Patrik Jonsson/The Christian Science Monitor
Steve Messer stands at his farm market in Asheville, N.C. The idea of transgender people in women's bathrooms gives him pause, but he supports their right to choose the bathroom that corresponds with their gender identity.

N.C. residents' question: How much is 'bathroom bill' going to cost us?

North Carolina's reputation as the South's most progressive state brought enormous economic benefits. The transgender bathroom debate shows how things are changing – and could hold national lessons.

Just down the road from where an old-time AM station pumps out “10,000 watts of gospel power,” the thumbs-up “like” symbol of the global social media giant Facebook adorns a sprawling data storage complex – a nearly half-billion dollar investment in one of the poorest corners of Appalachia.

Facebook’s spending is a sign of North Carolina’s pull on corporate America, boosting it to the second-largest state economy in the Southeast, behind Florida and ahead of Georgia. But that strong economic foundation, built over decades, is showing signs of cracks, observers say.

The cracks appeared even before a hastily passed law that critics say discriminates against lesbian, gay, bisexual, and especially transgender Americans – a law that means North Carolina “just became the Bull Connor of the tech industry,” says Mike Capra, an Internet talk show host, referring to the civil-rights-era Birmingham, Ala., official who used his authority to block racial integration.

To critics here in the Tar Heel State, House Bill 2 flies in the face of a long-cultivated image of North Carolina as a reasonably welcoming Southern state with growing, thriving urban areas – a success attributable to heavy state investment, particularly in education and training, which had the knock-on effect of attracting more top-end talent. The state is the nation’s top importer of educated people.

But that investment began to erode in 2010, when tea party Republicans rose to power in Raleigh. An emphasis on cutting spending programs, including for public school children, caused concern even before the combustible element of the culture wars were added. Despite economic growth in cities like Raleigh, Charlotte, and Asheville, two-thirds of North Carolina counties have seen poverty intensify since 2010.

Now, North Carolina has become a crucible for more than just gender identity rights but how economics mix with attempts to legislate morals. What happens next may be ultimately defined not just by moral strictures in the most socially conservative corners of America, but by the thirst for economic salvation from devastating levels of poverty.

The region as a whole is watching to see if conservative principles cost North Carolina its comeback.

“We’re talking billions and billions of dollars at stake here,” says Andrew Brod, an economist at the University of North Carolina-Greensboro. “They’re playing with fire.”

•  •  •

Gov. Pat McCrory has dismissed dissent from the state’s corporate citizens as a “coordinated … slander” campaign built on a misrepresentation of the law.

Indeed, the Public Facilities Privacy and Security Act is long and complex (it includes a section on the minimum wage). And it’s true, as supporters say, that 29 states and more than 10,000 United States locales also don’t offer antidiscrimination protection to transgender people.

Yet North Carolina’s law has been targeted by corporate America because it was the first to demand that people be prepared to show their birth certificate in order to use the bathroom. The law “is not a direction in which states move when they are seeking to provide … thriving hubs for business and economic development,” wrote Facebook CEO Mark Zuckerberg in a signed letter – though the company hasn’t signaled any definitive moves around future investments.

Moreover, this is still the South, where memories haven’t faded regarding other famous civil rights battles over bathroom and water fountain eligibility that took place here.

Not too far away, Mississippi’s recently passed law goes even further in allowing businesses to refuse service to LGBT people based on “moral” objections as well as “sincerely held religious beliefs.” Six other states are considering similar bathroom measures.

North Carolina, however, has more than most to lose. Less than a month after the bill was passed, the Center for American Progress estimates that the state has already put $500 million in corporate investment and tourism dollars in jeopardy. Putting an exclamation point on the tourism issue, Britain’s Foreign Office has issued a travel advisory warning its LGBT citizens traveling to North Carolina or Mississippi.

