​Key Point: Louisiana’s labor market looks okay even as the unemployment rate increased by 0.2-percentage point to 3.5% unemployment rate. But the labor force has 10,622 (-0.5%) fewer people in it than pre-shutdown in February 2020 and private sector employment is 30,000 (-1.8%) below then, indicating a much weaker labor market and economy overall.

Labor Market: A job is the best path to prosperity as work brings dignity, hope, and purpose to people through life-long benefits of earning a living, gaining skills, and building social capital. The table below shows Louisiana’s labor market over time until the latest data for December 2022 by the U.S. Bureau of Labor Statistics.​

The establishment survey shows that net total nonfarm jobs in the state increased by 4,800 jobs last month (+0.2%), bringing this to 50,700 jobs below the pre-shutdown level in February 2020. Private sector employment was up by 4,400 jobs (+0.3%) and government employment rose by 400 jobs (+0.1%) last month. Compared with a year ago, total employment was up by 46,200 jobs (+2.4%) with the private sector adding 45,600 jobs (+2.9%) and the government adding 600 jobs (+0.2%).
 
The household survey finds that the civilian labor force rose by 5,028 people last month and is down 10,622 people since February 2020, which results in the labor force participation rate of 58.5% being 0.1-percentage point lower than it was in February 2020 but well below the 61.2% rate in June 2009 at the trough of the Great Recession. The employment-population ratio is 0.9-percentage point above where it was in February 2020 and nearly back to where it was in June 2009. While the unemployment rate of 3.5% is substantially lower than the 5.2% rate in February 2020, a broader look at Louisiana’s labor market rather than this weak indicator shows that Louisianans still face challenges, especially compared with neighboring states based on several measures.

​Economic Growth: The U.S. Bureau of Economic Analysis (BEA) recently provided the real (inflation-adjusted) gross domestic product (GDP) in Q3:2022 for Louisiana and other states. 

​The following table shows how U.S. and Louisiana economies performed since 2020. The steep declines were during the shutdowns in 2020 in response to the COVID-19 pandemic, which was when the labor market suffered most. The decline in real GDP annualized growth of -3% in Q2:2022 was the 5th worst and increase of +2.5% in Q3:2022 ranked 23rd in the country. 

The BEA also reported that personal income in Louisiana grew at an annualized pace of +5.8% (ranked 19th) in Q2:2022 (tied +5.8% U.S. average) and of +2.5% (ranked 47th) in Q3:2022 (below +5.3% U.S. average).
 
Bottom Line: Louisianans gained jobs in December but continue to feel the costs of the shutdowns in 2020 and other restrictive policies that reduce opportunities for them to find well-paid jobs. Institutions matter to human flourishing in countries and states, which is floundering in Louisiana compared with many other states. The Fraser Institute recently ranked Louisiana 20th for economic freedom based on 2020 data for government spending, taxes, and labor market regulation. And the Tax Foundation recently ranked the Pelican State as having the 12th worst business tax climate and 15th highest corporate income tax rate. While the state has improved its tax code recently and lower taxes may happen soon from an expected budget surplus, this lack of economic freedom and poor business tax climate are contributing to a net outmigration of Louisianans to other states, which is a drain on the state’s economic potential now and in the future. State and local policymakers should work to reverse this trend by passing pro-growth policies.

​Free-Market Solutions: In 2023, the Louisiana Legislature should provide the state’s comeback story by:

• Passing pro-growth policies that limit government spending, reform and flatten taxes, expand school choice, improve workforce development, remove barriers to work, and reform safety nets.
• Improving the state’s economic situation will come from increasing economic freedom and individual liberty which will help Louisianans better resist D.C.’s overreach—which has resulted in stagflation—and better flourish for generations to come.

​Key Point: Americans are suffering under big-government policies as average weekly earnings adjusted for inflation are down for 21 straight months. It's time for pro-growth policies to unleash economic potential to let people prosper.  

​Overview: The irresponsible “shutdown recession” and subsequent government failures have led to a longer, deeper recession with high inflation that are having persistent consequences for many Americans’ livelihoods. This includes excessive federal spending redistributing scarce private sector resources with deficit spending of more than $7 trillion since January 2020 to reach the new high of $31.4 trillion in national debt—about $95,000 owed per American or $250,000 owed per taxpayer. This new debt has hit its limit and needs to be addressed with spending restraint as the Federal Reserve monetized most of the new debt, leading to a 40-year-high inflation rates. The failed policies of the Biden administration, Congress, and the Fed must be replaced with a liberty-preserving, free-market, pro-growth approach by the new majority by House Republicans so there are more opportunities to let people prosper.  

​Labor Market: The U.S. Bureau of Labor Statistics recently released the U.S. jobs report for December 2022. The BLS’s establishment report shows there were 223,000 net nonfarm jobs added last month, with 220,000 added in the private sector. Interestingly, while there have appeared to be a relatively robust number of jobs created, a recent report by the Philadelphia Fed find that if you add up the jobs added in states in Q2:2022 there were just 10,500 net new jobs rather than more than 1 million initially estimated. This further indicates that the recession started in (likely) March 2022 (more on this below).
 
That expected revision to the establishment report supports the weak data in the BLS’s household survey, which employment increased by 717,000 jobs last month but had declined in four of the last nine months for a total increase of 916,000 jobs since March 2022. This number of net jobs added since then is much lower than the report 2.9 million payroll jobs in the establishment. The official U3 unemployment rate declined slightly to 3.5%, but challenges remain, including: 3.1% decline in average weekly earnings (inflation-adjusted) over the last year, 0.4-percentage point lower prime-age (25–54 years old) employment-population ratio than in February 2020, 0.6-percentage point below prime-age labor force participation rate, and 1.0-percentage-point lower total labor-force participation rate with millions of people out of the labor force. 

​These data support my warnings for months of stagflation, recession, and a “zombie economy.” This includes “zombie labor” as many workers are sitting on the sidelines and others are “quiet quitting” while there’s a declining number of unfilled jobs than unemployed people to 4.5 million And that demand for labor is likely inflated from many “zombie firms,” which run on debt and could make up at least 20% of the stock market and will likely lay off workers with rising debt costs. 

Economic Growth: The U.S. Bureau of Economic Analysis’ released economic output data for Q4:2022. The following provides data for real total gross domestic product (GDP), measured in chained 2012 dollars, and real private GDP, which excludes government consumption expenditures and gross investment.

​The shutdown recession in 2020 had GDP contract at historic annualized rates because of individual responses and government-imposed shutdowns related to the COVID-19 pandemic. Economic activity has had booms and busts thereafter because of inappropriately imposed government COVID-related restrictions in response to the pandemic and poor fiscal policies that severely hurt people’s ability to exchange and work.

Since 2021, the growth in nominal total GDP, measured in current dollars, was dominated by inflation, which distorts economic activity. The GDP implicit price deflator was +6.1% for Q4-over-Q4 2021, representing half of the +12.2% increase in nominal total GDP. This inflation measure was +9.1% in Q2:2022—the highest since Q1:1981—for a +8.5% increase in nominal total GDP that quarter. This made two consecutive declines in real total (and private) GDP, providing a criterion to date recessions every time since at least 1950. In Q3:2022, nominal total GDP was +7.6% and GDP inflation was +4.4% for the +3.2% increase in real total GDP. But if inflation had been as high as it was in the prior two quarters or had the contribution of net exports of goods and services (driven by natural gas exports to Europe) not been 2.9%, real total GDP would have either declined or been essentially flat for a third straight quarter.

​In Q4:2022, there was a similar story of weaknesses as nominal total GDP was +6.4% and GDP inflation was +3.5% for the +2.9% increase in real total GDP. But if you consider the +2.9% real total GDP growth was driven by contributions of volatile inventories (+1.5pp), government spending (+0.6pp), and next exports (+0.6pp) which total +2.7pp, the actual growth is quite tepid. For all of 2022, real total GDP growth is reported +2.1% year-over-year but measured by Q4-over-Q4 the growth rate was only +0.96%, which was the slowest Q4-over-Q4 growth for a year since 2009 (last part of Great Recession).

The Atlanta Fed’s early GDPNow projection on January 27, 2023 for real total GDP growth in Q1:2023 was +0.7% based on the latest data available.
​
The table above also shows the last expansion from June 2009 to February 2020. The earlier part of the expansion had slower real total GDP growth but had faster real private GDP growth. A reason for this difference is higher deficit-spending in the latter period, contributing to crowding-out of the productive private sector. Congress’ excessive spending thereafter led to a massive increase in the national debt that would have led to higher market interest rates. This is yet another example of how there is always an excessive government spending problem as noted in the following figure with federal spending and tax receipts as a share of GDP. 

