New economic reports suggest an increasingly thriving economy thanks to changes in regulatory and tax policy and the Bernie Sanders promise of the government providing a job, an education, and health care is just a fantasy that ultimately ends in misery, according to Texas Public Policy Foundation Chief Economist Dr. Vance Ginn.
Numbers released Thursday from the Labor Department show, that in the final week of April, just 211,000 Americans filed first-time unemployment claims. That’s the lowest number since 1969. The monthly average for April was 221,500 new claims, the lowest since 1973, when the U.S. workforce was half the size it is now.
Ginn says there are pretty simple reasons for the low numbers.
“A big part of it has to do with the regulatory reform. The rollbacks by the Trump administration last year gave some more consumer and business confidence out there, that are near record highs. Along with the Tax Cuts and Jobs Act that was passed in December, these things have (people) saying, ‘Let’s go ahead and invest. Let’s go ahead and hire more workers.
“People are spending more at the same time. That’s the way you really get more job creation and more economic growth over time,” said Ginn.
But the historically low unemployment claims don’t tell the whole story. Ginn says there is definitely room for improvement in the labor participation rate and the unemployment rate, known as U-6, that includes part-time workers and people who have given up looking for work.
“They are improving but there is still a ways to go. The unemployment rate – the reported number – is at 4.1 percent. But the U-6, which includes under-employed and discouraged workers, is still above eight percent. That’s above where we’re usually at at this time in an economic expansion. As of this month, this is the second-longest economic expansion in U.S. history,” said Ginn.
He’s also not satisfied from what he’s seeing from an economic indicator known as the employment to population ratio.
While the economy grows, the political left has a very different vision for America’s economic future. Sen. Bernie Sanders, I-Vermont, who narrowly lost the 2016 Democratic Party nomination to Hillary Clinton, is now pushing a plan to provide a government job to every American, along with taxpayer-funded health care and college tuition.
While conservatives recoil at such an agenda, a new Rasmussen poll shows 46 percent of Americans like the Sanders plan.
Ginn is not surprised.
“What it tells us is that people like to get things for free or what they perceive to be free. But it also tells me that 54 percent of people understand the opportunity cost and what direct cost this will have,” he said.
“So even with it being “free,” they still oppose it because they understand this is going to come with some sort of cost. Somebody’s got to pay for it and all the details aren’t out yet,” said Ginn.
He says a majority of Americans still realize this cannot be done.
“Making sure that the jobs pay $15 an hour or making sure that there’s health care benefits, maybe even having “free college,” all these things come with a huge cost,” said Ginn, who says that money would have to come from tax hikes on businesses and individuals.
“If you’re raising the cost of doing business, that means fewer jobs available in the private sector. So are we going to have more federal government jobs. How exactly will these people be employed?” asked Ginn, who also notes that many people may not like the jobs the federal government would assign them.
But conservatives like Ginn face an uphill climb. While firmly believing data and experience are on the side of limited government and free markets, Ginn says it’s a lot easier to promise “free” stuff than to articulate the beauty of markets.
“Often times that can be difficult. When you say you’re cutting taxes and then you show that the corporate income tax rate went from 35 percent to 21 percent, how is that not for the “rich?” (We know) businesses simply submit taxes. They don’t actually pay for them. People pay for them through the form of higher prices, lower wages, and fewer jobs available.
“Often times that’s a difficult message to sell but that’s the economic reality and I think we’ve got to stick to those core principles throughout each and every one of these policy initiatives,” said Ginn.
Last week the Texas Public Policy Foundation held the 16th Annual Policy Orientation. This three day event included a number of keynote speeches and panels on key policy issues (watch YouTube Channel for all panels).
I had the honor of moderating the following panels dealing with the Center for Economic Prosperity:
Please watch and share as you see fit. This is truly one of my favorite times of the year. May you enjoy and learn as much from these videos as I did.
If you watch one video today, watch my interview on Capital Tonight discussing the benefits of the pro-growth Tax Cut and Jobs Act passed today by Congress and signed by President Trump at time 3:30 here.
Here’s the Texas Public Policy Foundation’s press release on it today with my statement.
My thoughts: Although it’s not perfect, upon final passage today by the House and eventual signature by President Trump, this first major tax reform in a generation (1986 was last time) is a historic moment for our republic.
