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.
Fear and uncertainty over the pandemic are rising again as the first U.S. case of the Omicron variant of COVID-19 was found in a patient in California and has been spreading across the nation. But let’s not panic and jump to solutions. While this could contribute to the second consecutive winter wave, our new research shows why state governments shouldn’t overreact. Instead, we must steer clear of the devastation caused by mistaken shutdowns over the last two years.
Recently, Federal Reserve Chairman Jerome Powell told a U.S. Senate committee that this new variant poses “downside risks” to our country’s economic recovery and inflation headed into 2022.
But if recent history is a guide, the economic consequences of Omicron—or future variants—would be mostly from bad policies out of Washington and state capitols.
Congress is already running up massive deficits with excessive spending and misguided policies. The Fed has monetized much of that debt issuance, creating too much money that’s chasing too few goods, hence the highest inflation in 39 years. That inflation rate is challenging for the middle class, but it’s devastating to the impoverished who struggle to afford spiking prices of groceries, gasoline, and more.
But what’s too often missed is the effect that states had on making what could have been a slowdown or minor recession in response to the pandemic into a severe downturn.
Our new research, commissioned by the Georgia Center for Opportunity, finds that the overreaction by states to previous waves did substantial damage without much benefit in reducing the effects of the coronavirus.
The research shows a statistical correlation between how severe state governmental actions were in shutting down their economies and negative impacts on employment more than a year after the pandemic began in America. This was the case even after controlling for a state’s dependence on tourism or agriculture, population density, and the prevalence of COVID-19 infections and hospitalizations.
Our research found no correlations between the severity of shutdowns imposed by state governments and the rate of reported COVID-19 hospitalizations or deaths.
What we do know is that nationally, there are 3.3 million fewer people employed in the private sector since February 2020, a month before the shutdowns in most states. But the job loss is not spread evenly across the country.
Our study did not settle for simply comparing the job loss as measured from February 2020, the month before the pandemic hit. Instead, we ran more than 200 ARIMA model forecasts to capture pre-pandemic trajectories in an effort not to skew the results. Not all states had upward trajectories, and job growth rates varied from −0.8% to 2.9% for the 12 months prior to the pandemic.
States like Hawaii, New York, California, and New Mexico that imposed harsher economic restrictions generally have greater job losses even today than those states that were less harsh, such as South Dakota, Iowa, Nebraska, Missouri, and Utah. For example, New York was 10.2% below its trajectory in October 2021 while Nebraska was just 2.4% below.
Policies need to be implemented in a way that preserve jobs.
Protecting the rights and opportunities of workers to earn a living is obvious. Equally important are the psychological benefits that come with the dignity of work. And there are socio-economic benefits from work that positively impact everyone, such as building social capital and gaining skills, which are especially important for those in marginalized communities who were most impacted by the pandemic.
As the states prepare to deal with the Omicron variant (and we’re sure there are more to come), it is paramount that they consider the empirical evidence and not impose burdensome restrictions—such as business closures, stay-at-home orders, school closures, gathering restrictions, and capacity limits—on economic activity that will likely end up doing more harm than good.
Instead, the policies need to be crafted more carefully to expand opportunities for the poor and preserve jobs in an open economy in which entrepreneurs can solve problems while taking measures when necessary to protect vulnerable populations.
These are the policies that should have been done all along to avoid the severity of the shutdown recession and the effects on lives and livelihoods thereafter. Let’s not make another mistake when so many are already suffering.
Mr. Randolph who authored the study, is the Director of Research for the Georgia Center for Opportunity. Mr. Ginn, who sat on the advisory panel for the study, is chief economist at the Texas Public Policy Foundation, served as associate director for economic policy at the White House Office of Management and Budget, 2019-20.
www.texaspolicy.com/reconciliation-bill-is-an-assault-on-marriage-and-families/Marriage is already tough enough; fewer and fewer Americans are even attempting it, and while divorce rates are down slightly, that may only be a temporary side effect of the pandemic. Yet the evidence is clear—marriage is the not-so-secret ingredient for success in life, for men, women and especially for children.
