​The fact that our nation’s unemployment rate is approaching the low rate of 3.5% that was reached just prior to the pandemic should be a cause for celebration. But for a variety of reasons, the official unemployment number is misleading.

The employment situation is not as rosy as it may seem. There is a wide disparity among the states that can be explained by how much economic freedom they allow, including how severely each state shut down its economy due to the COVID-19 pandemic.

Consider that the U.S. remains 1.6 million jobs short of our February 2020 high, just before the pandemic came to our shores. Since then, our population has grown by 3.8 million people but the labor force shrank by 174,000 workers.
The picture diverges for states. As demonstrated in our 2021 study, the states with the worst job recovery also imposed the harshest COVID-19 measures.

For example, two states with the severest lockdowns — California and New York — are also experiencing two of the worst job recoveries, with unemployment rates at least a full percentage point above the national average of 3.6% based on the newly released March 2022 data.

Conversely, Utah and Nebraska, who are among the states with the least severe lockdown policies, are tied with the lowest unemployment rate of 2.0%, well below the national average.

In measuring how states have rebounded, a better metric than the unemployment rate is the recovery in private employment. Only 16 states have recovered all the private jobs lost due to the shutdowns compared to February 2020. But if we account for each state’s pre-pandemic job growth trajectory, our analysis shows that Montana and Utah stand above the rest for exceeding our forecast of their private employment.

Idaho follows closely behind Montana and Utah, and then Wyoming, North Carolina, Mississippi, South Dakota, Arkansas, Maine, and Georgia to round out the top 10 performing states. Except for Maine and North Carolina, each one has a Republican trifecta (GOP controls both chambers of the legislature and the governor’s office).

North Carolina leans Republican, and Maine is the anomaly having a Democrat trifecta.

What about the bottom 10 states in private-sector jobs recovery? They are Hawaii, New York, North Dakota, California, Maryland, Vermont, Minnesota, Oregon, Massachusetts, and Louisiana. Four of those have Democrat trifectas and four lean Democrat. Louisiana, the last state to make the bottom 10, leans Republican.

North Dakota — a Republican trifecta that had one of the least restrictive COVID policies — is a special case due to an unusual economic situation. Its pre-pandemic job growth numbers differed from all other states, and it also relies more heavily on mining and petroleum than any other state. Its petroleum industry went bust in 2014, causing private employment to peak in December 2014 that finally bottomed out in January 2017. Since then, its private job growth has been slow, less than 1% per year.

President Biden’s anti-fossil fuels executive orders, including the cancellation of the Keystone XL Pipeline, have only made matters worse for North Dakota.

Putting this outlier aside, what accounts for this dramatic difference in recoveries between red and blue states? As already indicated, Republican governors were less severe with their lockdown policies.

For another, all Republican governors (with the exception of Louisiana) ended supplemental unemployment payments before they were set to expire last September. These payments contributed to some people receiving more than they would have had they been working. In fact, one study finds that those states that didn’t end these payments early contributed to 3 million fewer people in the labor force.

Underlying the difference is likely the extent of economic freedom in each state. Using the Economic Freedom of North America 2021 report published by the Fraser Institute, which is based on 2019 data, the top 17 states allowing for the most economic freedom either lean Republican or have Republican trifectas. In fact, 14 of them are the trifectas.

Eight of the bottom 10 have Democrat trifectas, with New York leading the pack, followed by California. The other two in the bottom 10 include Vermont that leans Democrat and West Virginia with a Republican trifecta.

The best path to prosperity is a job. Work brings dignity, hope, and purpose to people by allowing them to earn a living, gain skills, and build social capital that endures. Advancing policies that connect people with work, along with reducing barriers for new jobs and opportunities, should be our goal, rather than making a government the first resort for help that disconnects people from what work brings.

The red states are showing the way to achieve this sound policy. Other states should follow while things at the federal level look bleak. But as our founders desired, the system of federalism that breeds a laboratory of competition helps shed light on what works best to let people prosper.

https://www.texaspolicy.com/economically-free-states-are-recovering-rapidly-high-control-states-not-so-much/

It’s bad enough when politicians enact witless economic policies with huge price tags, but it’s even worse when those policies destroy American lives and livelihoods. New research shows that this will be the pandemic-era legacy of the politicians that forcibly closed businesses, made people stay home, then incentivized millions of out-of-work Americans to give up the opportunity to get their lives back on track.

