notwithstanding says we send this but now we really don't mean it so this time with this legislature that they they checked on the state with what they promised on and in terms of money and so that that part is is set and there's also no through the fiscal research division of the Gen. assembly in the office of State budget.

They come up with taking a look back at the last few recessions and say you know to survive 90% of these without a tax increase or without excessive cards you need to use. We should get this up to about 11% is what the target is now. It's not a study firm that it has to reach that, but that's what the that's what the legislators trying to get Joe at the point that you and I are talking at least am I have heard at least one state ledges legislator mentioned the rainy day fund and we've heard a number of members of the US congressional delegation, particularly in the affected areas in Fayetteville, Wilmington, etc. talk about that tapping federal disaster funds and also looking to Gov. Cooper to talk in the Gen. assembly to talk about this fund.

Are you expecting that they will tap this fund I wouldn't I would think that given that two years ago they they took $100 million from its two provide immediate assistance to the affected areas.

I would think that they'll come back sooner than their schedule to write are scheduled to be back at the end of November out expecting the comeback in the next couple weeks to to say to set aside $100 million, or, worse, substantially more to help with immediate needs in the area because this affected home six affected businesses. This affected the interstates tensely affected railroads. There's there's a lot of damage and a lot of things that need to happen quickly, regardless of what happens with the federal money and in and just in Britain, regardless of all the great private efforts that are being raised what they have to do in the legislature to in order to move some of this money out. It is at a relatively easy quick thing to do is a complicated then they try to make a note that they try to make sure that there's a boat with it. In the end and and a in a greater than majority but it should be something it's especially when you have a disaster like this, it should be relatively easy for them to be able to say working with take some money and put it into the affected areas and and last time they had a plate plan to repay it within a year, and they did and start expect something like that that this would become an appropriation next year but to be able to get that money. And that's that's part of what the purposes is that in the middle of the year when you have something come up and you need to spend money, it's therefore that there's also in the budget that was passed about 500 $600 million of unappropriated on reserve funds that they can use as well so they may not need to go into the rainy day fund. They may be able to just say we have this money that we work on appropriate part of the reason why you just have cash sitting on the table at the end of the budget is for something like this is what everything you're describing. Joe really leads me and I would think our listeners to understand that over the past few years.

These some fiscally conservative decisions that have been made by the leadership in the Gen. assembly are proving out to be important and very impactful to North Carolina yeah when you save money out of time. You don't have to borrow money in the future. It's a great and and you can make decisions and help people when they when when when you have something that there does need to be helping. Only government can step in and and so if you reduce what you spend so that your spending less than you then you taken against simple simple basic things that we figure out his family since his work. Same way with legislature and lastly Joe I you mentioned something really interesting. A few moments ago Army said something about the private efforts we can't forget about that and leave leave that out of the story in this recovery in reaction to the devastation of Lawrence. So many private groups and individuals have stepped up to work in partnership with federal and state government and local government as well.

It's amazing.

It's always a reassuring thing the sea right that in a democracy works when we work together on our own. In addition to through through our voting and so that's that's one of the great things you know you hate to see that this kind of thing happen, but it's it's reassuring to see her fellow North Carolinians and everybody across the country. Stepping up to be able to provide assistance. We been talking with Joe Colletti. He is senior fellow for the John Locke foundation and he is a fiscal analyst. You can read all of his work, and John Joe planning so much.

Thank you stay with us much more Carolina journal radio to come in just a moment. This week's edition of Carolina journal radio was brought to you by Blue Cross and Blue Shield of North Carolina working every day to transform the health system from North Carolinians. More information available at today. Thomas Jefferson, John Adams, friends, rivals, great American presidents. Their ideas still have great value today. You could hear those ideas. Monday, November 5. It's a special living history event in Raleigh. Thomas Jefferson and John Adams come to life in a debate on the future of the United States of America. Taxes, trade, foreign threats, Jefferson and Adams dealt with them all though has shelter differences before a live audience.