But marriage is about to become even harder. Congress’ massive reconciliation bill, clocking in at more than $5 trillion, is riddled with provisions that undermine society’s most fundamental institution—the family. From multiple marriage penalties to taxes that will prevent parents from passing businesses and farms down to their children, to lower household incomes paired with higher prices (financial stress is still the primary cause of divorce), the bill makes marriage more expensive and even cost-prohibitive in some cases.
We’ve long known that fiscal policies can have a big effect on marriage rates. Chief among these policies are welfare programs.
“A safety net marginally reduces the costs of single parenthood, nonmarital childbearing, and divorce,” a U.S. Congress Joint Economic Committee report said in 2020. “It also can create a significant tax on marriage because the addition of a spouse with income typically reduces safety net benefits, and if he has only modest earnings or unsteady employment, the trade-off may not be worthwhile.”
But Congress and the Biden administration are doubling down on such policies. If the reconciliation bill passes, marriage will be even less advantageous to couples and to children.
Let’s look at a few examples of how.
First, multiple marriage penalties are found in the bill. A marriage penalty occurs when tax liability for a couple increases after the wedding because of differences in tax bracket thresholds, deduction limitations, and other aspects of the tax code. Some couples could find nearly all of one spouse’s income now subject to a higher tax rate. Marriage penalties in the proposed structure can total $130,200 annually in higher taxes.
Estate taxes are another way the reconciliation bill chips away at a family’s opportunities. Family businesses and family farms will be severely penalized upon the death of a parent. The federal estate tax, also known as the death tax, currently applies only to estates valued over $11.7 million, with the top marginal rate at 40%. Democrats would lower the exemption by $8.2 million and increase the top marginal rate to 65% while also introducing a tax on unrealized capital gains. The total tax rate on an estate can easily climb over 70%, even on relatively modest estates.
One former Democratic senator says hiking the estate tax is a mistake. “I’m trying to sound the alarm, both economically and politically, for Democrats that this is not a path to walk,” says Heidi Heitcamp of North Dakota. “The disruption that it would create for small family business and farmers and family assets is not worth the pain.”
The bill will also result in fewer jobs and lower household incomes. Our analysis shows that the “Build Back Better” plan (as the Democrats are now euphemistically calling it) will reduce employment by the equivalent of 5.3 million full-time jobs.
And it will reduce incomes. Despite the Biden administration’s repeated promise to not raise taxes on those earning less than $400,000 a year, there are many implicit and even explicit tax increases on that group. Aside from the bottom quintile, those who earn under roughly $20,000 a year, all income groups will see their after-tax incomes decline as a result of the Democrats’ tax agenda, through a combination of direct and indirect taxation, as well as reduced income from lower economic growth.
Combined with runaway inflation due to the Democrats’ love of modern monetary theory, the pressures on married couples and other families will only intensify.
As historian Will Durant pointed out, “The family is the nucleus of civilization.” It’s our most basic institution. We can’t build back better on top of its ruins. Congress must reject the reconciliation bill.
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.
Overview: The COVID-19 pandemic and forced business closures by state and local governments over the last year left much economic destruction. Many Americans have been recovering as we near herd immunity and states reopen, but fiscal and monetary policies out of D.C. are distorting economic activity and the labor market. For example, the labor market has been improving at a slower pace in recent months, even as there has been at least $6 trillion in passed or proposed bills during the first 100 days of the Biden administration. The federal unemployment “bonuses” and even more in handouts have reduced incentives to work, resulting in a similar number of unemployed as the record high of 9.2 million job openings. Although the economy has withstood these headwinds for now, a pro-growth approach is necessary.