It’s now clear that half the states kept destructive policies in place even after their devastating effects were known. What should have been a temporary bridge to keep people afloat while America tackled COVID-19 became a nightmare of dependence and depression.

In March of 2020, the federal government began paying weekly “bonuses” known as supplemental insurance to people on unemployment. That meant many people received more money from unemployment insurance than they did while working. It was even expanded to include those who hadn’t paid into the program.

By the fall, the country began emerging from the pandemic, vaccines became available, and business started to open again and look for workers. The speed of American resilience was something to behold. But the government refused to make the transition with the rest of the country and kept paying people to stay home.

Eliminating people’s jobs and paying them to be unemployed was robbing millions of Americans of the dignity that comes with finding purpose and achieving self-sufficiency. It destroyed lives, driving dependency on government, contributing to drug and alcohol addiction, and exacerbating isolation and depression.

These effects of the program were blatantly obvious through the spring of 2021 but that didn’t stop the Biden Administration and Congress from extending the benefits through September. By the summer of 2021, the nation had nearly 11 million unfilled jobs, a spike from just under 7.2 million at the beginning of the year.

That’s why 26 states decided to terminate the unemployment bonuses early instead of letting them expire in September 2021. At the time, some in the media portrayed the move as cruel, ripping critical funds away from those struggling during the pandemic.

But new research from the Texas Public Policy Foundation shows that the states that ended the benefits early had superior job growth, ending the soul-crushing dependency inflicted upon millions by the misguided policy.  By the end of 2021, only Texas and three other states that ended the bonuses early had regained all the jobs that they lost during the pandemic.

In the states that continued paying the unemployment bonuses through September 2021, job growth was anemic. Roughly 3 million more people stayed on unemployment in states that maintained the increase in benefits versus the states that ended the program early.

The states that continued this policy deserve particular scorn for going down this fatuous path because they should have known better. The unemployment bonuses were first implemented in 2020 during the depths of the government-imposed restrictions and the disastrous results were known a year later. Yet they pushed forward full throttle irrespective of the harm it was causing to millions of Americans.

There were better solutions.

Early in the pandemic when much wasn’t known, Congress could have eliminated federal payroll taxes. Instead of creating a new disincentive to work, policymakers could have removed an existing disincentive and let workers keep more of what they earned. A July 2020 study found that eliminating payroll taxes would have added 2.7 million jobs in six months.

Later, after we learned more about the pandemic and the costs of shutdowns, the Biden administration should have focused on ending state government-imposed shutdowns. These shutdowns were a failure that did little to nothing to mitigate the pandemic’s effects yet contributed to massive business closures and job losses, along with a host of other problems that will be long-lasting..

The experiment with unemployment “bonuses” should be closed and never opened again. It unnecessarily prolonged the economic devastation brought on the country by the pandemic and slowed the path to recovery for millions of Americans. Job creation proved to be the fastest road to provide help and hope.

https://www.texaspolicy.com/the-real-cost-of-pandemic-era-policies/

There’s new evidence government-imposed shutdowns prompted by the COVID-19 pandemic have done more harm than good. Instead, a better choice is keeping the economy open so people stay connected to work and targeting resources to vulnerable populations.

A new meta-analysis from Johns Hopkins University underscores this finding, revealing that lockdowns in America and Europe during the first pandemic wave in spring 2020 only reduced the death rate by 0.2% on average. Researchers concluded that lockdowns “have had little to no public health effects” while imposing “enormous economic and social costs” and should be “rejected as a pandemic policy instrument.”

While businesses were shuttered, people were forced to stay home, and schools remained closed, the unintended social and economic consequences were clear: Rising unemployment, learning loss among students, spiking rates of domestic violence, and a pandemic-level rise in drug abuse and overdoses. All of that social and economic devastation yielded a minimal impact on health-related suffering due to COVID-19.

The new research from Johns Hopkins mirrors our own findings in a recent nationwide study, which found that overreaction by states to waves of the pandemic did substantial damage without much benefit in reducing the effects of the pandemic.

The research shows a statistical correlation between how severe state governmental actions were in shutting down their economies and negative impacts on employment more than a year after the pandemic began in America. This was the case even after controlling for a state’s dependence on tourism or agriculture, population density, and the prevalence of COVID-19 infections and hospitalizations.

Our research found no correlations between the severity of shutdowns imposed by state governments and the rate of reported COVID-19 hospitalizations or deaths. States like Hawaii, New York, California, and New Mexico that imposed harsher economic restrictions generally have greater job losses even today than those states that were less harsh, such as South Dakota, Iowa, Nebraska, Missouri, and Utah.