A growing boycott campaign now involves perhaps as many as 1,000 high-paying jobs lost, including 400 from PayPal canceling a multimillion dollar expansion. The list of canceled concerts and shows – including Bruce Springsteen, Pearl Jam, Ringo Starr, and Cirque de Soleil – so far have cost millions of dollars in lost revenue. Thursday, the National Basketball Association said that the 2017 All-Star Game won’t be played in Charlotte unless the law is changed.

Over the weekend, the annual High Point furniture market, still a cornerstone of the state economy, saw "hundreds, even thousands" fewer buyers than usual. Lionsgate says it won’t make more movies or TV shows here, composer Stephen Schwartz won’t allow any of his musicals, including “Wicked,” to be performed in the state, and Google won’t pour any venture capital into the state until lawmakers repeal the law. Corporate recruiters say they’re getting pushback over the law from potential hires.

Total losses are difficult to quantify, especially as no one can measure what Allen Freyer of the North Carolina Justice Center calls the “silent protest” of companies and entrepreneurs quietly scratching the state off their list.

But there is evidence that the losses could be significant. After a controversial religious liberty bill passed in Indiana a year ago, the state lost $60 million in convention business before lawmakers watered down the law. Georgia Gov. Nathan Deal (R) cited corporate investment in vetoing what he called a “discriminatory” religious liberty bill last month.

“There’s something fundamental about discrimination that keeps capital and talent on the sidelines instead of actively engaged in growing the economy,” says Mr. Freyer. He blames Republican gerrymandering, which he says has divided the state into distinct ideological factions that make debate and compromise difficult at the statehouse.

Some proponents of the bathroom bill say much of the corporate rhetoric is bluster. “My sense, as a dilettante economist, unless we become the only state to maintain gender-specific public accommodations, I think [the controversy is] likely to blow over,” says Eric Dent, a freelance op-ed columnist.

At the same time, clearly feeling the pressure, Governor McCrory last week added some protections for LGBT state employees with an executive order, and urged the General Assembly to reconsider a provision that bars discrimination complaints in state courts. (So far, the General Assembly has not indicated a willingness to do so.)

For many, it wasn’t enough.

•  •  •

In an election year, the support of the law will be tested in places like Forest City, where most folks support barring transgender people from women’s bathrooms.

According to a 2013 survey, North Carolina has three of the country’s 10 poorest cities, and Forest City is among them.

Everybody here “grew up on cotton,” says Tony Heffner, a pawn broker in a soiled white T-shirt. But textile mills and greeting card printers are long gone. Now, the biggest draw to downtown is Smith’s Drugs, where waitresses call patrons “buddy” and sling liver mush, a cornmeal-infused mélange of pig parts. Mr. Heffner says he doesn’t even sell gold anymore, because all people do is look at it.

“The money all went away,” he says.

Nevertheless, many residents, including Mr. Heffner, struggle to tie global corporate complaints about discrimination against LGBT people to the poverty all around them. For many, that shiny Facebook facility might as well be in Kalamazoo for all its local economic impact.

Instead, many here see the backlash as a bullying tactic. “You give them an inch and they try to take a mile,” says Kay, a local antiques dealer who offered only her first name.

Squaring one’s bedrock Baptist faith with shifting cultural mores is difficult, but can’t be avoided, says a woman shopping in Kay’s store. She says that despite the Bible’s admonitions against homosexuality, “I’m friends with a lot of gay people.”

Though she has concerns about men exposing themselves in women’s bathrooms, the bathroom bill, she says, “makes me think of a wise man who once told me that more rules equal more misery.”

For others, the economic connections are clearer.

Rhonda Thompson is a devout Christian who runs the Iron Ink tattoo shop. Her clientele, she says, is largely poor, scraping together tax refunds for more skin art. Meth is a scourge, as are “kitchen job” tattoos that her artists get hired to repair.

As with many here, she doesn’t see why barring people born with male genitalia from women’s bathrooms is such a big deal. But she does question whether the state’s leaders are making a mountain out of a mole hill by taking a stand that disregards the complaints of those willing to invest in the state and its workers.

