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Notebook

What Happened to North Carolina?

Protesters outside the North Carolina Statehouse in Raleigh, N.C., on May 16.Credit...Al Drago/CQ Roll Call, via Associated Press

In late September, the skies opened over North Carolina. The remnants of Tropical Storm Julia crashed into Bertie County, on the Albemarle Sound inside the barrier islands of the Outer Banks, sending cascades of muddy water into homes and stores and forcing officials to release a herd of bison kept at a local zoo. Gov. Pat McCrory diverted his increasingly struggling re-election campaign to tour the soggy town. He had barely had time to do so before another storm, 130 miles inland, sent several feet of water from the Cape Fear basin racing through Fayetteville.

It’s been that kind of year in North Carolina. As floodwaters were rising, protests wracked Charlotte, the state’s largest city, after the local police shot and killed a black man named Keith Lamont Scott while serving a warrant for someone else. This came on the heels of a federal appeals court decision in July that struck down restrictive voting laws the state legislature had passed in 2013, which, the court observed, “target African Americans with almost surgical precision.” Between visits to the flood zones, Governor McCrory, a Republican, was forced to defend another new law allowing police to withhold body- and dashboard-camera footage of the sort protesters were demanding to have released in the Scott shooting from the public.

All this was playing out against the backdrop of his state’s most persistent debate: the so-called “bathroom bill,” a law passed in March that stripped legal protections for lesbians, gays and transgender people and made it illegal for transgender people to use public restrooms that don’t match the sex listed on their birth certificates. The legislation triggered a wave of corporate reprisals that have battered the state’s economy, and possibly the governor’s hopes for a second term. An analysis by the Williams Institute of the University of California, Los Angeles estimated that the law could cost North Carolina nearly $5 billion in lost federal funds, along with thousands of jobs and millions in tax revenue. Investors managing $2.1 trillion in collective assets warned in September that North Carolina was headed for a “state-government-inflicted recession.” The law is now the subject of several federal lawsuits. If it is struck down, it will become the 14th law passed by North Carolina’s legislature found to be unconstitutional since Republicans took control in 2011.

Among southern states, North Carolina would have seemed to be the least likely to find itself a flashpoint in the national debate over tolerance and inclusion. The state has long traded on a reputation of relative political moderation, or at least balance. From 1999 to 2003, voters sent both the archconservative Jesse Helms and the then-Democratic darling John Edwards to the United States Senate. The state went narrowly to Obama in 2008 and narrowly to Mitt Romney in 2012.

But it is also Exhibit A of the partisan self-sorting that has defined national politics in recent decades; a trend that has produced violent mood swings. Its population is divided between the predominantly Democratic metropolitan areas surrounding powerful research universities, corporate centers and high-tech industries on one hand, and majority Republican voters in emptying towns struggling to survive the shuttering of once-dominant furniture, textile and tobacco industries on the other.

The opposing demographics held each other in relative check until after the 2008 election. But after Democrats won the presidential, gubernatorial and senatorial races that year, the national Republican State Leadership Committee coordinated donors to flip the Statehouse. Taking advantage of the Supreme Court’s Citizens United ruling, which allowed virtually unlimited private spending on campaigns, this group of donors — led by discount-store magnate James Arthur Pope — flooded cheap, often-ignored state legislative races with attack ads against Democrats.

The resulting Republican majority immediately moved to impose drastic abortion restrictions and curbs on same-sex marriage, along with new limits on voter access — disproportionately and, according to the federal courts, intentionally affecting black voters — and police accountability. These policies have predictably sharpened the state’s partisan divide, but they have also more unexpectedly created a rift between what used to be the Republican Party’s most durable bases: social conservatives and business. The man most clearly caught in the middle is Governor McCrory.

Although McCrory made his national debut defending one of his state’s radical new laws, until a few years ago North Carolinians knew him as the moderate mayor of Charlotte. A longtime employee of utility giant Duke Energy (he remained on the company’s payroll throughout his 14 years as mayor), the Ohio native, raised outside Greensboro, N.C., was regarded as a business-boosting pragmatist. He was devoted to deregulation and corporate tax cuts and generally eschewed ideological fireworks. His signature issue was championing a light rail system, the first built in the state.