For example, New York was 10.2% below its trajectory in October 2021 while Nebraska was just 2.4% below.

The bottom line is that while policymakers were likely working in good faith to do their best in a challenging situation, it’s crucial we learn from these past mistakes so that we don’t repeat them. And make no mistake about it—those mistakes have driven untold amounts of human suffering during the past two years.

The worst part is that the government-imposed shutdowns created even more barriers for people who were already struggling. Every American was impacted, of course. These interventions created challenges and burdens for the middle and upper classes, but for our poorest communities they were outright damaging.

Protecting the rights and opportunities of workers to earn a living is obvious. Equally important are the psychological benefits that come with the dignity of work. And there are socio-economic benefits from work that positively impact everyone, such as building social capital and gaining skills, which are especially important for those in marginalized communities who were most impacted by the shutdowns.

As the states look for a long-term strategy to deal with the pandemic, it is paramount that they consider the empirical evidence and not impose burdensome restrictions—such as business closures, stay-at-home orders, school closures, gathering restrictions, and capacity limits—on economic activity that have proven to do more harm than good.

Instead, the policies need to be crafted more carefully to expand opportunities for the poor and preserve jobs in an open economy in which entrepreneurs can solve problems while taking measures when necessary to protect vulnerable populations.

These are the policies that should have been done all along to avoid the severity of the shutdown recession and the effects on lives and livelihoods thereafter. Let’s not make another mistake when so many are already suffering.

https://www.texaspolicy.com/lockdowns-were-a-failure-what-we-do-next-doesnt-have-to-be/

Fear and uncertainty over the pandemic are rising again as the first U.S. case of the Omicron variant of COVID-19 was found in a patient in California and has been spreading across the nation. But let’s not panic and jump to solutions. While this could contribute to the second consecutive winter wave, our new research shows why state governments shouldn’t overreact. Instead, we must steer clear of the devastation caused by mistaken shutdowns over the last two years.

Recently, Federal Reserve Chairman Jerome Powell told a U.S. Senate committee that this new variant poses “downside risks” to our country’s economic recovery and inflation headed into 2022.

But if recent history is a guide, the economic consequences of Omicron—or future variants—would be mostly from bad policies out of Washington and state capitols.

Congress is already running up massive deficits with excessive spending and misguided policies. The Fed has monetized much of that debt issuance, creating too much money that’s chasing too few goods, hence the highest inflation in 39 years. That inflation rate is challenging for the middle class, but it’s devastating to the impoverished who struggle to afford spiking prices of groceries, gasoline, and more.

But what’s too often missed is the effect that states had on making what could have been a slowdown or minor recession in response to the pandemic into a severe downturn.

Our new research, commissioned by the Georgia Center for Opportunity, finds that the overreaction by states to previous waves did substantial damage without much benefit in reducing the effects of the coronavirus.

The research shows a statistical correlation between how severe state governmental actions were in shutting down their economies and negative impacts on employment more than a year after the pandemic began in America. This was the case even after controlling for a state’s dependence on tourism or agriculture, population density, and the prevalence of COVID-19 infections and hospitalizations.

Our research found no correlations between the severity of shutdowns imposed by state governments and the rate of reported COVID-19 hospitalizations or deaths.

What we do know is that nationally, there are 3.3 million fewer people employed in the private sector since February 2020, a month before the shutdowns in most states. But the job loss is not spread evenly across the country.

Our study did not settle for simply comparing the job loss as measured from February 2020, the month before the pandemic hit. Instead, we ran more than 200 ARIMA model forecasts to capture pre-pandemic trajectories in an effort not to skew the results. Not all states had upward trajectories, and job growth rates varied from −0.8% to 2.9% for the 12 months prior to the pandemic.

States like Hawaii, New York, California, and New Mexico that imposed harsher economic restrictions generally have greater job losses even today than those states that were less harsh, such as South Dakota, Iowa, Nebraska, Missouri, and Utah. For example, New York was 10.2% below its trajectory in October 2021 while Nebraska was just 2.4% below.

Policies need to be implemented in a way that preserve jobs.

Protecting the rights and opportunities of workers to earn a living is obvious. Equally important are the psychological benefits that come with the dignity of work. And there are socio-economic benefits from work that positively impact everyone, such as building social capital and gaining skills, which are especially important for those in marginalized communities who were most impacted by the pandemic.