​But the Fed monetized much of it to keep rates artificially lower thereby creating higher inflation as there has been too much money chasing too few goods and services as production has been overregulated and overtaxed and workers have been given too many handouts. The Fed’s balance sheet exploded from about $4 trillion, when it was already bloated after the Great Recession, to nearly $9 trillion and is down only about 6% since the record high in April 2022. The Fed will need to cut its balance sheet (see first figure below with total assets over time) more aggressively if it is to stop manipulating so many markets (see second figure with types of assets on its balance sheet) and persistently tame inflation. 

​The resulting inflation measured by the consumer price index (CPI) has cooled some from the peak of 9.1% in June 2022 but remains hot at 6.5% in December 2022 over the last year, which remains at a 40-year high (highest since June 1982) along with other key measures of inflation (see figure below). After adjusting total earnings in the private sector for CPI inflation, real total earnings are up by only 1.1% since February 2020 as the shutdown recession took a huge hit on total earnings and then higher inflation hindered increased purchasing power. 

​Just as inflation is always and everywhere a monetary phenomenon, high deficits and taxes are always and everywhere a spending problem. The figure below (h/t David Boaz at Cato Institute) shows how this problem is from both Republicans and Democrats. 

​As the federal debt far exceeds U.S. GDP, and President Biden proposed an irresponsible FY23 budget and Congress never passed one until the ridiculous $1.7 trillion omnibus in December, America needs a fiscal rule like the Responsible American Budget (RAB) with a maximum spending limit based on population growth plus inflation. If Congress had followed this approach from 2002 to 2021, the (updated) $17.7 trillion national debt increase would instead have been a $1.1 trillion decrease (i.e., surplus) for a $18.8 trillion swing to the positive that would have reduced the cost to Americans. The Republican Study Committee recently noted the strength of this type of fiscal rule in its FY 2023 “Blueprint to Save America.” And the Federal Reserve should follow a monetary rule.

​Bottom Line: Americans are struggling from bad policies out of D.C., which have resulted in a recession with high inflation. Instead of passing massive spending bills, like passage of the “Inflation Reduction Act” that will result in higher taxes, more inflation, and deeper recession, the path forward should include pro-growth policies. These policies ought to be similar to those that supported historic prosperity from 2017 to 2019 that get government out of the way rather than the progressive policies of more spending, regulating, and taxing. The time is now for 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.
• Reject new spending packages that America cannot afford nor needs; pass a fiscal rule like the RAB instead.
• Impose monetary rule with the Fed having a much smaller balance sheet and a much higher federal funds rate target until we End the Fed.
• Enact return-to-work policies.
  

​Key Point: Texas continues to lead the way in job creation over the last year (see first figure) and second in economic growth in the third quarter of 2023 (see last figure), but there’s more to do to help struggling Texans deal with the state’s affordability crisis, especially spending, regulating, and taxing less.

​Overview: Texas has been a national leader in the economic recovery since the inappropriate shutdown recession in Spring 2020. This includes reaching a new record high in total nonfarm employment for the 14th straight month, leading exports of technology products for 20 consecutive years, and being home to more than 50 of the world’s Fortune 500 companies. While the 87th Texas Legislature in 2021 supported the recovery by passing many pro-growth policies like the nation’s strongest state spending limit, there’s more to do in the ongoing 2023 session to remove barriers placed by state and local governments.
 
Labor Market: The best path to prosperity is a job, as it helps bring financial self-sufficiency, dignity, hope, and purpose to people so they can earn a living, gain skills, and build social capital.
 
The table below shows the state’s labor market for December 2022. The establishment survey shows that net nonfarm jobs in Texas increased by 29,500 last month, resulting in increases for 31 of the last 32 months, to bring record-high employment to 13.7 million. Compared with a year ago, total employment was up by 650,100 (+5.0%)—fastest growth rate in the country—with the private sector adding 628,800 jobs (+5.7) and the government adding 21,300 jobs (+1.1%). 

​The household survey shows that the labor force participation rate is slightly higher than in February 2020 but well below June 2009 at the trough of the Great Recession. The employment-population ratio fell was unchanged in November and nearly where it was in February 2020, and the private sector now employs 700,000 more people than then. Texans still face challenges with a worse unemployment rate, though historically low, and nonfarm private jobs just recently above its pre-shutdown trend (Figure 1).
 
The figure below compares the ratio of current private employment to pre-shutdown forecast levels in red states and blue states if both chambers of the legislature and the governor are Republican (dark red), Democrat (dark blue), or some combination (lighter colors). 

​The results show a clear distinction between red states and blue states, with the stringency of restrictions by governments during the pandemic along with pro-growth policies before and after the shutdowns playing key roles. Specifically, 21 of the 25 states with the best (highest) ratios are in red-ish states while 13 of the 15 states and D.C. with the worst (lowest) ratios are in blue-ish places as of December 2022.
 
The following figure from Soquel Creek on Twitter tells the story even more directly: those states with more economic freedom prosper more than those with less economic freedom (see rankings in Fraser Institute's Economic Freedom of North America report: FL ranks #1, Texas ranks #4, California ranks #49, and New York ranks #50). 

Overall, multiple indicators should be considered in this nuanced labor market, such as the fact that the unemployment rate is a weak indicator as many have dropped out of the labor force. While the labor force participation rate in Texas slightly exceeds where it was before the shutdowns, and the 3.9% unemployment rate could be considered full employment, the employment-population ratio is 0.2-percentage point below the pre-shutdown ratio.

​Economic Growth: The U.S. Bureau of Economic Analysis (BEA) recently provided the real gross domestic product (GDP) by state for Q3:2022. The Figure below Texas had the second fastest GDP growth (first is Alaska) of +8.2% on an annualized basis to $1.89 trillion (above the U.S. average of +3.2% to $20.05 trillion). In the prior quarter, Texas had the fastest growth with +1.8% growth as the U.S. average declined by -0.6% that quarter. Of course, these followed Texas’ GDP contractions of -7.0% in Q1:2020 and -28.5% in Q2 during the depths of the shutdown recession. Fortunately, GDP rebounded in Q3 and Q4, yet declined overall in 2020 by -2.9% (less than -3.4% decline of U.S. average) but increased by +3.9% in 2021 (below the +5.9% U.S. average). The BEA also reported that personal income in Texas grew at an annualized pace of +6.9% in Q3:2022 (ranked 6th highest and faster than the U.S. average of +5.3%) but slower than the robust +8.4% in Q2:2022 (ranked 6th best and above the U.S. average of +4.9%) as job creation and inflated income measures found their way across the economy. ​

​Bottom Line: As Texas recovers from the shutdown recession and faces an uncertain future with the U.S. economy having stagflation and a likely recession, Texans need substantial relief to help make ends meet. Other states are cutting, flattening, and phasing out taxes, so Texas must make bold reforms to support more opportunities to let people prosper, mitigate the affordability crisis, and withstand destructive policies out of D.C.
 
Free-Market Solutions: In 2023, the Texas Legislature should improve the Texas Model by:

• Passing pro-growth policies to:
  • Spend Less: Lower state government spending and pass responsible local spending limit.
  • Tax Less: Start eliminating local property taxes with historic surpluses at the state and local levels.
  • Regulate Less: Improve workforce development, remove barriers to work, reduce occupational licensing, reform safety nets, and enact school choice.
• Strengthening the Texas Model, which recently ranked as the 4th best in economic freedom, will help Texans better resist D.C.’s overreach and flourish more for generations to come.

America is in the midst of an identity crisis, and it’s probably not the kind you’d think. Our nation is wrecked by an abysmal economy and unhappy people losing confidence in their country. In such unhappiness, people on both sides of the political aisle too often propose “solutions” that grant the government more control of our lives, even though that control is usually the source of the problem.

The American experiment has paved the way for millions to escape poverty and build a better life via a free-market system with a constitutional republic that encourages innovation and results in more human flourishing than ever before. We need to get back to those roots.

I had the opportunity to discuss this phenomenon with Dr. Samuel Gregg, author of the book The Next American Economy and distinguished fellow at the American Institute for Economic Research, who said this country’s founding values are based on “liberty and personal responsibility.” 

What set America apart was a vision for commoners to determine their own future, and we continue to rank as the most entrepreneurial country in the world. American’s earliest ideals demanded liberty and responsibility, rejecting directives from a distant King. As a result, the roles of the federal and state governments were carefully managed by a system of federalism, with checks and balances to restrain overreach and protect liberty. According to Gregg, this ongoing experiment is why immigrants are continually inspired to leave their homes and venture to the United States. 

These core tenets of America have become less defined over the past century. America has increasingly chosen big government over individual liberties, thereby reducing the benefits of free-market capitalism.

The major expansions of government started in the progressive era, with Presidents Teddy Roosevelt, Woodrow Wilson, and Herbert Hoover. Those historic expansions were put on steroids by President Franklin D. Roosevelt’s “New Deal,” which prolonged and deepened the Great Depression. Likewise, President Lyndon B. Johnson’s “Great Society” program ballooned government through the creation Medicare and Medicaid, among others. The results have been massive government spending with increased dependency on government programs. 