When I met with McCrory on a porch at the executive mansion in late June, he did his best to distance himself from the recent activities of the state legislature. “I’m my own guy and that’s my priority,” he said, leaning back on a bench in his shirt sleeves. But the governor, for all of his efforts to project laid-back confidence, was in a maelstrom. The trouble had started in March, a few weeks after Charlotte’s City Council revised its existing nondiscrimination ordinance to ensure businesses and public facilities such as hotels, restaurants and taxis couldn’t discriminate against gay, lesbian or transgender customers. As widely understood, that would allow transgender people to enter the public restroom of their choice under the protection of the law.

The irate conservative leaders of the state legislature, convinced this represented a threat to public safety, convened a one-day emergency session to overrule the ordinance. But the bill they drafted, the Public Facilities Privacy and Security Act — better known as House Bill 2 — went much further than regulating bathrooms. H.B. 2 revoked every local nondiscrimination ordinance in the state, replacing them all with a single policy that explicitly excluded sexual orientation and gender identity as protected classes. It then expressly made it illegal for people to enter bathrooms in publicly funded facilities such as airports, schools and arenas that did not correspond to their “biological sex,” which the law defined as the gender on their birth certificate.

McCrory signed the bill that night. When I asked him why, he told me he had thought about Mike Pence, the Indiana governor who has since become Donald J. Trump’s running mate. Pence courted national controversy in 2015 when he took three days to sign a bill that allowed Indianans to ignore some nondiscrimination protections on grounds of “religious freedom.”

Under threats of boycott from corporations, as well as the N.C.A.A., Pence signed an amendment granting limited protections based on race and sexual orientation, which made no one happy. Decisive action, McCrory thought, would keep L.G.B.T. rights groups like the Human Rights Campaign from turning H.B. 2 into a liability for his re-election bid against the longtime Democratic state attorney general, Roy Cooper. “I knew it was a political setup,” he told me. “I’m no fool.”

McCrory also knew that, while he had to appeal to the conservative base that supported the bill, he had to keep the backing of suburban moderates who pushed him to victory in 2012. So he attempted some political tap-dancing, defending the controversial law as “common sense” even as he strongly implied that he had nothing to do with its creation.

Throughout our interview, McCrory took pains to contrast himself with the social conservatives in the Statehouse down the street and highlighted his opposition to other conservative legislation including a “religious freedom” bill that more closely resembled Indiana’s. McCrory also noted his refusal to call the special session in which H.B. 2 was passed. He stopped just short of suggesting his own party should lose seats in the fall. “You know a supermajority gives more power to the legislature than the executive branch,” he said. “You talk to any governor and we’re all going through the same thing.” But Republican strategists in the state, as well as other officials and lobbyists who have talked with McCrory and his staff about the issue, told me the governor’s office did take a leading role in pushing for the bill.

Before McCrory signed the legislation, a lobbyist under contract with Apple tried to set up a phone call between the governor and an Apple executive to discuss it, said Darren G. Jackson, a Democratic state legislator who later met with the company’s representatives. Apple is a major investor in North Carolina, operating a $3 billion iCloud data center and solar farm in Maiden. Tim Cook, its openly gay C.E.O. who went to business school at Duke University vehemently opposes the law.

McCrory’s office never responded to the request. (Apple declined to comment for this story.) Instead, McCrory’s chief campaign strategist, Chris LaCivita — who organized the Swift Boat Veterans for Truth campaign against John Kerry in 2004 — wrote the contract lobbyist, who represents several firms opposed to the bill, and others trying to persuade legislators to vote against the law, to let them know he was watching them. “Pressure was being put on lobbyists and the business community to stay out of it,” Jackson said. (LaCivita declined to comment on the emails.)

One thing that does seem clear is that the business backlash took McCrory by surprise. “No one could have predicted the consequences” of supporting H.B. 2, said Theresa Kostrzewa, an influential Raleigh-based Republican lobbyist who spoke with the governor while the bill was being debated. Not so long ago, business interests had usually been compatible with the social conservative agenda. But the politics of the business world have changed as power has moved away from industries like manufacturing into socially liberal centers like New York and Silicon Valley — a change reflected in North Carolina’s own shifting economy.