You could join them. It's living history. Monday, November 5 at 7 PM at the North Carolina Museum of natural sciences in Raleigh. Tickets are $10, five dollars for students like tickets that's John Locke with or call 1866 jail left info. Welcome back to Carolina journal radio I Michiko guy recent controversy surrounding Facebook and its users.

Data is prompted new questions about the social media giant next guess recently spoke to the John Locke foundation's Shaftesbury society about Facebook what it knows about you, with whom it shares that information. What you could do about it. Send the prospect of more regulation.

Bob Chandler is a technology expert. He is president of Vantage, Inc., welcome to the program. Bob thanks from image so first of all, before we get into the. The regulation aspect which would be most this interview Facebook's more than just a fun place to find out what your friends are up to.

It really does collective lot of information about people does it does some of the information people willingly give to Facebook others over the try and figure out from what you do and so Facebook has just a ton of information on the first half knows you know those things, like your gender. It knows where you check in when you do different things and also it starts to try and figure out okay. What's this person's race with her political beliefs, and then another thing that a lot of people realize is if you have it on your iPhone or on your android phone, it will actually track your location using the phone and so if you go and look at the information Facebook has on you.

They may have all these places that you been, and they certainly have all the places that you checked in, because Facebook has all of that information. There has been some discussion now about regulation of Facebook and what is been discussed on that front. There's been different things of been talked about the EU is doing a big privacy thing right now so that's getting a lot of getting a lot of press, but on the United States side. Some people thought about having even a constitutional amendment about our right to privacy but a lot of people talked about. Should there be legislation saying you what exactly can companies do with your information and that they have to make it very explicit of what their policy is and give you ways to opt in or opt out of that policy now Facebook at like many other companies may see that the big hand of government stepping in with more regulation, say oh no, we don't want that, but you suggest that at least in this case Facebook might be interested. Regulation what is right.

They had Mark Zuckerberg, the person Facebook. They called him up before Congress and so he went and testified there that was interesting in a lot of ways. One of the ancient ways was seeing how many senators really didn't understand what Facebook was, and some were not truly know what the Internet is but those of the people would be putting this regulation together. And so one of them's Lindsay Graham asked Mark Zuckerberg he said, would you be open to being regulated and Mark Zuckerberg said will I think so as long as as long as it was the right kind of regulation, so I thought to myself, what would be the right kind of regulation for Facebook what Facebook would like to do is they would like to have regulation that would prevent other companies from coming into their space and maybe there some regulations that you have to be a really huge company in order to afford to comply with those regulations, both small start up. They couldn't do that.

Also, Facebook talks about trying to put some artificial intelligence in place to track hate speech that's taken a long time to develop in this North area. How could some small start up company be able to do those kinds regulations. So in essence what Facebook would like his barriers to entry, to keep them on top. We are chatting with Bob Chandler. He is president of Mac, Vantage, Inc., and I should notes that he is the person who works with the computers for the John Locke foundation.

In addition to being a technology expert in general, Bob, is this something that's unusual for these larger tech companies or have we been seeing this with the other companies as well.

But once they get to be fairly large.

They don't really mind as much when the government wants to step in. I think it's something that we see across all industries. Whenever somebody becomes the incumbent player then they want to be able to keep other people out of their out of their industry there and so we've seen at some on the tech side.

But this is one of the few times when I think people really start to be concerned about what the tech companies are doing in general. You know when they're making computers are just making phones and not insured in it.

But now that all of a sudden their private information is being sold or being put out there. That's when people started make some sort really think about is something we like to have regulated and I think Facebook is thought about how can we take advantage of that. Now there is no additional government regulation are there good prospects for some competitor to come along and offer a product that might undercut Facebook's dominance of the wood regulation make a huge difference for Facebook in the long term. I think part of the regulation would be closing the door after the horses out give it give a MySpace account which no never did get on MySpace so we all remember that was a social media platform is one of the first ones, and so now no one's ever heard of that and so Facebook last year. Their ad revenues were up, but there visits were down and so now a lot of people I think are moving to twitter and so twitter is kind of taking on Facebook and some of the things that you should do and then the big thing now is on Instagram.

