Originally published at Texans for Fiscal Responsibility. 
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Overview

• Free-market capitalism is the best path to letting people prosper, as it is the best economic institution that supports jobs and entrepreneurship so that more people can earn a living, gain skills, and build social capital. 
• The Texas economy remains a leader in jobs and economic growth, but the state has much to do to advance policies that will let people prosper. But let’s see what the data tell us about the Lone Star State.
• As Texans face an affordability crisis from high inflation, high property taxes, and an uncertain future with a weakening U.S. economy, the Legislature provided some tax relief but not nearly enough because of excessive spending last year. 
• Texas should provide more opportunities for people to prosper, mitigating the affordability crisis and withstanding destructive policies out of D.C. This can be done by passing sustainable budgets, eliminating property taxes, and passing universal school choice. 

The U.S. Bureau of Labor Statistics provides Texas’ labor market data to examine how people are doing across the state. 
Texas’ employment has been up for 44 of the last 46 months since May 2020.

• The establishment survey shows that nonfarm employment has increased by 1.14 million jobs since pre-COVID lockdowns in February 2020 to 14.1 million in February 2024, the fourth-best jobs recovery since then. The household survey shows that employment has increased by 1.0 million to 14.58 million jobs since February 2020. 
• In February, nonfarm employment increased by 49,800 jobs (the third-largest percentage increase of any state, at 0.4%, as 12 states had declines or essentially no growth), and it has been up for 44 of the last 46 months. The household survey also showed employment increased, but by 19,854 jobs in February, and it has also been increasing for 44 of the last 46 months. 

Texas workers gain jobs in most industries, and many people gain purchasing power. 

• Nonfarm jobs were up by 291,400 over the last year (the most in the country) to 14.1 million, for a 2.1% increase (the 7th fastest). Jobs in the private sector rose by 225,900 over the last year to 12.02 million (85% of total jobs), and government employment increased by 56,600 to 2.05 million (15% of total jobs). 
• Figure 1 illustrates how most major industries increased employment in February 2024 compared with February 2023. Still, a few industries had increases in average weekly earnings that did not keep up with chained CPI inflation of 2.9%, meaning they lost purchasing power.

Figure 1. Texas Labor Market by Industry

​Source: U.S. Bureau of Labor Statistics

Economic growth has picked up, but personal income lags the U.S. average.

• Figure 2 illustrates the recent report by the Bureau of Economic Analysis (BEA) that annualized growth in real GDP in Texas was up 5.7% in 2023 (well above the 2.5% growth for the U.S. average) ranked 2nd best in the country to $2.1 trillion. It grew by 5.0% annualized in Q4:2023, ranking 5th best.
• The BEA also reported personal income growth for Texas grew by 6.2% in 2023 (ranked 7th) to $2.0 trillion (above the 5.2% growth for U.S. average). It increased by 5.2% annualized in Q4:2024, ranking 8th best in that quarter.  

Figure 2: Real Gross Domestic Product by State in 2023

​Improve the Texas Model with pro-growth policies that limit government by:

• Spending Less: Lower state government spending and pass sustainable state and local spending limits.
• Taxing Less: Start eliminating local property taxes with surpluses at the state level to buy down school district M&O property taxes and at the local level by using their own surpluses to buy down their own property tax rates until all property taxes are eliminated. Texans must stop renting from the government and start owning their property with the elimination of property taxes.
• Regulate Less: Remove barriers to work, reduce occupational licensing, reform safety nets, and enact universal school choice. 

Strengthening the Texas Model will help Texans better resist D.C.’s overreach, be more competitive with other states, and, more importantly, flourish more for generations to come. Let’s start today!