More than 160 executives signed a letter from the Human Rights Campaign denouncing the governor and calling for the law’s immediate repeal. Included in the group: Chief executives of 30 of North Carolina’s top 300 employers, like Bank of America, the largest corporation headquartered in the state; along with Apple, Pfizer and other major companies. PayPal canceled plans for a global call center in Charlotte that would have created 400 jobs, a project McCrory had just spent two weeks taking credit for. Deutsche Bank froze plans for a $9 million, 250-job expansion of its technology center. Six states, including New York and California, banned state-funded travel, including state university sports teams. North Carolina tourism bureaus have reported millions of dollars in losses from cancellations.

Most embarrassingly, the N.B.A. pulled its 2017 All-Star Weekend from Charlotte, canceling an event local leaders had spent years trying to attract, along with its expected influx of more than $100 million. The N.C.A.A. and Atlantic Coast Conference followed suit, pulling tournament games out of the state including the A.C.C. football championship.

Behind the scenes, McCrory and some Republican lawmakers scrambled to undo the damage — trying to keep the NBA All-Star Game by promising a partial repeal and a process to address the “bathroom issue.” McCrory also issued a limited executive order extending L.G.B.T. protections to state employees. But small-town legislators weren’t interested in negotiating. Neither they nor their constituents had much use for the big corporations and tech firms attracting new jobs to cities. They laughed off Charlotte’s loss of what the president pro tempore of the Senate, Phil Berger, dismissed as an “exhibition basketball game.” Other legislators threatened to take back millions of dollars in tax breaks for American Airlines, a signatory of the Human Rights Campaignletter, which the governor had just lobbied for.

“We want those companies here if they want to be part of North Carolina. If they want to turn North Carolina into California, they should go to California,” Dan Forest, McCrory’s separately elected and more conservative lieutenant governor, told me. Several efforts at repealing the bill fell apart as Republicans insisted Charlotte rescind its L.G.B.T.-friendly nondiscrimination ordinance first.

With the state’s economy and reputation in the balance, McCrory changed tactics. He began embracing the bill more strongly in public, joining legislative leaders in trying to shift blame to the Charlotte City Council for passing protections in the first place. He even started doing something that would have been unthinkable just four years ago: lashing out at his former corporate allies.

He blasted the N.B.A. for being a member of the “the sports and entertainment elite” and accused them of banding with Cooper and the “liberal media” to impose “their political will.” When investors led by Trillium Asset Management issued their warning about the economic consequences of the state’s politics, McCrory mocked them as “New York hedge fund billionaires” and said they had “hosed everyday working North Carolinians.” (There were no hedge funds involved in the statement, Trillium spokeswoman Caroline White said. Trillium has an office in Durham.)

North Carolina also found itself defending H.B. 2 in federal suits brought by the Justice Department, the American Civil Liberties Union and several transgender plaintiffs, who won a limited injunction in late summer. The full trial is scheduled for mid-November, after the presidential election.

The costs of the backlash are becoming politically obvious. Polls consistently find that a majority of North Carolinians believes H.B. 2 has hurt the state’s economy and reputation, even though slight majorities also still oppose letting transgender people use the bathrooms of their choice. In a late August poll from Monmouth University of likely voters, the approval rate for H.B. 2 had fallen to 36 percent. Cooper got the support of 72 percent who disapproved of the law. In an early September trip to Charlotte, Hillary Clinton used the opportunity to hit McCrory with the specter of H.B. 2, saying, “Discrimination is not only wrong, it’s bad for business.”

North Carolina is a crucial swing state. Clinton currently leads Trump there by 2.6 points in the RealClearPolitics average of recent polls. Deborah Ross, a Democrat, leads the Republican incumbent, Richard Burr, by a slimmer margin in the race for the United States Senate. McCrory, the only statewide candidate saddled with H.B. 2, is trailing Cooper by an average of 4 points.

North Carolina’s state government is a liability on many fronts — even the weather. When Cooper refused to defend H.B. 2 in court, lawmakers voted to pull half a million dollars from the state disaster relief fund to pay legal fees. McCrory refused to sign that bill, which became law without his signature. The floods hit a few weeks later. Yet another law the state legislature passed in 2012 prohibited state coastal planning officials from taking into account the effects of sea-level rise because of climate change. When I contacted McCrory’s press office this week, a spokesman told me the governor was extremely busy trying to preparing for the possibility of more floods; Hurricane Matthew was advancing up the Atlantic Coast.

Jonathan M. Katz is a freelance journalist and the author of ‘‘The Big Truck That Went By: How the World Came to Save Haiti and Left Behind a Disaster.’’

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