That's what all the kids are doing now and so they refer to Facebook is the place where your grandparents are and so Instagram now maybe taking over, but one of the things to realize is Facebook owns Instagram and then their snap chat another thing is I haven't even heard about but it sounds as if in this regulation front Facebook might be in the position of saying please don't throw me in the briar pad as well that time they would actually like something that would help preserve their business. That's right.

And also whatever regulation the government does will be based on the current model, and so in one sense, that may actually entrench that model. They say oh you have to do things this way and meet these regulations that might prevent innovation that would allow things to be done a completely different way. Like Instagram is his focus on photographs worse. Facebook has been focus a lot. Someone photographs but a lot on just new text messages coming out as someone who watches this industry very closely and also was someone probably tells a fan of free market principles is the best course of action. Here, one that involves regulation or we would be better to allow other competitors to try to take some of this market away from Facebook. I do trust the market a lot and think that okay these things are the things are fluid and Facebook seems like it's huge and could never fall. So did MySpace and so I think that there will be competitive pressures in their and the different companies can come in. There may be a need overall for some for some legislation on privacy though is I think privacy is now in his place where you can easily hear your information be shared instantly across the whole world, there may be some role for government.

But as far as I've seen from the senators and congressmen that talked about it so far. I'm not sure they really understand the nuances that would make that effective. So the brief time that we have remaining.

If there is some regulation would you warn against allowing Facebook to play a very big role in helping corrective regulation. Yes I would hope that they're not the ones who are overwriting the regulation and but on the same token, I'm not sure what made the sense of having it either. So perhaps the getting some experts who don't have any skin in the game. Yes, I think you know a lot of the legislation is actually written by senators, A's and those sorts of people and so I think there's by a lot of those people that are really up on what's going on in the technology trends that I think the industry industry needs input and also the public would need input as well. What's very interesting topic. We know one person who's going to be watching very closely, as this moves forward is Bob Chandler. He is a technology expert, especially on back computers which is part of the name of his company is president of Mac Vantage Corporation expert for doing something surrounding a lot more on Carolina journal radio just a moment. Did you know you can now advance freedom and free markets just by shopping with Amazon it's true online shopping is now a great way to support the John lot foundation just shot using the Amazon smile program and designate the work foundation to receive a portion of your purchase amount that's right you shop and Amazon donates money to assess the John Locke foundation is how it works long time to Amazon smile. It's the same Amazon you know same products same prices is much better.

Amazon donates .5% of the price of your eligible purchases to pass the John Locke foundation to try and be sure to designate the lot foundation is a nonprofit, you want to support. It's that easy. So now not only will you enjoy what you buy will also support freedom. Don't forget log on to today by something nice and help defend freedom. Support the John Locke foundation, Thomas Jefferson, John Adams, friends, rivals, great American presidents. Their ideas still have great value today. You can hear those ideas. Monday, November 5. It's a special living history event in Raleigh.

Thomas Jefferson and John Adams come to life in a debate on the future of the United States of America. Taxes, trade, foreign threats, Jefferson and Adams dealt with them all though how shelter differences before a live audience.