President George W. Bush’s expansion of Medicare with Part D provided some prescription drug coverage for seniors, with questionable results, at a massive cost. President Barack Obama’s Obamacare expanded government control, contributing to the high cost and declining quality of US healthcare. President Trump’s attempt to punish China with tariffs actually punished low-income Americans most. Most recently, President Biden’s 2022 “Inflation Reduction Act” further grows government, without reducing inflation and at a huge cost to taxpayers. 

Inflating the role of government in an attempt to solve underlying issues created by big government created a vicious cycle that continues today. Government meddling distorts the economy by blocking and confusing free people’s choices. This results from a cultural shift, where Americans increasingly seem to believe government can solve problems better than markets or individuals.

This belief is contradicted by the evidence. The lack of belief in free markets is really the lack of believe in free people, as the market is nothing but people. Big government is usually the cause of economic and social problems, so trying to solve them with more government just exacerbates the issues. A severe deficit in the knowledge of history, both of culture and economics, helps explain why post-modern socialist solutions increasingly entrance younger generations. 

Unlike older countries, America’s identity comes from the “texts, documents, and debates” that created our founding, says Gregg. Surveys show that only 1 in 3 Americans can pass a citizenship test, because most of them aren’t familiar with the foundational ideas outlined in our texts and documents. A national identity crisis is near-inevitable, when we forget our core values of liberty and personal responsibility

The further we stray from the principles that made our nation great (including free-market capitalism, a constitutional republic, and personal responsibility) the more swiftly we head down what economist Friedrich Hayek called “the road to serfdom.” 

Only by learning our unique history, and grasping the principles of free-market economics free from burdensome interference, can Americans embark on the next American economy.

Originally published at AIER. 

​

​People point to tax burdens and over-regulation as the reasons for economic decline. But the reality is that high government spending is the precursor to heavy taxes and regulation. 

Look no further than the Fraser Institute’s latest report to see how states rank for economic freedom based on government spending, taxes, and labor market regulation. 

​The five lowest-ranking states for economic freedom are Oregon (46th), Vermont (47th), Hawaii (48th), California (49th), and New York (50th). The most economically free states are Florida (1st), New Hampshire (2nd), South Dakota (3rd), Texas (4th), and Tennessee (4th). 

​I recently interviewed Dr. Dean Stansel, contributing author of the report, about his findings. He said, “anytime the government takes from you, that’s an infringement on your freedom.” And he’s right; if the government doesn’t spend, it doesn’t need to tax and it wouldn’t fund bureaucrats to regulate.

The data in the report are two years behind, so these findings reflect 2020, which include only a few months of the pandemic-related shutdowns and excessive policy restrictions. Given the continued excess of spending since then, there is good reason to believe that the scores will look worse in the following reports, even if the relative rankings don’t change much. 

The lowest-ranking states for economic freedom spend excessively and raise taxes to fund self-imposed expenses instead of limiting spending to what the average taxpayer can afford.

Given this, there’s no surprise that New York is 50th. The state’s extreme spending has led it to what’s been estimated as a $10 billion deficit. It also ranks last in individual income taxes and second to last in property taxes, according to the Tax Foundation’s latest rankings of state business tax climate, which ranks the state 49th.

Florida, on the other hand, ranks first in economic freedom with no personal income taxes, and ranks fourth among states in business tax climate. 

The trend is similar among the more and less economically free states: those with lower spending, taxes, and regulations boast better economic freedom rankings, while states like New York and California with egregious tax burdens and regulations are the least economically free. 

According to Stansel, the top states remained at the top even after pandemic-related shutdowns slowed state economies because they more successfully kept spending, taxes, and labor market regulations under control. 

But the real question is: why should we care about economic freedom?

Economic freedom is the measure of how much people can decide for themselves on how to meet their needs, given that we live in a world where resources, especially time, are scarce. In free-market capitalism, people own and direct the means of capital and labor. But with socialism, politicians own and direct the means of capital and labor. 

Government interference, whether in the form of excessive government spending that distorts economic activity, or heavy taxation and barriers to work and capital growth through regulation, reduces means and opportunities for voluntary exchange that supports greater human flourishing.

The more regulations state governments impose, the less incentive people have to work and be entrepreneurial. The more the state taxes, the less money people have to contribute to the savings, investment, and capital growth that provides for the wealth of nations’ investment. 

People are fleeing less economically free states toward the freer. There is greater potential for personal flourishing where there are fewer barriers to individual decisions that support economic growth. 

While tax and regulation reforms are reasonable steps for states seeking more economic freedom, it won’t help much if state spending remains unrestrained. According to the late economist and originator of the ideas for the EFNA report, Milton Friedman, the ultimate burden of government is not how much it taxes, but how much it spends. 

Balancing the budget is one thing, but that’s a short-term fix for an ideological problem too many states seem to have made, about the expanded role of government. Taxpayers must fund government programs when instead, the government should be limited to its constitutional roles so more money stays in the pockets of taxpayers and the productive private sector. 

Until states decide to impose a strict spending limit based on a maximum rate of population growth plus inflation, cut and eliminate burdensome taxes, and scrap burdensome regulations, economic freedom will continue to collapse. And, more importantly, people will suffer. 

States must not let that happen. Instead, state governments should get out of the way so that economic freedom can empower people to prosper.

Originally published at AIER. 

​Those states that practice more free-market capitalism with limited government tend to have better economic performance, providing an economy and civil society with opportunities to help the neediest among us achieve long-lasting prosperity.

Key points
– Comparing institutional frameworks in states and their outcomes provides key factors that encourage thriving states, families, and entrepreneurs.
– Measures of economic freedom and government burden are useful indicators of which states have growing economies and more jobs over time.
– The results for these states demonstrate how institutions that encourage individual liberty, free enterprise, and civil society support prosperous outcomes, particularly in relieving poverty.
– States ought to pursue policies that advance more of these lessons to provide a robust economy and flourishing civil society that will best help the neediest among us.

Original post at TPPF. 

​Economics is the new American religion. Disagree with the mainstream narrative surrounding it, and you’re a heathen needing quick conversion. No longer is it seen as a social science requiring unbiased scrutiny: it’s about giving people what they think they want, no matter the cost.

And the cost they take in doing so is a big one: people’s prosperity.

I recently sat down with Dr. Peter Boettke, professor of economics and philosophy at George Mason University, to discuss what needs to happen to reverse the problem of people turning “to politics for a sense of truth,” as he puts it. He explains the problem this way: “When my truth is not being listened to, my only recourse is to impose truth on others who are peddling in falsehood.”

He’s correct. This desperate need to control is what leads to the government being placed on a pedestal as the Almighty solution rather than being viewed as a tool to preserve liberty. And there’s a need to use economics to tradeoffs of proposed solutions. When people aren’t allowed to disagree concerning economics and more policies are pushed on them as gospel, Americans are left with less opportunity for accomplishing extraordinary things.

Instead of getting caught up by culture concerning economics, we need to return to the four pillars as defined by Boettke that substantiate this social science and contain the basis to achieve prosperity.

Pillar One: Truth and Light

The truth is that we live in a world of scarcity. This reality sheds light on the truth that because of scarcity, we must make tradeoffs to attain our goals. For most, this looks like trading your scarce time to work and earn money for scarce goods. Many today argue that not everyone can work or should be required to do so, which leads to petitioning Capitol Hill to pass policies that reduce the need to work.

Lawmakers can pass one policy after another, but that will never change the inherent “dignity of work” as Boettke puts it. And respecting people’s agency gives them dignity.

Pillar Two: Beauty and Awe

We live in a world of spontaneous order. In every century, it’s beautiful and awe-inspiring to see how voluntary activity results in the spontaneous order that leads the way to the formation of global markets through which we thrive today.

To achieve this phenomenon, it’s essential that individuals are empowered to work and contribute to society. Governmental policies that impose economic barriers cannot produce the same orderly result that emerge when people are permitted to achieve their hopes and dreams through a system of free markets and limited government.

By latching onto the cultural ideology that the government and not the individual must work to solve all economic woes, we move further away from personal responsibility and deeper into the crippling dependency mindset. A mindset that convinces people they are powerless instead of possessing the tools required to flourish.

Pillar Three: Hope

Economics gives us hope of changing our circumstances. Through capitalism and entrepreneurship, we can have hope in civil society as the first resort while the government is the last resort in reducing poverty by encouraging long-term self-sufficiency.

This was one of the major downfalls of governments across the country in 2020.

By shutting down the economy and deciding which businesses were essential, small business owners and entrepreneurs were sidelined, leaving them fewer opportunities and less hope of climbing out of the government-imposed economic crisis. And less hope for those locked into their road to serfdom.

Pillar Four: Compassion

Economics at its core takes compassion on the impoverished and disadvantaged, seeking to lift them up. “It’s not about making the wealthy better off but about how we can lift up the poor [so that] the poor get richer even faster than the rich get richer,” Boettke explains.