The COVID-19 pandemic and forced business closures by state and local governments over the last year left much economic destruction. Many Americans have been recovering as we near herd immunity and states reopen, but fiscal and monetary policies out of D.C. are distorting economic activity and the labor market. For example, the labor market has been improving more slowly in recent months even as Congress recently passed the American Rescue Plan Act (ARPA), which led to fewer people wanting to work due to more unemployment “bonuses”—up to $1,200 per month—and even more in handouts. This has contributed to a record high of 9.3 million job openings with a similar number unemployed. Fortunately, the economy continues to withstand these headwinds for now, which is why a pro-growth approach is necessary.
Americans’ lives and livelihoods took a hit in spring 2020 when the COVID-19 pandemic disrupted their routines and how they earn a living as lockdowns by governments in response to the pandemic exacerbated the situation.
Congress has since authorized about $4.5 trillion in aid, which has swelled an unsustainable national debt. Combined with the redistribution of resources from the private sector, the result is a crowding out effect that harms America’s future economic potential and disproportionately hurts those who cannot afford this government overreach.
There is a need for sound policy by governments at every level to support a safe, expedited, and fiscally responsible rebound so Americans have more opportunities to thrive.
The COVID-19-induced recession in Texas has strained the ability of many Texans to pay taxes to fund the state’s budget. The Legislature should consider prioritizing budget reductions to cover any potential budget shortfall.
In May, U.S. Senators Bennet (D-CO) and Young (R-IN) introduced the RESTART Act (S. 3814) to provide increased flexibility to the Paycheck Protection Program (PPP). It also would establish a new lending program for small and medium-sized businesses to cover up to six months of operating expenses for those hit hardest by the economic fallout due to COVID-19 and lockdowns by state and local governments. This bill is bipartisan with 56 cosponsors in the Senate and 163 cosponsors in the House (H.R. 7481) as of Sept. 27.
TPPF proposes adding an amendment to include rehire grants to cover 120% of up to six months of the costs of rehiring employees terminated since the beginning of the COVID-19 crisis. While the economic damage continues from governments not ending lockdowns, congressional discussions are progressing towards moving the RESTART Act to the floor for a vote. In lieu of other congressional action, TPPF supports the passage of the RESTART Act and recommends adding the rehire grant amendment while reallocating CARES Act unspent dollars to fund it.
Texas’s economy took a major blow in March from COVID-19 as it reduced Texans’ activity across the state. Then lockdowns by state and local governments in response to the novel coronavirus further exacerbated the economic fallout. The economic data are clear that the labor market, economic outlook, and social mobility remain well below where it was in February. These weaknesses tell the story of how many Texas families and employers are struggling in their lives and livelihoods during this trying time without hope until government reopens the economy.
Overview: The U.S. Bureau of Economic Analysis recently released the second estimate of real (inflation-adjusted) gross domestic product (GDP) in Q2:2020. The latest figures show GDP contracted by 5% (annualized) in Q1:2020 and 31.7% in Q2:2020 for a total GDP loss of $2 trillion this year. The Federal Reserve Bank of Atlanta’s GDPNow running estimate of real GDP indicates it could increase by 28.9% in Q3:2020 (as of August 28) depending on COVID-19 responses. The U.S. private economy has lost $2 trillion this year from COVID-19 and resulting lockdowns by state and local governments, but it will keep improving as states reopen.
In this Let People Prosper show, we discuss the push by locally elected officials for total control of our lives instead of allowing control by local voters. We also discuss the reasoning for every dollar raised by increasing the state's sales tax rate to go to property tax relief of lower tax bills instead of growing government by just reducing recapture which stays with school districts and doesn't go to cutting your tax bills. That discussion included the House Ways & Means hearings of HJR 3 last week and SB 2 this week. Finally, we discussed major reforms to bail and ban the box that could improve the criminal justice system and help those that are involved. These are the ways we can help Texans and all Americans have more opportunities to prosper.
Please watch the full episode and share with your network. Thanks!
In this Let People Prosper episode, we discuss the key elements of real property tax cuts (slower growth rates and lasting tax reductions), movement afoot to eliminate civil asset forfeiture, and potential expansions in local liberty that are being discussed at the Texas Legislature. As we get closer to the end of session, these are critical aspects that you don't want to miss.