The permanent cut of the corporate tax rate to below the worldwide average, immediate expensing of capital purchases for five years, lowering tax liability for business pass-through income, and permanent elimination of the corporate alternative minimum tax are huge for reducing the cost of doing business. The individual income tax cuts will likely be felt by the vast majority of taxpayers. The $10,000 limit on the state and local tax deduction will put pressure on state and local politicians from excessively spending and taxing hard-working people. The inclusion of 529 savings plans in the tax bill to allow $10,000 to be used for schooling will empower parents so more children can have their unique needs met. The repeal of Obamacare’s individual mandate is a tax cut for people that had been forced to purchase insurance, but the regulations and likely continued increases in premiums from fewer non-healthcare users require full repeal of this absurd law.
According to the principle of good taxation (simple, flat, broad), this tax bill achieves simplification and broadening the base, but flattening the brackets didn’t happen as there remains seven income tax brackets with the highest rate dropping from 39.6% to 37% and the lowest remaining at 10%.
Overall, this is a pro-growth, prosperity-generating tax bill that help many people have a brighter future by reducing government barriers to their ability to flourish.
But there’s more work to do! We must push for spending restraint and cuts, which is the way we truly reduce the excessive burden of government instead of just the tax burden.
The Texas model has provided the path to policy, let’s make sure that continues here and continues to infiltrate the big government planners in D.C. as we have seen in regulatory reform and now what is historic tax reform.
Here's my interview on KEYE TV regarding the most recent steep drop in oil prices and its potential effect on the stock market and Texas economy.
By the end of trading on Friday, the New York Stock Exchange was down 391 points for the day, 1,437 points from two weeks ago. The reason: the plummeting price of crude oil and a faltering Chinese economy.
"There are some major headwinds moving forward," said Dr. Vance Ginn, economist for the Texas Public Policy Foundation. "We're almost in correction territory and when you look at the oil prices are down more than 20 percent since the beginning of the year which is what we call a bear market."
The price of crude oil has been a concern in Texas for months, as oil and gas companies lay off people. But for now, Dr. Ginn says don't panic about your 401k. "We're seeing substantial volatility, so this may not be the time to pull everything out," he said, adding it might be a good idea to wait and watch. Dr. Ginn says you should check with your financial advisor if you're nervous.
The bright spot right now is those low, low gas prices. At the Buccee's in Bastrop, KEYE TV caught up with drivers filling up. "At the high prices, it was 50 bucks. And now it's about 20, 30," said one man who was filling up his SUV.
Latrice Newton stopped on her way from San Antonio. "This is a wonderful thing for my budget. I live in San Antonio and I'm seeing $1.60 so to stop and see it at $1.44, it's great," she said.
But while gas prices might be freeing up some of your budget, Dr. Ginn says you might want to be putting that savings away. "It's important for Texans to be able to save for a rainy day just in case something does happen in the future," he said.
Here's my interview on KEYE TV with video here: http://keyetv.com/news/local/falling-oil-prices-could-spell-trouble-for-austin.
For the last year and a half, drivers across the nation have enjoyed paying less and less for a gallon of gasoline. "Lower gasoline prices help us to have more money to go buy food or put food on the table," said Dr. Vance Ginn, economist at the Texas Public Policy Foundation.
But Dr. Ginn notes, here in Texas, that good news is countered by bad news. "If it continues to stay low, there is going to be some larger effects moving forward," he said. "Oil and gas is the lifeblood of the Texas economy, and really, the nation."
Eighteen months after oil prices began to slump due to a global oversupply and a strong dollar, Dr. Ginn is using the R-word on Texas cities that depend more on the oil and gas industry. "In Houston or Midland-Odessa, they're really going to struggle. And we could see more regional types of recessions," he said.
Texas has diversified its industries since the oil bust of the 1980s -- more tech in Austin, financial services in Dallas-Fort Worth. And if you just look at job growth numbers, all seems well. "Over the last year, Austin job growth has increased by 4.1 percent. That's pretty fast," Dr. Ginn said. But Austin, even though it's heavy on tech, can't hold out on oil and gas trouble forever. "There is less consumption," said Dr. Ginn. "There's a slowdown in hiring, things of that nature that also has an effect on Austin itself." Already, the state is seeing a dip in revenues coming from the oil and gas industry.
So while Austinites enjoy the low gas prices, remember, if it seems too good to be true, it probably is.
"Fourteen percent of the private economy being dependent on oil and gas activity across the state of Texas, you are going to see that spread across the state including in Austin," Dr. Ginn said.
Vance Ginn, Ph.D.