“It just seems like with everything they do, poor people are struggling even more,” she says.

•  •  •

Even more so than Georgia – which hosted the Olympics in 1996 – North Carolina gave America the template for a New South where the transformation from manufacturing economy to a knowledge economy could be glimpsed, and, perhaps, realized. Most critically, it was the first Southern state to invest heavily in public and secondary education.

And it largely worked.

U-Haul moves more households, on net, to North Carolina than any other state. Thanks to northern transplants, the Triangle region of some 1 million people has more hockey rinks than the 5 million people Atlanta metro area.

And after Republicans took over from a scandal-plagued Democratic Party in 2010 and McCrory was elected in 2012, the legislature has balanced the state’s books and filled up the rainy day fund, all of which has been rewarded with a triple-A bond rating from Moody’s. McCrory has called it a “Carolina Comeback” based on conservative principles.

Though a significant state income tax cut has likely helped the economy to some extent, North Carolina State economist Michael Walden says the gradually improving national economy has played the biggest role in the state’s shored-up finances.

And comparatively, the North Carolina recovery has been lukewarm, as the state continues to lose ground to other Southern states, including Florida and Georgia. North Carolina’s poor, especially, are taking a hit, as the gap between national average earnings and what’s in their pocket has widened under Republican leadership.

In balancing the budget, Republicans particularly targeted services for the poor, slashing unemployment benefits, refusing to expand Medicaid, and slashing per-pupil spending by $500 since 2008. There’s a sharp ideological edge to the cuts, critics say.

“They are sort of systematically dismantling the institutions that let North Carolina be a leader in the New South on education, investment in public institutions, and now this discrimination bill is sort of the culmination of how much the state has changed,” says Chris FitzSimon, director of the progressive NC Policy Watch. “They continue by their actions – not just their policy decisions – to dabble in vengeance and revenge, a kind of meanness that’s damaging the brand of North Carolina that people have spent decades to build.”

Earlier this year, Standard & Poor’s, the bond rating agency, wrote that North Carolina’s “favorable” economic climate “has spurred strong domestic in-migration, which has been good for population and economic growth.”

But the reference to in-migration also exposes the state’s vulnerability to branding and perception, says Mr. Walden, the North Carolina State economist.

“This legislation, whatever the merits or demerits, appears to have tarnished the state’s reputation in the short run, which could manifest itself in economic losses,” he says.

•  •  •

If the state capital of Raleigh has come to represent a moral uprising against things that “defy common sense” (which is how McCrory framed transgender bathroom use), the Blue Ridge mountain city of Asheville is the antithesis.

It has become a haven for LGBT people, ranked among the top 10 places for homosexual couples to retire. But many legislators in Raleigh don’t see an economic beacon where Louis CK plays the Orange Peel, Matt Damon is a new resident, and where the brewery New Belgium is putting a major new facility expansion. They see it, as one state legislator said, as “a cesspool of sin,” where a larger battle of Biblical morality is playing out in real time.

Despite Asheville's local reputation as a bastion of acceptance, a company that had been considering bringing 500 tech jobs to town said it was ruling out Buncombe County unless HB 2 was changed, the president of the Asheville Chamber of Commerce told the Asheville Citizen-Times.

A WRAL poll showed the North Carolina public evenly split over the question of which bathroom transgender people should use. But while 4 in 10 North Carolinians worry that the law will have a negative economic impact, just over 1 in 10 believe it will have no effect.

For farmer Steve Messer, the acceptance of alternative lifestyles means growing business for his farm stand, located next door to the Mountain Mojo coffee shop, where long-haired young men in Carhartt pants pull up in beat up Toyota trucks.

Yes, Mr. Messer worries about the safety of children in public restrooms. Yet understanding those who walk a different path is also a Biblical virtue, he says.

“Me being from the mountains, I think I speak for a lot of folks when I say I honestly don’t care who is in the next stall,” he says.

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