​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/

The media is quick to explain away the runaway inflation that is squeezing American families and darkening the prospects of Democrats in the upcoming midterm elections.

“The U.S. economy has been hit with increased gas prices, inflation, and supply-chain issues due to the Ukraine crisis,” CBS News tweeted on Tuesday.

Its article went on to claim, “Although many Americans may prefer that the U.S. stay out of the conflict between Russia and Ukraine, the brewing violence and political fallout are already hurting their wallets.”

Americans know better—because each of these problems has been worsening ever since President Joe Biden took office in January 2021.

The West Texas Intermediate crude oil (WTI) price is up 98% since January 2021. Yet WTI is essentially flat since the White House warned that Russia would soon invade Ukraine on Feb. 11. On that day, WTI sold for $93 per barrel. On Tuesday, it closed at $92.

It just goes to show that the Biden administration (and its allies in the media) will try to blame anything except its own bad policies.

https://www.texaspolicy.com/you-cant-blame-ukraine-crisis-for-rising-inflation-gas-prices/

​We were promised job growth—after all, that was the main selling point for the March 2021 American Rescue Plan Act (ARPA) from President Biden and the congressional Democrats. Promise made—promise broken.

In February 2021, the Congressional Budget Office (CBO) issued its economic outlook and projected 6.252 million jobs would be added in 2021 without ARPA. The White House then projected ARPA would add 4 million additional jobs for a total of 10.252 million more jobs in 2021.

ARPA was said to be necessary for the labor market recovery. Without it, job growth would slow, but with it, job growth would blossom. ARPA promised to get Americans back to work, get COVID-19 under control, and return the country to normal.

None of this happened.

According to the U.S. Department of Labor, the economy added just 6.116 million jobs in 2021, 136,000 fewer jobs than the CBO estimated without ARPA. At a cost of $1.9 trillion, ARPA was expensive from the start as it was added to an already bloated national debt. Now it appears the law added no jobs to the economy, and possibly cost jobs. It was not just expensive, it was also a detriment to the recovery.

The marketing behind ARPA was nothing new; many spending bills have been sold to the American people as stimulus measures. But labeling government spending as “stimulus” is a misnomer. When the government spends money, it usually only stimulates more government, not productive activity in the private sector.

This is partly because the government has no money of its own and it must get resources from the private sector before it can spend or redistribute them. That means any government spending has a cost which is often ignored by political pundits—but must be paid for all the same.

Whether government spending is financed through taxes, borrowing, or inflation, it represents a burden on the private sector. Whatever alleged benefits are to be derived from government spending must be weighed against the cost of first acquiring the resources needed for that spending.

The more government spends, the greater the burden on Americans.

This was evident in the 2008-09 Great Recession and the slow recovery that followed. Despite record spending by the federal government (once again called stimulus), the economy recovered at the slowest pace since the Great Depression of the 1930s. While total output lagged, employment lagged even more when compared to other recessions.

The labor market has now bogged down again.

Despite 10.6 million job openings, the economy is still missing 3.6 million jobs as compared to before the pandemic and there are still 6.3 million people unemployed.

Instead of supercharging the labor market recovery, trillions of borrowed dollars in new spending are hindering it. Because of direct cash payments, welfare expansions, unemployment “bonuses,” and other government transfer payments, many people are rationally choosing not to return to work. And while some of these programs have expired, their costly effects on people and the federal budget persist.

On top of those pressures, exaggerated fears of the omicron variant along with mixed messaging from government health officials have made some people afraid to go back to work. Other people, particularly in the health care industry, have been hesitant to take a COVID-19 vaccine and have consequently been forced out of their jobs because of ill-advised mandates.

The common factor in these examples is bad policy on the part of the government. Whether it is excessive regulation or spending, these public sector mistakes impact people’s lives in a very real—and negative—way.

ARPA failed to deliver on its promise of growing jobs and instead grew government, especially government debt, which now stands at a mind-boggling nearly $30 trillion, far exceeding the entire U.S. economy.

That debt is like an anchor weighing down future economic growth because it constantly requires interest payments, which sap the nation’s economic growth, meaning fewer jobs and less income. In FY 2021, taxpayers funded the second highest interest payment on the national debt—to the tune of a whopping $562 billion, with no end in sight.

ARPA is just the latest in a long line of massive government spending programs that were billed as stimulus for the economy, but only stimulated more government. That is something to keep in mind the next time Washington promises us more jobs.

https://www.texaspolicy.com/government-stimulus-didnt-stimulate-job-growth/

“Stimulus” checks are in the mail to many (but not all) Americans, and the news is awash in stories about the best ways to spend that $1,400, and even speculation about whether we’ll see a “stimmy rally” on Wall Street.

But Texans are smart enough to know that no check from the government comes without strings attached.

President Joe Biden’s $1.9 trillion monstrosity is filled with a progressive “wish list;” only about 9% of the funds have to do with the pandemic.

