New economic reports suggest an increasingly thriving economy thanks to changes in regulatory and tax policy and the Bernie Sanders promise of the government providing a job, an education, and health care is just a fantasy that ultimately ends in misery, according to Texas Public Policy Foundation Chief Economist Dr. Vance Ginn.
Numbers released Thursday from the Labor Department show, that in the final week of April, just 211,000 Americans filed first-time unemployment claims. That’s the lowest number since 1969. The monthly average for April was 221,500 new claims, the lowest since 1973, when the U.S. workforce was half the size it is now.
Ginn says there are pretty simple reasons for the low numbers.
“A big part of it has to do with the regulatory reform. The rollbacks by the Trump administration last year gave some more consumer and business confidence out there, that are near record highs. Along with the Tax Cuts and Jobs Act that was passed in December, these things have (people) saying, ‘Let’s go ahead and invest. Let’s go ahead and hire more workers.
“People are spending more at the same time. That’s the way you really get more job creation and more economic growth over time,” said Ginn.
But the historically low unemployment claims don’t tell the whole story. Ginn says there is definitely room for improvement in the labor participation rate and the unemployment rate, known as U-6, that includes part-time workers and people who have given up looking for work.
“They are improving but there is still a ways to go. The unemployment rate – the reported number – is at 4.1 percent. But the U-6, which includes under-employed and discouraged workers, is still above eight percent. That’s above where we’re usually at at this time in an economic expansion. As of this month, this is the second-longest economic expansion in U.S. history,” said Ginn.
He’s also not satisfied from what he’s seeing from an economic indicator known as the employment to population ratio.
While the economy grows, the political left has a very different vision for America’s economic future. Sen. Bernie Sanders, I-Vermont, who narrowly lost the 2016 Democratic Party nomination to Hillary Clinton, is now pushing a plan to provide a government job to every American, along with taxpayer-funded health care and college tuition.
While conservatives recoil at such an agenda, a new Rasmussen poll shows 46 percent of Americans like the Sanders plan.
Ginn is not surprised.
“What it tells us is that people like to get things for free or what they perceive to be free. But it also tells me that 54 percent of people understand the opportunity cost and what direct cost this will have,” he said.
“So even with it being “free,” they still oppose it because they understand this is going to come with some sort of cost. Somebody’s got to pay for it and all the details aren’t out yet,” said Ginn.
He says a majority of Americans still realize this cannot be done.
“Making sure that the jobs pay $15 an hour or making sure that there’s health care benefits, maybe even having “free college,” all these things come with a huge cost,” said Ginn, who says that money would have to come from tax hikes on businesses and individuals.
“If you’re raising the cost of doing business, that means fewer jobs available in the private sector. So are we going to have more federal government jobs. How exactly will these people be employed?” asked Ginn, who also notes that many people may not like the jobs the federal government would assign them.
But conservatives like Ginn face an uphill climb. While firmly believing data and experience are on the side of limited government and free markets, Ginn says it’s a lot easier to promise “free” stuff than to articulate the beauty of markets.
“Often times that can be difficult. When you say you’re cutting taxes and then you show that the corporate income tax rate went from 35 percent to 21 percent, how is that not for the “rich?” (We know) businesses simply submit taxes. They don’t actually pay for them. People pay for them through the form of higher prices, lower wages, and fewer jobs available.
“Often times that’s a difficult message to sell but that’s the economic reality and I think we’ve got to stick to those core principles throughout each and every one of these policy initiatives,” said Ginn.
Ph.D. Economist at the Texas Public Policy Foundation. Blog posts are publications by the author.