In “This Week’s Economy” episode 54, I discuss the following and more:

• What should President Biden do about the tragedy at Baltimore’s Francis Scott Key Bridge?
• Which countries hold most of our debt held by foreign countries? The answer will probably surprise you.
• Why do some on the right want more government in our lives, including Florida Gov. DeSantis’ social media ban for minors? 
• Will school choice happen in Louisiana and Texas soon?
• 
  

Please like this video, subscribe to the channel, share it on social media, and provide a rating and review.
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See show notes on Substack: www.vanceginn.substack.com
Visit my website for more economic insights: www.vanceginn.com

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Originally published at Texans for Fiscal Responsibility.​

Highlights

• People prosper most from free-market capitalism; we need more of it in America.
• Americans are suffering from big-government policies out of D.C. 
• This brief highlights more than just the headlines you usually get. 

Figure 1: Real Average Weekly Earnings Remain Down 4.2% Since January 2021

​Source: Fed FRED

Labor Market
The Bureau of Labor Statistics recently released its U.S. jobs report for February 2024, which was another mixed report with some strengths but many weaknesses.

• The establishment survey is the most reported.
  • Employment increased by 275,000 net nonfarm jobs in February to 157.8 million. Nonfarm employment increased by 2.7 million over the last year and up by 5.5 million since February 2020 before the COVID-related lockdowns. This is much lower than the 15 million jobs President Biden claims were added during his tenure, as about 10 million jobs were recovered after the lockdowns. 
  • There have been large jobs added revisions in previous months as the data used for seasonal adjustments are from the last few years when there was substantial volatility in the labor market and other reasons. These include downward revisions for job creation of 43,000 to 290,000 in December 2023 and 124,000 to 229,000 in January 2024, for a total downward revision of 167,000 jobs. This means the net increase in February was only 108,000 jobs added, indicating a weaker-than-reported labor market.
  • Last month, 223,000 jobs were added in the private sector to 134.6 million (85% of total jobs), and +36,000 jobs added in the government sector to 23.2 million (15%). Over the last 12 months, the 2.7 million jobs added across the country (+1.8%) comprised 2.1 million jobs in the private sector (+1.6%) and 629,000 in the government sector (+2.8%).
  • Figure 2 shows the industries where jobs were added over the last year, with declines in the industries of transportation and warehousing and information. 

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Figure 2. Changes in Employment by Industry Over the Last Year

​Source: Fed FRED
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• The household survey is important but often not reported.
  • Employment fell by 184,000 jobs in February to 160.9 million employed. Net employment has declined in four of the last five months and five of the last ten months for a total decline of 582,000 jobs since September 2023 and just 60,000 jobs added since March 2023. 
  • Figure 3 shows how these two surveys have diverged since March 2022, when there were two consecutive quarters of declining real GDP (i.e., recession), after indexing both employment measures to 100 in January 2021. While these two surveys typically track each other closely, this has not been the case since then, and the establishment of nonfarm employment now exceeds household employment level by 2.8%, which could mean that nonfarm employment is over-reported by at least 4.4 million jobs.

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Figure 3. Establishment Nonfarm Jobs Far Outpace Household Employment Level Since March 2022

Source: Fed FRED

• The labor force increased by 150,000 in February 2024 to 167.4 million. The labor force has declined in four of the last ten months and is up 1.2 million since February 2023. 
• The unemployed increased by 334,000 last month to 6.5 million, bringing the official U3 unemployment rate up to 3.9%, and the broader U6 underutilization rate is up to 7.3%. 
• Since February 2020, the prime-age (25-54 years old) employment-population ratio has been essentially flat at 80.7% since March 2023 but down from the recent high of 80.9% in July 2023. The prime-age labor force participation rate was 0.5 percentage points higher at 83.5% than in February 2020, and the total labor-force participation rate was 0.8 percentage points at 62.5%, where it has been since February 2023, with millions of people out of the labor force holding the U3 rate artificially low.

Economic Growth
The U.S. Bureau of Economic Analysis recently released the third estimate for economic output in the fourth quarter of 2023. 

• Table 1 provides data over time for real total gross domestic product (GDP), measured in chained 2012 dollars, and real private GDP, which excludes government consumption expenditures and gross investment. 