The latest BLS state-level jobs report for February shows that Texas continues to lead the way in job creation for the last 12 months and keeps the state's near record low unemployment rate of 3.8%. Here's the statement by the Texas Workforce Commission.
The presentation below provides an overview of Texas’ economic, labor market, and fiscal situation while also comparing Texas with other large states. There are also policy recommendations to strengthen the Texas Model of limited government so that it can foster more individual liberty and economic prosperity.
My prior research on how institutions matter takes a deeper dive into these figures. I recommend reading it along with watching my vlog on the subject. To summarize, Texas should increase economic freedom by eliminating unnecessary government barriers to competition to let people prosper.
Watch my explanation of previous state-level labor reports and other videos at my YouTube channel: Vance Ginn Economics.
In this Let People Prosper episode, we discuss local government transparency and efforts to rein in progressive policies like government-mandated paid sick leave, state reforms to the criminal justice system, and the failure of the Texas House to pass a Conservative Texas budget...but there was a good discussion about property tax relief!
In this Let People Prosper episode, James Quintero, Chance Weldon and I discuss the Conservative Texas Budget related to SB 500; Teacher Retirement System (TRS) of Texas related to SB 12; superintendent pay reform in HB 880; local debt issues in HB 440, HB 477, and SB 30; and a legal case regarding child safety.
In this Let People Prosper episode, James Quintero, Derek Cohen, and I go over this week's key issues in the Texas Legislature.
These include issues related to the following:
In this Let People Prosper episode, James Quintero, Dr. Derek Cohen, and I discuss today's release of reports on the U.S. and Texas jobs picture, movement on annexation reform (HB 347), and various issues related to criminal justice reforms (HB 63). Find more of TPPF's work at www.txlegehub.com.
In this Let People Prosper episode, James Quintero, Dr. Derek Cohen, and I discuss the following:
In this Let People Prosper episode 75, Chance Weldon of TPPF's Center for the American Future joins James Quintero and me to discuss today's Supreme Court ruling that's a win for people and for TPPF. James discusses his recent testimony before the Texas House Public Education Committee in support of House Bill 134 that increases bond transparency. I discuss my recent testimony before the Texas House Ways & Means Committee at the 45-minute mark here (written testimony) on ways to strengthen the Texas Model.
Amazon Favoritism Problem, TX Property Tax Update, & Committee Org Meetings: Let People Prosper Ep 74
In this Let People Prosper episode, James Quintero, Derek Cohen, and I discuss key topics this week for Current Events Friday.
More to come on Monday. #LetPeopleProsper
In this Let People Prosper episode 73, we discuss efforts to change Texas' rainy day fund to lower the economic stabilization fund (ESF) cap and impose a new endowment fund (SB 69), overview of an organizational meeting by the House Committee on Criminal Jurisprudence, and the latest on property tax relief that info on SB 2 in the Senate Committee on Property Tax today and the organizational meeting by House Ways & Means Committee on Wednesday.
In this Let People Prosper episode 69, I sit down with James Quintero, director of the Think Local Liberty project, and Dr. Derek Cohen, director of the Right On Crime project, to discuss the Texas budget, ban-the-box, and annexation.
You don't want to miss this first episode of many where we'll address a number of good, bad, and pretty good bills that influence our prosperity throughout session while giving you a heads up on which bills will be heard in committee so you can make your voice heard.
In this episode we discuss the state's recommended budgets by the House and Senate and how they compare with the Conservative Texas Budget, bad bill of HB 495 related to criminal history, and a prosperity-enhancing bill of HB 347 related to annexation that builds on passage of SB 6 during the 2017 special session.
In this Let People Prosper episode 67, let's discuss the importance of sustaining and improving the Texas Model of no personal income tax, relatively low taxes, relatively less government spending, and sensible regulation that allow entrepreneurs opportunities not available elsewhere. This can be boiled down to: Institutions Matter. Let's recall previous discussions highlighting these key points while noting how Texas led the way in job creation again in 2018.
Vance Ginn, Ph.D.