If people understood economics under these four pillars, rather than viewing it as a list of technicalities with which to police people, more progress would prevail.

Governmental barriers imposed in our lives may be in popular demand but they are not the proposed solution among the American entrepreneurs fueling the economy. As Matt Ridley writes, “Innovation is the child of freedom and the parent of prosperity.”

When seeking economic solutions for the nation, the path forward should be about how best to provide opportunities to let people prosper by removing barriers, respecting individual agency, and allowing hope and compassion to be cultivated in communities. That’s achieved by enhancing and preserving liberty through limited government and a flourishing civil society. Otherwise, we’re destined to fail the lessons of economics.

Originally posted by Econlib

​he Fraser Institute recently released the 2022 Economic Freedom of the World (EFW) Report, reflecting data and rankings for 2020. The findings show that economic freedom in the U.S. fell to its lowest level since 1975, from 6th place to 7th. Although all countries in the report were negatively affected in terms of economic freedom by the COVID-19 pandemic and subsequent shutdowns. The U.S. decline is considerable and indicative of pressing problems that will continue to erode our liberty and prosperity if left unresolved.

Thankfully, the problems that put us here also point to the solutions that can propel us forward into prosperity.

Aggressive Shutdowns

During the peak of the pandemic-related shutdowns, the EFW rating fell to its lowest level since 2009, from the depths of the Great Recession.

Entrepreneurs were sidelined, small businesses deemed “non-essential,” and many Americans sent home from work, reducing economic freedom and opportunities to quickly overcome the government-imposed dire situation.

I recently interviewed Dr. Robert Lawson, founding co-author of the EFW report and Clinical Professor at Southern Methodist University’s Bridwell Institute, about these findings.

“The income per capita in the top countries [in the report] is about eight to nine times higher than the lowest-ranking nations,” he explained.

Economic freedom does not significantly affect equality, a common concern among critics, but it does have empirically positive outcomes for prosperity. As Thomas Sowell famously said, “There are no solutions. There are only trade-offs.”

In this case, the temporary health concerns of the public were placed on a pedestal that did not consider long-term prosperity. While vaccines and reopenings may have provided some relief from the pandemic, the massive economic consequences are proving to be much longer and steeper than it seems many policymakers were willing to concede. 

Out-of-Control Government Spending

In just five months, we’ll be three years out from shutdowns and stay-at-home mandates that continue to negatively affect our economy today. The national deficit of 2020 was more than three times what it was in 2019, which was already bloated at $1 trillion due to excessive government spending.

At the time, many were convinced this was necessary for getting us through a public health crisis, and they were discouraged from considering the financial consequences these measures could impose. Couple that with the Federal Reserve’s more than doubling its balance sheet to $9 trillion, simply printing money at this point, and the U.S. is enduring its highest inflation rate since 1982.

And now, the Biden Administration discounts the wisdom history can teach us about inflation and instead opts to endorse new, unproven economic schemes like Modern Monetary Theory, which asserts that the Fed should create more money to fund Congress’ deficit spending, regardless of how it alters inflation.

It’s no wonder, then, that inflation continues to climb, robbing people of their purchasing power. This is theft through inflation.

Change is critical not just for economic output but because “more economic freedom improves indicators of social wellbeing,” as Lawson says. With more purchasing power and fewer impeding regulations, Americans can overcome challenging circumstances through work and long-term self-sufficiency, instead of being dependent on government programs that provide short-term payments. But cultivating this change requires creating trust as a culture in communities.

“In rule-based, highly regulated countries, building up trust is much harder,” says Lawson, who ventured to Venezuela, Cuba, Russia among other countries, speaking with citizens about how the lack of economic freedom affects their lives as research for his book Socialism Sucks. Without social trust, people don’t want to trade. Each new regulation and trade restriction the government passes weakens an individual’s ability to bring about change at ground level.

In addition to improving economic freedom, we need more hope in our public discourse. For nearly three years now, Americans have woken up daily to harrowing messages about how they’re vulnerable and incapable due to a widespread virus, inflation, supply-chain problems, and more. The common gloom-and-doom narrative has become the norm, leaving the nation yearning for optimism. Optimism sets democracy apart from totalitarianism and is desperately needed today.

The truth of the matter, and the hope it provides, is that there is a solution to this crisis: economic freedom. While the next annual EFW report hits in 2021 will likely reveal an even worse situation for economic freedom, a trend will likely continue given how the Biden administration is pursuing big-government policies that are destroying not only economic and individual liberty, but the American Dream itself.

We need a return to the classical liberalism that has advanced people’s livelihoods through capitalism and limited government. Those principles helped set the stage for billions of people to be brought out of extreme poverty, so let’s get back to them.

Originally posted by AIER

​The Washington Post called them President Biden’s “wins in Congress.” But Democrats shouldn’t take that victory lap yet, as the Post admits—there’s little in the so-called Inflation Reduction Act that will do anything of the sort.

Despite the Biden administration’s claims to the contrary, the U.S. is in a recession. And despite its claims that everything else is to blame for the 40-year high in inflation, the blame is on the bad policies of excessive spending, taxing, regulating, and money-printing out of Washington. And the progressive fiscal policy pursued by this administration and Democrats in Congress is only making it worse. Signing the IRA was only throwing gasoline on the raging economic fire.

In the first two quarters of 2022, the U.S. had two consecutive quarters of declining real economic output, historic declines in productivity, and rapid inflation contributing to half of companies planning to cut jobs. Every time there have been two declining quarters of real economic output since 1950, the period has been called a recession. So why should this time be different? Clearly, the economy is floundering and American families are struggling to make ends meet. No wonder, we’re all dealing with lower economic output and high inflation not seen in four decades.

The IRA will result in higher taxes, more debt, more inflation, and deeper recession at exactly the worst time for the American people. The policy solutions aren’t complicated; we must limit government and maximize liberty by reducing spending, cutting taxes, removing regulations, and tightening the money supply. The policy mistakes in Washington over the last year prove that rules-based policies that rein in the failures of government are needed now maybe more than ever.

Originally posted at TPPF.

It’s official—we’re in a recession. And have been all year.

The government reported today that there were two consecutive quarters of declining inflation-adjusted economic output to start 2022, a condition that has been called a recession every time since 1950. And inflation is running at a 40-year high.

Americans are struggling in the Biden economy. Consumer expectations about the economy have dropped to the lowest in nearly a decade. Small business sentiment is at a 48-year low. Even as the Biden administration is stuck on how to define a “recession,” Americans feel this depressed economy.

This stagflation on steroids hasn’t been seen in a generation and it is the direct result of the economic policy disaster coming out of D.C.

Forty years ago, the economy dealt with a similar situation after bad policies from the Carter administration and the Federal Reserve. It took severe monetary tightening by Fed Chair Paul Volcker and a double-dip recession to correct the prior government failures.

Fortunately, the Reagan administration balanced some of Volcker’s (correct) quantitative tightening with a pro-growth policy approach of some spending restraint, large tax cuts, sensible deregulation, and more free trade agreements. These policies removed barriers imposed by government and supported incentives to work and invest so that the economy expanded, such that the next 20 years are called the Great Moderation.

Fast-forward to today and we’re in a similar economic situation with a recession and high inflation but without the same bravado of sound policy at the Fed or in the White House.

Instead, Federal Reserve Chair Jerome Powell has been tightening monetary policy at a faster rate than in recent years—but at a much slower rate than Volcker did then, meaning high inflation will likely persist.

And President Joe Biden is clearly no President Reagan.

In fact, just this week President  Biden has been pushing a $280 billion spending bill known as the “CHIPS Act,” which is essentially taxpayer handouts to semiconductor businesses and the tech industry that may help China in the process at the expense of all other businesses and Americans. The Senate passed the CHIPS Act and the House likely will, too, as some see it as “free” money to win votes.

Instead of increasing corporate welfare, raising the national debt, and likely driving inflation higher, the answer should be to reduce the cost of doing business by cutting taxes, spending, and regulation, which is a proven recipe for prosperity.

We’ve seen the opposite. When you overinflate an economy through overspending by Congress, overprinting by Fed, and overregulating by Biden, these are the depressed and depressing results.

And Biden and Congress are doubling down on bad policy.

There may be an agreement in the Senate on a scaled-down version of “Build Back Better” in a reconciliation bill, which is being scored over a decade at $430 billion in new spending but potentially a reduction in the debt by $300 billion from an estimated $730 billion tax hike. But the devil will likely be in the details of how much more permanent spending is hidden, as in previous versions, and how much of this temporary tax hike won’t materialize in more revenues as it makes the recession more severe.

Tax hikes don’t work to reduce the deficit because they slow economic growth, which reduces tax revenues. And this is the worst time to be raising taxes, much less paying for $370 billion more for the Green New Deal, forcing us toward unreliable energy sources at a very high cost.