​
Table 1: Economic Output, Growth, and Inflation 

​Another key measure of economic activity is the real average of GDP and GDI, which accounts for domestic production and income and is known as real gross domestic output. Real GDO in the third quarter increased by 3.4%, and in the fourth quarter increased by 4.1% to $22.5 trillion. Figure 4 shows how this measure has declined on an annualized basis in three of the last eight quarters, increasing this value by only 2.9% since the fourth quarter of 2021 before the two consecutive quarters of declines in the first and second quarters of 2022.

Figure 4. Annualized Real Gross Domestic Output Growth

​Meanwhile, the federal budget deficit continues unabated because of overspending and declining tax collections from a weaker economy. The national debt has ballooned to $34.6 trillion, and net interest payments on the debt will soon be a top federal expenditure, rising to above $1 trillion. The Federal Reserve has monetized, or printed, much of the new Treasury debt to keep interest rates artificially lower than where the market would suggest. The Fed will need to cut its balance sheet (total assets over time) more aggressively if it is to stop manipulating markets (see this for types of assets on its balance sheet) and persistently tame inflation. 

The current annual inflation rate of the consumer price index (CPI) has been moderating since a peak of 9.1% in June 2022 but remains elevated at 3.2% in February 2024. Compared with the Fed’s average inflation rate target of 2%, which really should be 0%, the current CPI inflation rate is too high, as are other key measures of inflation. A recent paper by Larry Summers, who was the 71st Secretary of the Treasury for President Clinton and Director of the National Economic Council for President Obama, and co-authors notes that if the calculation of CPI kept housing calculation methods and personal interest payments in, then the latest peak in inflation would have been 18% instead of 8.1%. Figure 5 shows their chart with these data that also highlights how the method-adjusted inflation would be closer to 10% instead of the reported 3.1%.
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Figure 5. CPI Inflation Differences When Methods Are Similar Over Time

​Just as inflation is always and everywhere a monetary phenomenon, deficits and high taxes are always and everywhere a spending problem. David Boaz at Cato Institute has noted how this problem is caused by both Republicans and Democrats. To control this fiscal and monetary crisis, the U.S. needs a fiscal rule like the Responsible American Budget (RAB) with a maximum spending limit based on the rate of population growth plus inflation. This was recently released as part of Americans for Tax Reform’s Sustainable Budget Project, highlighting this approach’s benefits at the federal, state, and local levels. 

If Congress had followed this approach from 2004 to 2023, Figure 4 shows tax receipts, spending, and spending adjusted for only population growth plus chained-CPI inflation. Instead of an (updated) $20.2 trillion national debt increase, there could have been only a $700 billion debt increase for a $19.5 trillion swing in a positive direction that would have substantially reduced the cost of this debt to Americans. The Republican Study Committee recently noted the strength of this type of fiscal rule in its FY 2025 “Fiscal Sanity to Save America.” To top this off, the Federal Reserve should follow a monetary rule so that the costly discretion stops creating booms and busts.

Figure 6: Federal Budget Gap Shrinks If Spending Limited to Population Growth Plus Inflation

​Bottom Line
Bidenomics has been a failure and the policy approach must be redirected to pro-growth policies that shrink government rather than big-government, progressive policies. It’s time for a limited government with sound fiscal and monetary policy that provides more opportunities for people to work and have more paths out of poverty. 
​
Recommendations:

• Set a pro-growth policy path with less spending, regulating, and taxing at all levels of government, which includes return-to-work policies.
• Reject new spending packages that America cannot afford nor needs; pass the RAB instead.
• Impose a strict monetary rule with the Fed having a much smaller balance sheet and a much higher federal funds rate target until we End the Fed.