You could join them. It's living history. Monday, November 5 at 7 PM at the North Carolina Museum of natural sciences in Raleigh. Tickets are $10, five dollars for students like tickets that's John Locke with or call 1866 jail left info if you have freedom we got great news to share with you now. You can find the latest news, views, and research from conservative groups across North Carolina all in one place North Carolina it's one stop shopping for North Carolina's freedom of movement and North Carolina

You'll find links to John Locke foundation blogs on the days news Carolina reporting and quick takes Carolina journal radio interviews TV interviews featuring CJ reporters and lot foundation analysts, opinion pieces and reports on higher education from the James Dean Martin, Center for academic renewal, commentary and polling data from the scimitar's Institute and news and views from the North Carolina family policy Council. That's right, all in one place North Carolina that's North Carolina spelled out North Carolina Try it today. This week's edition of Carolina journal radio was brought to you by Blue Cross and Blue Shield of North Carolina working every day to transform the health system from North Carolinians. More information available at today. welcome back Carolina journal radio on which coca the recent US Supreme Court confirmation hearing for Brett Cavanaugh helped shine a spotlight on North Carolina's junior US Sen. Republican Tom Tillis chided his Democratic colleagues and liberal activist Tillis asked why they were focusing on issues that had little to do with Cavanaugh's record on the bench or talk about all the start money and efforts going on the other side will just got an email from Morgan organizing for action, y'all would know that is the legacy campaign of Pres. Obama tell me to oppose you because you're going to deny reproductive rights deny healthcare coverage that advance climate change in a bad way, and the ongoing violence prevention.

I'm pretty sure once you get confirmed on the bench or be able to follow bill to do any of that what you may end up doing is fine. And now that we got lazy. We did work hard enough. We did not understand the Constitution. We didn't reach across the to create enduring value which is largely the reasons why people get frustrated with. They want you to do our job just discourse.

It said numerous times in his confirmation hearing that I had the privilege of participating in it's not my job to do your job. Mr. Sen., if you're frustrated and worried about the prospects of somebody being able denied coverage for pre-existing conditions and let's fix it. That's why follow bill a couple weeks ago.

Let's fix it, don't play politics and blame the Supreme Court for your inadequate architecture of a bill. Let's fix it if you're worried about the balls and strikes that Judge Cavanaugh's called on the bench around regulatory issues. It seems to me you called balls and strikes on both sides of the administrative procedures are in there seem to be flaws in there that need to be fixed for the attorneys in the room were studied on the law rather than trying to get Judge Cavanaugh to commit one where the another on these policy initiatives. The Pres. Obama and others around this table or are interested in general and to explain to you the legal theory behind his position that may have in fact produced an outcome that he didn't particularly like, but because he didn't based on its interpretation of the Constitution and the laws don't expect him to be a politician and as for motivations, you don't have to say that it's been said by at least one person on this committee that on the one hand, we should question other people's motivations. On the other hand up on a personally insulting things because I think we have before us an eminently qualified judge someone who's going to call balls and strikes us strikes to suggest that because I'm inclined to support him. But I'm complicit in evil really makes me wonder the sincerity about questioning other people's not moat motives. That's US Sen. Tom Tillis Republican from North Carolina. He's outlining some of his concerns about Democratic senators approach the US Supreme Court nomination for Brett Cavanaugh, will return with more Carolina journal radio minimal this week's edition of Carolina journal radio was brought to you by Blue Cross and Blue Shield of North Carolina working every day to transform the health system from North Carolinians. More information available at today. Thomas Jefferson, John Adams, friends, rivals, great American presidents. Their ideas still have great value today.

You can hear those ideas. Monday, November 5. It's a special living history event in Raleigh. Thomas Jefferson and John Adams come to life in a debate on the future of the United States of America. Taxes, trade, foreign threats, Jefferson and Adams dealt with them all though how shelter differences before a live audience. You could join them.

It's living history. Monday, November 5, 7 PM at the North Carolina Museum of natural sciences in Raleigh. Tickets are $10, five dollars for students like tickets that's John Locke with or call 1866 jail left info. Welcome back Carolina journal radio line which coca Charlotte served as the setting for the recent announcement of a new federal government plan. It's designed to help small business workers plan for retirement.