So this will likely raise the deficit, give the Fed more ammunition, and raise inflation further at the expense of growth. We can’t afford these progressive policies.

But we can correct past government failures faster and have another long period of economic prosperity like after Volker and Reagan.

The Fed should move back to a rules-based monetary policy and tighten more quickly now. Congress should pass a fiscal rule that restrains or cuts spending and make the Trump tax cuts permanent while finding more tax relief. And Biden should roll back his onerous regulation and sign free trade agreements.

And if they don’t, the states and the people have to step up to the plate to get us out of this depressed economy.

​Published at TPPF

Florida Gov. Ron DeSantis recently responded to questions about California Gov. Gavin Newsom’s ads airing in Florida, “It’s almost hard to drive people out of a place like California given all their natural advantages, and yet they are finding a way to do it.” He noted that California is hemorrhaging its population because of bad progressive economic policies so that they could be more free

Florida ranks third in the nation for economic freedom, according to the Fraser Institute. And California ranks second to last.

Our own study supports the position of DeSantis.

Freer states that were more reluctant to shut down their economies due to COVID-19 are doing much better economically than states with severe shutdowns. Even a state like California is suffering — which was considered an American paradise for nearly a century, with its perfect weather and natural beauty.

This month’s U.S. jobs report showed an increase of 372,000 net nonfarm jobs in June, yet it’s still under the pre-shutdown number by 524,000. The Biden administration trumpeted the good news of job growth, yet the real story is in the details. Labor participation is lagging and inflation-adjusted average hourly earnings are declining, and the bulk of the new jobs added are decisively in lower-tax, pro-growth-oriented states.

Residents are fleeing California, New York, Illinois, and Pennsylvania for places like Georgia, Florida, Tennessee, and Texas. DeSantis noted that it was once unusual to see California license plates in Florida, but it’s now a growing trend.

Of the 14 states that have recovered all their jobs lost due to the shutdowns, 12 are in states with legislatures and governors, championing a better fiscal and regulatory climate. This supports lower costs of living that offer new residents greater purchasing power and better opportunities to weather a looming recession.

Perhaps the most important statistic is how Americans are voting with their feet.

Forty-six million Americans changed zip codes in a 12-month period ending in February 2022. That’s the most moves since 2010. According to the U.S. Census Bureau, in 2021, California, New York, and Illinois had the highest domestic migration losses, and Florida, Texas, and Arizona gained the most.

Pods, a moving and storage company, offers up their own data on where Americans are increasingly headed. Virtually every destination benefitting now is in the Southeast, Texas, or Arizona. Pods continually cites that people say the lower cost of living as a primary reason for relocation.

U-Haul released a report showing essentially the same results. And there are private research organizations as well with more corroborating evidence, such as How Money Walks that uses IRS data.

And it’s not just people that are moving but businesses, too.

In June, Caterpillar Inc., a Fortune 500 company, announced they are moving their headquarters from Deerfield, Illinois, where they have been since the early 1900s, to Irving, Texas. This makes Texas now the headquarters of 54 of the Fortune 500 companies in the world. Remington Firearms, America’s oldest firearms manufacturer, recently announced its relocation from New York to LaGrange, Georgia.

The list goes on and on.

Competition amongst states for residents and businesses is a booming trend that doesn’t look like it will abate soon. Undoubtedly, ad campaigns and recycled political rhetoric will ratchet up the fight on both political sides for new residents and commercial enterprises. Yet the policies of lower spending and taxes, deregulation, and stronger property rights resulting in more freedom are winning.

Prolonged COVID-19-related shutdowns and excessive government mandates proved to be a formula for economic destruction. The evidence in favor of economic opportunity and robust markets is overwhelming.

Fortunately, Americans are now seeing and acting on not only mounting evidence but also their own real-life experiences — which is the true test of which approach is more viable.

Published at Real Clear Policy with Erik Randolph

Only a bolt of lightning or a dose of radiation can awaken zombies in the movies; the same isn’t true for an economic zombie. In the latter’s case, it took many years—especially the last two years—of deficit-spending fueling excessive money printing to get this day of reckoning for the U.S. economy with frequent mentions of “stagflation” and “recession.”

An economic zombie is harder to kill than in the movies, as they last as long as the policies that raised them, causing much avoidable pain to Americans—especially to those who can least afford it. Bad policies must stop so this scary movie disrupting our lives ends.

Zombie firms are those that are fragile as debt mainly funds their operations. They rose in the U.S. since 2008 as the Federal Reserve held interest rates too low for too long and Congress passed numerous bailouts and spending packages. Congress’ recent actions of even worse deficit-spending packages that led to a 20% increase in the national debt since January 2020 to a whopping $30.5 trillion—or $90,000 owed per American—helped prop up many more zombie firms.

Thankfully, the Fed is finally fighting the 40-year high inflation rate by (slightly) reducing its balance sheet to raise its federal funds rate target. But it’s well-behind the curve as it should be tightening much faster according to the well-respected Taylor rule. It’s also good news that Congress doesn’t look poised to pass any more reckless deficit-spending packages—thanks to Senate Republicans, Democratic Sen. Joe Manchin, and Sen. Kyrsten Sinema—but a new attempt is brewing.

When these bad policies stop, there will be a correction of these government failures that created zombie firms to turn to dust.

Evidence of this is small businesses—which are the most sensitive to these escalating costs—cutting 91,000 jobs in May, making it three out of four months with job losses at small businesses. And according to a recent WSJ survey, six out of ten small-business owners expect the economy to be worse in the next year, matching the record low in April 2020. Dying zombie firms will put downward pressure on labor markets as they cut workers and drop open positions to stem higher costs, which will reduce the inflated number of job openings exceeding unemployed workers.

With so many workers not looking for a job, there are also many zombie workers.

Millions of workers haven’t returned since the recession and others are jumping from one job to another to keep up with rapidly rising inflation and to find the “best” match. The handouts without work requirements—such as “stimulus” checks, child tax credit payments, and expanded Medicaid over the last two years—contributed to this situation as the personal savings rate jumped to a historic high of 33% in April 2020 and stayed elevated for a while. But now that rate is dropping like it’s hot, as people are running through their savings—with the latest rate of 5.4% in May 2022 being the lowest in nearly 14 years.

If zombie firms begin to crumble and zombie workers don’t search for a job, the resulting zombie economy will hit a wall. The result will be a rising unemployment rate, soaring inflation, and stagnating economy, which would extend this costly period of stagflation. This weakens President Biden’s argument that the strength of the labor market can mitigate the effects of inflation, as inflation-adjusted hourly earnings remain negative.

The Fed is way behind the inflationary curve, and it’s the primary entity that can correct this walking dead inflation situation. Instead of blaming “corporate greed” or “Putin’s price hikes,” President Biden, Congress, and the Fed must cut regulations, spend and tax less, and print less money.

The zombie economy’s reckoning is likely a recession with real GDP declines of in the first quarter and another likely decline in the second quarter. No wonder President Biden’s approval rating is hitting record lows and his disapproval rating hitting record highs.

To awaken the zombie economy, there needs to be responsible fiscal and monetary policies in Washington. This includes pro-growth spending, regulating, and taxing reductions to support expanding supply and aggressive quantitative tightening to deflate demand. Until then, the zombie economy will continue to bring deeper, longer-lasting pain.

Published at TPPF with Charles Beauchamp

​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/

​An MSNBC headline reporting on a recent interview of a White House economic advisor Jared Bernstein claimed that America has a “booming economy.” But that’s not what most Americans think about the economic situation.

The University of Michigan’s consumer sentiment index for March, which gauges how consumers feel about the economy, fell to a decade low at 59.4. This is a 5.4% drop from February and a 30% drop from March 2021.

The survey reveals Americans’ pessimism and uncertainty amidst the highest levels of inflation since the 1980s. Many Americans reported that they have had to reduce their quality of life and lower their living standards amidst the inflation crisis.

This crisis has been created by the Federal Reserve printing too much money to fund the overspending by Congress, and exacerbated by the Biden administration’s war against oil and gas that fueled higher energy prices and have been amplified by the Russia-Ukraine conflict.

The only positive news from the survey was slight optimism for the strengthening labor market. Survey statistics revealed that there was hope that the unemployment rate would continue to decline.

While there are reasons to be optimistic about the labor market’s increase in monthly nonfarm jobs—431,000 (with 426,000 in the private sector)—and the unemployment rate dropping to 3.6%, weaknesses remain.

For example, since the shutdown recession ended in April 2020, total nonfarm jobs are up 20.4 million but are still down 1.6 million from February 2020. This indicates that though the labor market is improving, but it’s not as strong as it was then.

And while the Biden administration touts the jobs created since he took office in January 2021, only 39% have been added since then while the other 61% were during the Trump administration.