​In the wake of the Baltimore bridge collapse, a major U.S. port has come to a standstill. The Port of Baltimore is the top U.S. port for vehicle imports and exports, as well as for farm and construction machinery. U.S. Transportation Secretary Pete Buttigieg told MSNBC on Wednesday that while there are many ports on the U.S. East Coast, “there is no substitute for the Port of Baltimore being up and running.”
​
How will this affect the U.S. economy—and even global supply chains? NTD spoke to Vance Ginn, the president of Ginn Economic Consulting and the former chief economist at the U.S. Office of Management and Budget, to find out more.

Originally published at AIER. 

R​ecently, the Biden administration handed  $1.5 billion to the nation’s largest domestic semiconductor manufacturer, GlobalFoundries, the biggest payout from the CHIPS and Science Act of 2022 so far.

The argument for this corporate welfare is America is too dependent on chips from China and Taiwan so more should be made domestically. Instead of seeing how America should reduce the cost of doing business for all semiconductor businesses here, some businesses will be picked as winners and others as losers. The cost of this form of socialism gives capitalism a bad rap and should be rejected.

This move echoes a broader trend of governments worldwide intervening in their economies through industrial policy. A cocktail of targeted subsidies, tax breaks, and regulatory tinkering, industrial policy aims to sculpt economic outcomes by favoring specific industries or firms, all for the supposed benefit of the national economy. Industrial policy puts business “investment” decisions in the hands of government bureaucrats. What could go wrong? 

While its champions tout its potential to boost competitiveness and spur innovation, the reality often tells a different story, especially in light of massive deficit spending. In practice, industrial policy tends to fan the flames of higher prices and sow the seeds of economic destruction. 

Politicians too often meddle with voluntary market dynamics by artificially bolstering favored sectors through subsidies and tax perks, resulting in the misallocation of resources and distorted prices. Moreover, the infusion of government funds to bankroll these initiatives with borrowed money can contribute to the Federal Reserve helping finance the debt, increasing the money supply, and stoking inflation.

The nexus between deficit spending and prices looms large over industrial policy. 

When politicians resort to deficit spending to bankroll industrial ventures, they put upward pressure on interest rates by issuing more debt and competing with scarce private funds. Elevated interest rates disturb private investment, ushering in a likely economic slowdown. 

Suppose deficit financing leans heavily on monetary expansion, whereby the central bank snaps up government debt. In that case, it fuels inflation by flooding the market with money that chases fewer goods and services.

The national debt is above $34 trillion, and the Federal Reserve has already monetized much of the increase in recent years. Racking up even more deficits is insane: repeating the same mistakes and expecting a different result. Excessive spending and money printing have landed us with above-target inflation for over three years running. 

The repercussions of industrial policy ripple beyond inflation to encompass the broader economic landscape. 

Excessive government meddling in specific industries crowds out private investment and entrepreneurship. When particular firms enjoy subsidies and preferential treatment, it distorts the competitive landscape and deters innovation. This stifles economic vibrancy and impedes the rise of new industries or technologies crucial for sustained growth.

For a cautionary tale of how Biden’s recent move could play out, look no further than Europe. 

Nations like Sweden, heralded by the West as a utopian example of big government yielding big benefits, spent the last year grappling with economic strife driven by dwindling private consumption and housing construction. Europe’s penchant for industrial policy, marked by subsidies, high taxes, and regulatory hoops, has contributed to its economic stagnation. 

To sidestep the dilemma of industrial policy missteps, policymakers should stop propping up their favorite sector or industry and instead unleash people to flourish by getting the government out of the way.

Politicians should foster an environment conducive to entrepreneurship, innovation, and competition. This entails cutting government spending, reducing taxes, trimming red tape, and championing trade by removing barriers to private sector flourishing.

By allowing market forces to determine resource allocation and rewarding entrepreneurship and risk-taking, people here and elsewhere can unleash their full potential and adapt to changing circumstances more effectively than under industrial policy frameworks.

​Biden’s billion-dollar amount to one company may seem like a lot, but that’s just a drop in the bucket of what’s to come from the CHIPS Act. Instead, these funds should be eliminated, preventing Congress from taking us further down the road to serfdom.