US Labor Secretary Alexander Acosta has details. Today's action by Pres. from is designed to make it easier for Americans to channel some of that rich economic opportunity, not just into today but into savings for their future. The president has asked Department of Labor to consider expanding when employers, especially small and medium businesses can band together to provide retirement plans. Now these plans. In essence, 401(k)s can include diversified investment options and automatic opt out enrollment 401(k) plans have a proven record 401(k) plans have worked in virtually all employees and large corporations have access to. But there are about 42 million Americans, one third of the private workforce that doesn't work for a large corporation but that works for small business and most of the small business employers can't provide access to the same quality 401(k)s. With so many Americans working for small businesses and so many without access to workplace retirement plans. There's a real danger that today's economic opportunity will not translate into savings for the Acosta asked his audience to consider the potential benefits. Step back and imagine if all the small businesses here in Charlotte can band together and say, as a group to provide retirement option for our employees administered by one central entity Chamber of Commerce, for example, is represented up here today.

Imagine the administrative savings but also managing the portability when an employee goes from one small business to another small business.

It's the same 401(k) plan portable 401(k) plan from small business to small business, no 401(k) plans are a straightforward proven vehicle used by millions of Americans working for large employers. If it works for them. There is no reason whatsoever that it should not work for employees of small businesses to small business employees don't deserve to be forgotten simply because they don't have and don't get the same attention as the large corporations they deserve access to retirement benefits as an association, chambers of commerce, and others can start providing these retirement benefits everyone will be better off North Carolina's Linda McMahon head of the US small business administration chimed in today's executive order is a significant and important step toward increasing economic security for our American workers. It does that by reducing the regulatory hurdles that vent millions of small businesses from providing workplace retirement plans. A significant percentage of small business owners and employees are not saving the money that they need for retirement everything that commercial on television where people in front of the big graph it said how do you think you are relative to having enough retirement dollars and few people hit that mark with the 401(k) type of plan. Small business cannot only provide a valued employee benefit, but also benefit from special tax incentives that's important for small businesses. As I traveled the country meeting with small business owners and I've been to 44 states so far. I often hear they'd like to offer their employees retirement savings plans, but they just can't afford it, and the smaller the business the more unlikely it is to be able to absorb the high cost inherent in administering employee retirement plans, McMahon pointed to the likely benefits of the new federal government rules the multiple employer plans that Sec. Acosta is referred to will result in significantly more small businesses offering retirement savings plans to their employees in the new plan will be implemented by simplifying regulation again hallmark of this presidency simplifying and rolling back regulations within a rolling back when I can introduce more small businesses are so important to our economy. They create two out of every three net new jobs in the private sector and we want those entrepreneurs who take a risk on starting a growing a small business to know where listening to you and the president has your back into America's workers. The new plan is a powerful message that we care about your financial security. We want you to take an active role in saving for your future but you don't have to do it alone right now, only about half of private-sector workers in places with fewer than 100 employees even have access to workplace retirement plans.

This action is going to make it easier for you to say and to be able to share in the benefits of our growing economy Jerry Howard of the national Association of homebuilders praise.

The idea men women wells North Carolina are overwhelmingly small business people work and live in the same communities. This initiative, the youth's pro rata sign will enable them to help their neighbors, their employees toward economic security in retirement. This initiative will help them compete against larger businesses in a very tight labor market just like because of the success of your economy are all grateful for that is causing us a little bit of problems with this initiative is going to help us out a lot, Mr. Pres., this initiative simply is good for business is good for employees.

It's good for communities it's good for the economy Bob Morgan that the Charlotte Chamber of Commerce welcome the announcement. Small business is a big part of Charlotte story. In fact there more than 50,000 small businesses, those with fewer than 20 employees who call the Charlotte region home. A significant number of these businesses are not able to bear the cost and the regulatory burdens of offering 401(k) retirement funds. Mr. Pres., companies in Charlotte. Big, small, and in between are already benefiting from the tax and regulatory relief. You have delivered to the American people your announcement today and the promotion of association retirement plans will I predict positively impact many of our small businesses in the thousands of people that they currently employ and let me say the Charlotte Chamber of Commerce would love to be the first local Association to implement one of these new plans. Pres. Trump offered his own comments about the proposal. I promise to put American workers first. I promise to put their families first fact, I promise to put their families even ahead of them and most of them like it and the ones that don't.