Other unaddressed labor market weaknesses remain. Inflation-adjusted wages are down by 2.3% over the last year, a depressed prime-age (25-54 years old) employment-population ratio by 0.5 percentage point since February 2020, and a broader U6 underemployment rate of 6.9%.

Further adding to the concern in the labor market is a record high of 5 million more unfilled jobs (11.3 million) than unemployed people (6.3 million).

These ongoing weaknesses are shedding light on the impacts of big-government policies out of D.C., such as the “stimulus” checks, enhanced unemployment insurance, expanded child tax credits, and pandemic-related mandates, that have limited and are hindering the rebound of the American economy.

Instead, we must return to normalcy if we wish to give Americans more opportunities to prosper.

But that’s not happening. Paired with the inflation we’re dealing with stagnating economic growth, creating a period of stagflation for the first time since the 1970s.

Rising inflation is foreshadowing concerns of a future recession and economic crisis as American families are paying substantially more for products and services amidst reduced purchasing power.

Why is our economy out of control, and what can be done to mitigate the economic crisis?

The government imposed a “shutdown recession” from March to April 2020 that proved devastating. Amidst the shutdown, elected officials heightened Americans’ economic dependence on government through $6 trillion in deficit-spending that included programs which disincentivized working.

Two years later, there must be a return to the dignity and permanent value of work — instead of the dependence on the government that the Biden administration is promoting.

For example, the Biden administration’s irresponsible proposed budget of $5.8 trillion includes massive spending while raising and creating harmful taxes, such as the new “billionaire tax” that Sen. Joe Manchin already shot down. The result of this irresponsible budget would be an increase in the debt by 50% to $45 trillion over the next decade, which is highly optimistic given their unlikely rosy economic assumptions.

Given the likelihood of continued trillion-dollar deficits for the foreseeable future and the Fed keeping its target overnight lending rate low even as it raises the rate by printing more money means that more inflation and economic damage are to come.

But this doesn’t have to happen.

Congress should choose a different path, enacting pro-growth policies like those passed from 2017 to 2019, which will better provide Americans with opportunities to improve their lives and livelihoods. This should be paired with binding fiscal and monetary rules to stop Congress from overspending hard-earned taxpayer dollars and to stop the Fed from overprinting money that’s reducing families’ purchasing power.

We should stop the “booming economy” rhetoric and focus on how families are doing. The way to give them more opportunities to flourish is by removing obstacles imposed by government.

https://www.texaspolicy.com/booming-economy-not-if-you-ask-most-americans/

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/

​Texas continues to recover from the shutdown recession of 2020. The state has made strong progress toward a full recovery, especially compared to other states. But it has much room for improvement by many metrics before we’ll see the robust pre-shutdown prosperity.

In February 2020, Texas had low unemployment and relatively high labor force participation. The unemployment rate was just 3.7%, which some economists consider to be full employment. That basically means the state’s labor resources were being used as efficiently as possible and there was no cyclical unemployment, which occurs when the economy is in recession or growing too slowly.

Likewise, a large portion of the population was participating in the labor market. In February 2020, the labor force participation rate was 64% and the employment-to-population ratio was 61.6%.

That then changed drastically with the COVID-19 pandemic and government-imposed shutdowns in March 2020. By April 2020, those numbers had dropped to 60.2% and 52.4%, respectively, the private sector lost 1.4 million jobs (12.8% decline), and the unemployment rate skyrocketed to 12.9%.

Since then, Texas has regained its lost private sector jobs, plus another 105,200 jobs, and the unemployment rate is back down to 5%.

These data tell an important story about the effect this had on Texans. The best path to prosperity is a job, as work brings dignity and hope to people by allowing them to earn a living, gain skills, and build social capital that endures. Public policy that affects the labor market is so important because it affects people’s livelihoods and their sense of dignity.

Last year, the federal government gave extra unemployment payments on top of normal payments. Together, these payments often resulted in recipients receiving more money than they might have made working. This, of course, incentivized them not to work.

About half the states, including Texas and mostly red states, rightly ended this program early and those states have been recovering faster than the states which continued the program. The states that discontinued the program before its nationwide expiration in September 2021 have averaged lower unemployment rates. They have also recovered jobs faster, relative to the number of jobs they had before the shutdown recession.

Of the 10 states with the highest proportion of private sector employment to pre-pandemic levels, nine are in red states, including Texas. Conversely, six of the 10 states and D.C. with the lowest proportion are in blue places. In general, conservative policies have been more conducive to job growth and overall recovery because they tend to get government out of the way so that people can make the decisions that are best for themselves and their families.

Texas is one of just seven states that have recovered all the private sector jobs lost in the shutdown recession. That is an achievement, but the state is still far behind (3% below) the pre-shutdown trend and other measurements of the labor market’s health show that Texas has more work to do.

The labor force participation rate is still 1.3 percentage points below its pre-pandemic level, meaning that some people have left the labor market, such as those who have given up looking for work. The employment-to-population ratio is also down 2 percentage points from its pre-pandemic level. It’s important to get these figures back to normal.

In November, Texas had 884,000 unfilled job openings and just 770,000 unemployed. That is 114,000 more job openings than workers available to fill them. To fill these jobs, Texas needs more of its people to rejoin the labor market. Achieving that goal starts with responsible government policies.

The Texas Model of lower taxes, no personal income tax, less spending, and sensible regulation is necessary to unlock poverty and let people prosper. Texas’ free-market-focused institutions helped the state outpace the national average both in economic growth and income growth in the latest data for the third quarter of 2021.

Because the 87th Legislature followed many of the Foundation’s recommendations, especially by passing the strongest spending limit in the nation, these successes for the state and Texans will hopefully continue. But we can do better.

Texas can build upon its past success in the upcoming 88th Legislature by further limiting government spending, ensuring opportunities to earn a living, eliminating property taxes, and advancing education freedom.

Such efforts will help families flourish, keep Texas Texan, and make Texas the leader for the rest of the nation.

https://www.texaspolicy.com/strengthening-the-successful-texas-model/

Texans continue to recover from the shutdown recession. There have been challenges like business closures, skyrocketing local property taxes, and anti-prosperity fiscal and monetary policies out of Washington. Fortunately, the Texas economy was (finally) fully opened on March 10, 2021, and the third wave of COVID-19 is now behind us with better results than after prior waves without statewide mandates of masks, closures, or vaccines—as these should always be voluntary. The 87th Texas Legislature mostly helped support the recovery with passage of many sound policies like a Conservative Texas Budget, a stronger state spending limit, and independent efficiency audits. However, there were missed opportunities like permanent, broad-based property tax relief. Given other states are drastically cutting or even eliminating taxes, Texas must remove government barriers so it can support more opportunities to prosper, remain an economic leader, and withstand bad policies out of Washington.

https://www.texaspolicy.com/texaseconomy/

The Texas Model of relatively less spending, no personal income tax, and sensible regulation continues to support improved economic freedom with more opportunities to flourish. But there’s room for improvement for the state recently ranked as the fourth most free nationwide.

Canada’s Fraser Institute recently released the Economic Freedom of North America 2021 report that scores states for economic freedom based on government spending, taxation, and labor market regulation. Economic freedom essentially is the freedom for people to use their property with minimal government interference. These scores are based on the latest available data for all jurisdictions in 2019, so they don’t include the effects of the shutdowns yet.

Based on these scores, they separate states into four quartiles. In the most-free quartile, the average per-capita income was 7.5% above the national average while the least-free quartile was 1% below it. Additionally, people tend to be richer when economic freedom is greater.

Economic freedom is essential to human flourishing.

Texas was the most economically free state in 1981 when the first score was reported. This was when the state had more conservative Democrats before party realignment with a political trifecta—control of the governor, house, and senate. But that ranking fell as they started to impose big-government policies that lowered it to seventh in 1991. The Lone Star State then dropped further and bottomed out at ninth in 1993. Through the late 90s and early 2000s, the more progressive Democrat-controlled House continued to restrict economic freedom which kept our ranking stubbornly low.

The first Republican trifecta was in 2003. The new leadership helped weather the storm of a fiscal crisis during a severe recession by overcoming a $10 billion shortfall through spending restraint. This new direction for limited government helped improve the ranking to fourth in 2006, rising to as high as second in 2008, while falling to no lower than fifth since then. This is quite impressive given these rankings can move depending on the relative ranking of states, and other states attempted to follow what worked in Texas.

The stronger commitment to the more successful Texas Model in recent years with a more conservative Republican trifecta especially since 2015 has helped support more economic freedom and prosperity.

Comparatively, Texas’ economic freedom ranks considerably better than other large states like California’s 49th, which has ranked in the bottom five states since 2002, and New York’s 50th, which has been in the bottom three states since 1981. Texas trails New Hampshire, Tennessee, and Florida, but the state’s score of 7.75 is near the leaders. It is only 0.08 points behind the top-ranked New Hampshire and 0.03 behind third-ranked Florida.

This comparison indicates the difference in governing philosophy.