As the states prepare to deal with the Omicron variant (and we’re sure there are more to come), it is paramount that they consider the empirical evidence and not impose burdensome restrictions—such as business closures, stay-at-home orders, school closures, gathering restrictions, and capacity limits—on economic activity that will likely end up doing more harm than good.

Instead, the policies need to be crafted more carefully to expand opportunities for the poor and preserve jobs in an open economy in which entrepreneurs can solve problems while taking measures when necessary to protect vulnerable populations.

These are the policies that should have been done all along to avoid the severity of the shutdown recession and the effects on lives and livelihoods thereafter. Let’s not make another mistake when so many are already suffering.

Mr. Randolph who authored the study, is the Director of Research for the Georgia Center for Opportunity. Mr. Ginn, who sat on the advisory panel for the study, is chief economist at the Texas Public Policy Foundation, served as associate director for economic policy at the White House Office of Management and Budget, 2019-20.

https://www.texaspolicy.com/with-the-omicron-variant-here-states-must-avoid-past-mistakes/

​History repeats itself, and at milestone intervals.

It was 100 years ago that President Warren Harding called for a return to normalcy. His vice president and successor, Calvin Coolidge, prickled at this loose expansion of the English language, but agreed with the sentiment.

After a series of traumatic events for the nation, including the Spanish flu pandemic, Harding knew that the nation needed to return to normal, starting with the government. In 1921, he called for a series of reforms which sound like they were written for 2021—cut government spending, cut taxes, and stop inflation.

Government spending is now, as it was then, out of control.

Federal spending increased by 89% during the pandemic and its share of America’s private sector output has skyrocketed to 45%, the highest since World War II before the latest shutdown recession. Despite tax receipts being at a nominal all-time high, the federal government is running record-breaking $3 trillion deficits with little help in sight.

Governments at all levels in the U.S. are now taking 34% of our private economy. This means that every year we work from Jan. 1 to May 4 just to pay our taxes. Meanwhile, inflation is also getting out of control. It is not only high, but accelerating.

At the current rate, prices will double in less than 14 years. And yet wages are moving in the other direction. While the general price level in June rose 5.4% from one year prior, average hourly earnings in the private sector adjusted for inflation fell 1.7%, hurting families’ purchasing power.

Harding faced similar problems in 1921—government spending had ballooned because of World War I, taxes were punitively high, and the Federal Reserve (Fed) had caused rampant inflation. And yet, the Harding administration turned it around quickly. In the summer of 1921, exactly 100 years ago, Harding spoke using words that sound like they were written for today:

“There is not a menace in the world today like that of growing public indebtedness and mounting public expenditures,” he said. “There has seemingly grown up an impression that the public treasuries are inexhaustible things, and with it a conviction that no efficiency and no economy are ever to be thought of in public expense. We want to reverse things.”

A good first step in reversing things would be to control the growth in government spending with passage of the Foundation’s Responsible American Budget.

This fiscal rule limits spending growth to a maximum rate of population growth plus inflation to keep federal expenditures below the average taxpayer’s ability to pay for them. This needed restraint would help curtail spending. Further cuts can then be made, targeting handouts that disincentivize work and welfare that traps people in poverty.

To provide tax relief at the federal level, Washington should cut marginal tax rates.

After Harding and Coolidge cut tax rates, tax revenue increased. The same phenomenon occurred when JFK, Reagan, Bush, and Trump cut tax rates, too. States should also move to cut taxes—and several states have already done so. Texas, with an abnormally high local property tax burden, should enact reforms to drastically reduce property taxes that are quite literally forcing Texans out of their homes.

To stop inflation, the Fed just needs to do what it did a century ago: It must stop furiously expanding the money supply.

Like it did in WWI, the Fed is currently acting as the financing arm of the radical growth in federal spending by purchasing a large share of government bonds—that should stop. The Fed also needs to return to its mission of price stability via a monetary rule, and nothing else. This means an end to targeting full employment and to engaging in social engineering, and a start to a monetary rule.

The effect of Harding’s and Coolidge’s reforms in the 1920s was a booming decade so prosperous that it resulted in the Roaring Twenties. The government ran a surplus and retired debt for every year of the decade. In the 1930s, the bad policies of the Hoover and Roosevelt administrations and associated Fed policy caused and prolonged the Great Depression.

If the nation implements similar reforms as those from a century ago, instead of the Biden administration’s proposals, then America can repeat her previous success. Reining in misdirected fiscal and monetary policy will bring a return to normalcy, so that we can let people prosper again.

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