We don't like them too much.

Anyway, but today I'm honoring the promise once more here in Charlotte.

From our youngest citizens to our senior citizens were truly making America great again, but listening to highlights from a recent presidential announcement in Charlotte. The federal government plans to make it easier for workers and small businesses to save for retirement will return with more Carolina journal radio with about a commitment to truth and transparency in government. That is the mission of Carolina journal and we are proud to deliver and now proud to tell you the North Carolina press Association has honored to members of our team with awards for reporting and writing, that's right, we really do deliver award-winning journalism we shine the light on government spending, reveal the truth about boondoggles and dig deep into programs paid for with your tax money. We keep you in the know in a way other media outlets don't in our reach and influence our growing all of our outlets. We reach more than 1 million N. Carolinians each month so make sure you're one of them. Our monthly print edition arrives in your mailbox every month.

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Call 1866 JL FI NFO for your free subscription, welcome back to Carolina journal radio Donna Martinez. The image is devastation in the stories of families displaced from their homes due to hurricane Florence are absolutely heartbreaking in the wake of the storm governor Roy Cooper served notice that the state would not allow what he called price gouging from those selling in demand products.

Things like eye scans. For example, or in demand services such as repair and debris removal, but our next guest says that the price gouging provision is actually misguided and that it hurts people is here to explain why Roy Coronado's Senior account. A must for the John Locke foundation Ray welcome back to the program. I'm good to be back on, so no one's heart cannot break. Frankly, when you see what is occurred in our state. In these different areas and and people are needing so many things I no doubt that the motivation and the intention of those who don't want people to be scammed is coming from their heart, but you're looking at the economics and, yes, and that's what this is really about. You actually say that this is misguided. It hurts people. Well let me just clear something up price gouging is not scamming okay scamming is defraud no one's defrauding people what they call price gouging which really is an economic term. It's just charging the market price okay and the reason why you want people to be able to charge the market price where supply equals demand economics terms is for short. For social reasons.

Okay what you want to such a situation, you want people to conserve whatever it is there date the money you you want producers sellers to get more stuff to sell. Okay you want more supply less demand.

You want people to guess her and you want people not to hoard okay for topping off of the gas to not only topping off right having great having three cars in your driveway going nowhere awful all the thankful gas. While the tanks at the pump are empty. This is the kind of thing that is encouraged by these laws which keep prices from rising to the market price. The so-called gouging price because what hot the higher price does is it makes people think. Do I really need to have that third car full of gas in my driveway.

That's just going to sit there. Do you mean it makes you consider your your decisions and and and and tell and discourages hoarding because that's what that is.

You don't want you want the available to support supplied be out there for with foreseeable emergencies. The woman who has to get to the hospital right can't get the hospital to deliver her baby but the kinky gas because there either our dessert or there's a line around the block. That's two hours long so the higher prices encourage socially beneficial behavior the force that lower prices discourage all that. One thing I left out is the higher prices encourages because it means a higher profit margin for the sellers. It encourages new supply to come into the area. Supplies will move from areas of lower profit. The higher profit which reduces the price right, exactly. So, in your example. Then, instead of people on having the full gas tanks were three vehicles that are sitting in the driveway going nowhere. If you are people I say no. That price is too high for me. I'm just not willing to pay that enough people start to do that. That's the market signal that brings the price down. Not only that it brings in other brings in more supply great example is from Fran two decades ago. Now where in Raleigh they were trying to. There was no ice okay and some some some college students from Goldsboro, where there is plenty nice.

If I were a renter and a nice truck where Phil flies go to downtown Raleigh and sell ice on the street corner right they were selling ice 10 $11 a bag. Okay, but what date they could get it.