For example, more conservative Texas and Florida rank 13th and 6th best, respectively, in state and local spending per capita compared with progressive California and New York ranking 48th and last, respectively. Of course, lower spending means less taxation, as Texas and Florida rank fourth and eighth best, respectively, in state and local tax burden per capita, while California and New York rank 43rd and last, respectively.

And Texas and Florida are right-to-work states while California and New York are not. Texas continues to reduce barriers to work by removing unnecessary and harmful regulations, especially relating to occupational licensing—though there’s still too many. And Texas keeps its minimum wage at the federal mandate of $7.25 per hour, though the real minimum wage is always $0.

These measures matter for human flourishing when you consider Texas has a lower cost of living (ranks 15th lowest in the state compared with Florida ranking 32nd, California 49th, and New York 48th) and better labor market outcomes, including lower income inequality and poverty.

Less economic freedom contributes to people fleeing California and New York for greener pastures. Over the last decade, the populations have grown more than two times faster in Texas and Florida compared with California and New York, and Texas’ population has grown 9.3% faster than Florida’s.

But Texas needs improvement.

One area is excessive local property taxes from too much government spending. The Texas Legislature provided limited relief this year, but much more is needed.

The state should build on its recent success of passing the strongest state spending limit in the nation this year by using use surplus funds to cut school district property taxes. And lawmakers should use the same approach for other local governments. These actions, along with redesigning the tax system, can result in eliminating property taxes by 2033.

By continuing to build on past successes and remove government barriers, Texas can be the most economically free state to best let Texans prosper.

​https://www.texaspolicy.com/economic-freedom-lets-texans-prosper/

​Since 1920, Texas’ economy has been hindered by a little-known protectionist law called the Jones Act. In fact, Wayne Christian, the current chairman of the Railroad Commission of Texas, noted in a 2018 letter that this act hurts Texas and the nation and should be reevaluated. At a time when energy prices are soaring and economic activity is souring from bad policy in Washington, ending this antiquated act would be a big boost to Texans and all Americans.

The Jones Act mandates that only ships built, owned, and crewed by Americans can transport goods between U.S. ports. But such vessels are relatively more expensive to build and operate because of the lack of competition due to government restrictions. As a result, it can often prove cheaper for Americans to purchase products made in other countries.

In times of national disaster, presidents, regardless of political affiliation, have provided aid to coastal states and U.S. territories by granting waivers of the Jones Act so the assistance can arrive efficiently.

The act especially harms states like Alaska and Hawaii, as well as U.S. territories like American Samoa, Puerto Rico, and Guam. Because of the added surcharges associated with shipping goods on an approved vessel, artificially high prices become the norm for most of the goods shipped to those places and result in billions of dollars of lost revenue for U.S. businesses — and thus American workers and consumers.

The Jones Act is even more burdensome on energy producers, especially here in Texas. Currently, Texas produces half of America’s natural gas output — but instead of shipping gas domestically, we are being forced to export our natural gas. Texas continues to ramp up liquefied natural gas (LNG) production, but the Jones Act has made it impossible to sell some domestically. In fact, there are only 96 American-made, Jones Act-compliant ships and no eligible ships capable of carrying LNG. Because of this, it’s more economically viable for some coastal states and territories to import from foreign nations rather than buying LNG produced in Texas. Repealing this protectionist measure would remove this obstacle and help lower energy prices. Currently, foreign nations with large reserves of natural gas and crude oil have greater incentives to enter U.S. markets because the act puts American energy producers at a disadvantage.

Last year, the U.S. exported LNG to 37 countries, with the Dominican Republic purchasing over half of its LNG from the U.S. Meanwhile, the Dominican Republic’s island neighbor of Puerto Rico found it cheaper to import most of its LNG from Trinidad and Tobago instead of mainland America. The difference is that the Dominican Republic is a foreign nation and is not limited to more expensive approved ships to buy from the United States.

Proponents for the Jones Act claim that it “bolsters” our national defense, but instead it increases energy dependence on foreign imports, often from unfriendly countries.

Another unintended consequence of protectionist shipping laws is one of the largest — and most dangerous — commercial challenges for ships that navigate the narrow connection in the Houston Ship Channel as they sail towards the Gulf of Mexico from near Houston.

Jokingly nicknamed the Texas Chicken, this hair-raising encounter in which oncoming ships steer almost directly at one another has become the norm for ship captains because Houston simply doesn’t have a wide enough channel to safely accommodate two-way traffic at normal distances. This is due to another costly protectionist measure called the Foreign Dredge Act of 1906. It prohibits foreign-built ships from dredging in the U.S. In addition to these risky maneuvers, the U.S. Army Corps of Engineers has talked at length about the channel’s inefficiencies and environmental concerns because of flawed assumptions that restricting certain ships benefits Americans.

Simply expanding the channel would solve many of the bottleneck issues our state sees with energy exports and shipping in general. However, the costs associated with conducting this project are artificially high because of the two acts. Two of the largest sand-moving projects in Louisiana dredged about 24.6 million cubic yards of sand, costing a combined total of $334 million. In the Netherlands, a similar project was undertaken, costing just $55.5 million while dredging 14% more sand.

The economic costs of the Jones Act are clear and, as economist Milton Friedman said, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”

The Jones Act was created to protect domestic shipbuilding, but it has turned a once-thriving U.S. maritime industry into a dying, anti-competitive relic — an allegory of what irresponsible government regulation looks like. If waiving the Jones Act works during a crisis, why have it at all? We shouldn’t, and Texans and all Americans would be better off without it.

https://www.texaspolicy.com/antiquated-jones-act-hobbles-texas-economy/

Economic freedom hit a record high in 2019—but then came 2020. That’s when government shutdowns limited economic freedom, with devasting impacts to people’s lives and livelihoods.

According to the 2021 Economic Freedom of the World Report, which measures economic freedom according to a number of economic variables, the global average for economic freedom hit a new high at 7.04 out of 10 in 2019, the most recent comprehensive data. But that’s going to fall in 2020 data from COVID-related restrictions and sky-high government spending.

Let’s first consider the benefits of economic freedom.

The top quarter freest nations have annual GDP per person over $50,000 (purchasing power adjusted), compared to under $6,000 in the quarter least free nations. The average income of the poorest 10% in the freest nations is more than $14,000, compared to the least free nations at under $1,600. In the least free nations, one out of every three people lives in extreme poverty ($1.90 a day) compared to less than 1% in the most-free nations.

And economically free nations have increased life expectancy, better health care, more educational achievement, and higher levels of happiness. Research has shown that happiness is driven even more by economic freedom than the increased prosperity it generates. People care about self-sufficiency, and the opportunities to attain it are more plentiful in places with more economic freedom.

During the financial crisis of 2007-2008, economic freedom declined globally. Governments responded with increased spending (as they would later respond to the COVID-19 pandemic), though with noticeable differences between advanced and emerging economies. For example, from 2007 to 2010, advanced global spending increased by 16% compared to 53% in other economies.

As the financial crisis receded, economic freedom recovered and moved to new heights. In 2007, the average economic freedom score was at its highest level ever, 6.90. It fell to 6.86 in 2009 as governments expanded their powers and spending in response to the crisis. By 2011 it had recovered to 6.93, edging out the score at the beginning of the crisis, and continued to increase.

Global growth resumed as economic freedom recovered.

While comprehensive 2020 data aren’t available yet, fiscal projections by the International Monetary Fund (IMF) indicate economic freedom took a huge hit from the extraordinary actions by governments.

Excessive government spending reduces economic freedom by crowding out people’s decisions in the productive private sector. To fund deficits now or later, governments consider raising taxes or just printing more money. Unfortunately, these actions make the problem worse, especially to the neediest among us, as the answer should be more opportunities to prosper through less spending—the true burden of government.

The IMF’s data show advanced economies being more profligate than other economies in spending this time around. Average spending increased by 28% between 2019 and 2021 in advanced economies while developing economies lagged at 12% for a world average of 21%.

Overall, government deficits increased by 280% in the advanced world, and 71% elsewhere, doubling global deficits. Gross government debt rose from 104% of GDP to 123% in advanced economies and from 54% to 64% elsewhere. These results threaten human flourishing worldwide.

In the U.S., America had a record low poverty rate and record high median household income in 2019. This was a result of increased economic freedom from the last administration’s deregulatory and tax cutting efforts. The unemployment rate reached new lows for almost every demographic and the overall rate was at 3.5% in February 2020.

As shutdowns happened across the country, the national unemployment rate skyrocketed to 14.8% in April 2020 and remains higher at 5.2% today. And many of those who have a job have seen their purchasing power fall due to higher inflation. Costly shutdowns and excessive spending have hit Americans’ lives and livelihoods hard, and these will have long-lasting effects.

Clearly, control by government through shutdowns over the last year caused much economic destruction. The already-passed $6 trillion in spending since the shutdown recession started is more spending than every economy except the U.S. and China. And this excess spending already contributed to a tripling of the deficit to $3.1 trillion in 2020.