There's a long line to buy that ice $11 a bag earned them a prophet.

Encourage them to bring in more supply right exactly what the higher price is supposed to do right increases supply advice. That's what it did well the police came along and shut them down and and my understanding is that the people waiting in line to buy gas at 10 $11 a bag actually cheered. I don't quite understand because the police were denying them the right to buy something which is seems bizarre but the point is is that it encouraged that higher price.

Encourage the additional supply and you would see that in lots of areas.

Why would someone bring more supply and let's say from Virginia to North Carolina if they can't sell it for anymore right or you've talked about and you've written about the state's law that allows this to the provision that allows the governor to say okay the so-called price gouging law is now in effect. What is really saying. I mean who is to determine what is the situation where were going to impose this is price control. So first of all, doesn't even have to be a natural does a disaster in our own state.

For example, the law now so used to be that had to be a disaster in our own state. The law now says that you can trigger the price gouging law if it's a disaster. Let's say in Texas that disrupts gasoline supply to North Carolina so a a a hurricane in Texas. Chris could trigger that law in Moco and enhance the rules are very complicated and I don't know them real well.

I mean it has to do with what you have been charging for the last 60 days which is irrelevant.

By the way, to what you charge now right supply and demand shifts all the time. The whole point here is that what you charge six days ago has nothing to do with what the price should be net. I demand and supply have moved in such a direction where price is going right. You have less apply more demand because people are trying to ward and the price is not allowed to respond to that. So what you charge yesterday is irrelevant to what you charge today that supply demand is always shifting and and prices need to follow that in order to what becomes the coordinate the market for debate basically being people's plans together. Otherwise, did you end up with these crazy situations where gas stations are closed people waiting in long lines for hours to get guess you have the 1970s, right if you wanted if you know those of you out there where you are young you don't remember 1970s.

Just look at the lives of so and so on that occur North Carolina whenever we have spoken this with Eric and for the exact same reason we had price controls on gasoline and oil at the time, which is what caused those shortages and its exact same principle. How serious is it if someone violates the price gouging provision. I mean is you and I are talking on my been reading about reports. Where is like a hot line of people are calling in reporting people because they think that they're charging too much for something a simple thing to do.

That is just don't buy but no there but there are heavy fines and and people so store owners would rather keep the price low. Of course, run out so that you don't just sell until it's gone shut their doors and go home right relax real every sit due to hurricane at home rather than working through what we want them to blow you in the back of the servant, what does it do with it encourages them to keep the price at the low price. The price that is not consistent with market until they run out and and that The pumps in and shut their doors in the home and this is what happens. So what do we do what can someone like you. And economists say to people that essentially gets them to do not listen to what is I think natural reaction from someone who's in a really tough situation that is to want to go out top off the gas tank buy as much ice as you can what you say to them well I what I say to them is would you rather have these products available at a higher price or not available at a lower price. In other words, you geared your UK you can find places with $2.59 a gallon on their side, except they don't have any to sell you at that price live in talking with Roy Coronado.

He is Senior economist for the John Locke foundation. That's all the time we have for the program this week. Thank you for listening on behalf of Mitch. Okay I'm Donna Martinez. Join us again next week for more Carolina journal radio this week's edition of Carolina journal writing is brought to you by Blue Cross and Blue Shield working every day to transform the health system. More information available today. Carolina journal radio program of the job. To learn more about John Locke, including donations that support programs like Carolina radio send email to development John 66 JL left info 166-553-4636 Carolina journal radio is a comfort action of the John line foundation, Carolina's free-market think tank and Carolina broadcasting system, Inc. all opinions expressed on this program are solely those did not merely reflect the advertisers or the station. For more information about the show for other programs and services of the John line foundation John Locke.toll-free at 866 JL would like to thank our wonderful radio affiliates across Carolina and our sponsors. Carolina journal radio. Thank you for listening.

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