After the Biden administration passed its excessive $1.9 trillion American Rescue Plan Act, it’s calling for an additional $6 trillion in “infrastructure” proposals (something Americans can’t afford).

Fortunately, we have a sound blueprint of what works well for increased opportunities to let people prosper: economic freedom through free-market capitalism. We need more of it now.

https://www.texaspolicy.com/economic-freedom-hit-record-high-globally-before-the-shutdowns/

OVERVIEW: Governments’ forced business closures and mandates in response to COVID-19 since March 2020 resulted in much economic destruction during the “shutdown recession.” A return to normal is essential for the recovery of economic growth and, more importantly, for the flourishing of people’s lives and livelihoods. However, more government
intervention in response to the Delta variant and reckless fiscal and monetary policies out of D.C. are hindering the recovery. The labor market has been improving more slowly than expected even though Congress has authorized
$6 trillion since the pandemic started and may soon authorize another $6 trillion, while the Federal Reserve has doubled its balance sheet to $8.4 trillion. The federal unemployment “bonuses,” which finally ended recently, and even more
in handouts, which have reduced incentives to work, resulted in the record high number of job openings exceeding the number of unemployed and added to the recovery’s uncertainty. Instead, we need a pro-growth approach.

https://www.texaspolicy.com/the-ginn-economic-brief/ 

​The economic success of the Texas Model’s limited government framework demonstrates that institutions matter for prosperity. But Texas must improve to remain competitive and support greater flourishing

​If you’re poor and reside where there’s little economic freedom, then you have fewer opportunities to improve your livelihood compared with those living in more economically free places. The freedom to have the flexibility to control your future and leave a legacy to future generations with little influence by government supports human flourishing.

This too-often overlooked fact is supported by the just-released study, “Economic Freedom Promotes Upward Income Mobility,” published by Canada’s Fraser Institute and prepared by Justin Callais, Texas Tech University, and Vincent Geloso, George Mason University.

Income inequality continues to be a divisive economic issue, with opponents of freedom blaming free markets for it. Yet, income inequality is no more prevalent in economically free nations than nations dominated by government intervention.

But there is a crucial difference that separates economically free nations from others—one at the heart of fairness and equity. And that is opportunity. The Institute’s new research shows income and social mobility are significantly stronger in free than in unfree places.

The study looks at 82 nations, utilizing mobility data from the World Bank and World Economic Forum, and freedom data from the Institute’s “Economic Freedom of the World Index.” The conclusions match other data noting that prosperity is much higher and poverty much lower in economically free nations.

The average per-person output in a top-quarter economically free nation is more than $50,000 (purchasing power adjusted) compared to under $6,000 in the quarter of least-free nations. The average income of the poorest 10% in the freest nations is over $14,000, compared to the same numbers in the least free nations reported to be just 11% of the freest nations at under $1,600.

While the study examines income mobility internationally, economic freedom spurs greater income mobility among the U.S. states. The higher level of in-migration to economically free states is best explained by people moving to seek greater opportunity.

The Fraser index includes several factors necessary for economic freedom, but the two most important for income mobility are the rule of law and reasonable regulation. Since the rule of law is relatively—if not completely—uniform across U.S. states, regulatory burdens help tell the story of migration flows.

The U.S. ranks 6th most economically free among 162 jurisdictions considered worldwide. Rankings among the largest states in terms of population and economic output (California, Texas, Florida, and New York) reveal a stark difference.

Both Texas and Florida, with their approaches of more limited government, rank in the top four among U.S. states in terms of economic freedom, whereas California and New York, which choose a heavy-handed governing philosophy, fall in the bottom 4 states.

Narrowing down the broader ranking to just the regulatory burden, which the study finds influences income mobility, the rankings are similar for these states. Ranking near the top are Texas at second best and Florida at 10th while California is at 35th and New York ranks 44th. Government spending per person is also much lower in these red states.

Taking these factors along with better fiscal policy into consideration, and no wonder people are moving in droves for improved opportunities from these dark blue states to these dark red states. This has also meant increases in state income and wealth from migration. Interestingly, despite what’s commonly suggested, polling data show that this migration isn’t soon to flip Texas blue soon.

Regulations too often exclude people from work and opportunity. They may require workers to purchase occupational licenses or train to acquire credentials before they can work. This takes time and money, which lower-income earners may not possess, creating a barrier that prevents them from fully participating and advancing in the labor market.

Such regulations slow wage growth for lower-income workers. And particularly, occupational licensing tends to hurt income growth among the poor more than those with higher incomes. Onerous business and hiring regulations can also slam the door shut on poor entrepreneurs who simply do not have the resources to satisfy government’s many hurdles.

Yet, many seem to believe free markets victimize people. But that’s simply false. Free market capitalism best lets people prosper.

Just look around the world. Where would a person rather live, even if they were poor? In economically free places like the U.S., Canada, Denmark, Texas, or Florida or unfree places like Russia, Egypt, California, or New York, or socialist basket-cases, Venezuela and Cuba?

Free markets continue to face many challenges following the 2009 recession, the COVID-19 pandemic, expansion of government overreach, and the evidence-free imaginings of free-market critics. Hopefully, the facts like those in this report will win out—people are more prosperous, less poor, and blessed with opportunity where economic freedom prevails.

Commentary

​Many Americans have historically associated “socialism” with things like the Red Scare, Nazism, the Cold War, and McCarthyism. Today, that fear has largely faded—particularly among young people—and has instead become a love affair.

A recent Axios/Movement poll found that 51% of 18 to 34 year-olds view socialism positively, though the share is only 41% for all Americans. That poll also found that 49% of young adults viewed capitalism favorably—a decrease from 58% in 2019. However, across all Americans there is 57% support for capitalism with just 36% having a negative view of it, which is a slight decrease from the 61% to 36% split in 2019.

Many reasons explain these trends, but the fact that capitalism has lifted more than one billion people worldwide out of poverty is irrefutable.

Despite this reality, the alarming rise in support for socialism, particularly among young adults, begs the question: Do proponents of “socialism” really understand it, and will it ever invade America?

In short, institutions matter and we should understand them, because when we do, we have a better appreciation for capitalism and will reject socialism, even as socialism metastasizes throughout many sectors of our economy.

Socialism is an economic system in which government owns the means of production. Socialism is an extractive economic institution with redistribution of resources—not with market prices but rather by elite politicians who supposedly understand the collective desires of society.

Capitalism, on the other hand, derives its success from an inclusive economic institution with private ownership of the means of production in a free enterprise system. This institutional framework has strong private property rights allowing for a well-functioning price system in markets that allow efficient allocation of resources to those who desire things most with a profit-loss calculation to increase prosperity.

Many supporters of socialism believe society would be best served by a big government that oversees things like health care, food, employment, and transportation, with college and housing at no charge. Socialism’s enthusiasts also claim government-run societies would decrease income inequality and give workers a greater voice.

However, socialists fail to recognize the truth that nothing is free.

More precisely, scarcity means there are always costs, whether realized or unrealized. Free college and universal health care could be fantastic services if they were truly free, but the government doesn’t have its own money—it must extract resources from Peter to give to Paul, and “free” provisions like these have poor outcomes.

Moreover, the ideas of “tax the rich” and “give to the poor” are fallacies that don’t support lower poverty or less income inequality, as they reduce opportunities for success in the productive private sector while contributing to greater dependency on costly government redistribution. This intervention stifles consumer power, eliminates competition, and oftentimes contributes to greater poverty and income inequality.

History shows us that socialism has never worked and will never work well.

Cuba—a socialist country located only 90 miles south of Florida—first embraced socialism over 60 years ago under Fidel Castro. Cubans yielded enormous liberties to Castro’s government in exchange for promises of a better life. As Cuba now grapples with shortages of COVID-19 vaccinations, food, and other critical supplies, even President Biden recently denounced Cuba and its economic system as a failure.

Despite the growing disdain for capitalism in the United States, data from the Economic Freedom of the World report confirms that capitalist, free-market policies lead to the greatest prosperity.

Greater economic freedom under capitalism provides for a more robust economy and a well-functioning price system that yields higher life expectancies, higher incomes, greater per-capita GDP, and less poverty. And capitalism is also morally superior to socialism as it empowers people to make decisions that meet their needs rather than being told what to do through subjective determinations from elite politicians. Furthermore, socialism requires the immoral violation of personal property rights and individual freedoms.

Government is not intended to dictate the lives of each individual, nor it is it supposed to control a society’s factors of production.

As former President Trump said, “America will never be a socialist county.” Socialism did not make America great, nor will it provide for a more perfect union. While we’ve moved further toward socialism in many sectors of our economy, which explains their poor outcomes, Americans should appreciate the many benefits of capitalism so that we can right the course toward more human flourishing.

​Commentary