Additionally, it will add substantially to the national debt, saddling us and our kids and grandkids with the tab while moving toward another redistribution recession as these funds reduce incentives to work, open states, and move off of government dependence.

And to make things worse, President Biden is already planning huge tax hikes to pay for more that would ultimately be paid by workers.

It’s no different for the states, which will also be receiving ARPA funds soon. There’s no such thing as free “stimulus” money; there are always strings attached. That’s why Texas’s leaders must be very careful with the roughly $43 billion from the American Rescue Plan Act (ARPA) they’re slated to receive. We must use the money wisely, and possibly, not to use it at all.

Some of the money is already earmarked. As for the more flexible funding the state will receive, Texas can expect about $17 billion to state government and $10 billion to local governments.

The Texas Attorney General’s Office, along with its counterparts in 20 other states, are already questioning the biggest string attached to the funding—Congress’ stipulation that it not be used “to either directly or indirectly offset a reduction in the net tax revenue.”

They rightly argue in a letter to Treasury Secretary Janet Yellen that this provision oversteps the federal government’s authority and could be used to prevent any state from cutting any tax. We need answers from her as soon as possible, especially as legislative sessions in Texas and elsewhere are quickly coming to an end.

On Monday, White House Press Secretary Jen Psaki seemed to confirm this interpretation of the bill. “The original purpose of the state and local funding was to keep cops, firefighters, other essential employees at work and employed, and it wasn’t intended to cut taxes,” she said.

The best strategy for the Texas leadership would be to follow a pro-growth course that lets people prosper without government interference. This approach would seek to keep taxes lower than otherwise, reduce debt obligations and fund only one-time expenditures. And Texas should reject all or most funds with strings attached.

We don’t need to adapt our approach to taxes and spending to fit the vision of progressives in Washington; we already have the successful Texas Model, thank you very much.

We must ensure that we don’t spend taxpayer money in ways that will create fiscal cliffs later on. Boosting public education funding with ARPA, for example, would result in public education “cuts” once that money is gone, and those “cuts” would be met with loud demands for more money from Texans, as was the case after receiving President Obama’s “stimulus” funds in 2009.

We must stick with one-time purchases, or paying off things, if possible, like loans to the federal unemployment insurance trust fund of at least $6.6 billion, paying down state debt that was borrowed at a high interest rate, better funding and reforming other post-employment benefits, or funding startup costs for market-based options in education and health care.

And we would like to see a high level of transparency and accountability. Ideally, all spending related to ARPA would be separated from the rest of the state’s budget and documented clearly on a government website.

But we have something even bolder to suggest: Texas should use some of the funding to extend the border wall, addressing another growing crisis.

The best way to help Texans recover from the economic devastation wrought by the government’s response to the pandemic is simply to let them return to work. ARPA ignores this. Instead, it’s a distraction from the onerous hikes in taxes, spending, and regulation by the Biden administration.

So, if Texas is going to accept this money (and rejecting it in full or in part should be strongly considered given the many restrictions and strings attached), let’s use this taxpayer money wisely, and ensure it goes to help keep Texas Texan.

https://thecannononline.com/theres-no-such-thing-as-a-free-stimulus/

​President Donald J. Trump recently signed four executive actions in response to a congressional stalemate on the next round of COVID-19 relief, drawing praise from a Texas economist.

Texas Public Policy Foundation (TPPF) Chief Economist Vance Ginn provided brief overviews on the use of federal Disaster Relief Funds (DRF) to boost state unemployment insurance funds, the payroll tax issue and enhanced unemployment insurance.

“The goal of President Trump’s four executive actions on Aug. 8 is to provide financial assistance at a time when Congress hasn’t acted to help struggling families due to the disruptions caused by COVID-19,” Ginn wrote. “Currently there is uncertainty regarding these actions that could weigh on employer and employee decisions until further clarity is provided.

While these actions may increase uncertainty that hinders economic activity, they can help American families in the short run by providing additional aid until state and local governments, hopefully soon, safely fully reopen society.”

TPPF Chief Economist Vance Gin | Photo courtesy of the TPPF Ginn offers an informed perspective, having recently served more than a year as the associate director for economic policy for the Office of Management and Budget (OMB). His role was to advise the OMB’s director on economic and fiscal policy matters, manage a team that sought evidence of good government and modeled the economic assumptions in Trump’s fiscal-year 2021 federal budget, which proposed a record of $4.6 trillion in cuts to the national debt over a decade.

Ginn said the Aug. 8 executive actions do not increase the deficit directly.

“The $44 billion for the federal enhanced unemployment insurance is paid from the funds available in FEMA’s disaster relief fund," he said. "And the deferral of payroll taxes is just a deferral so doesn’t add to the deficit unless Congress forgives those taxes through legislation later. Also, the Social Security Trust Fund won’t take a hit as money will be transferred from the General Fund to it until the payroll taxes are paid or forgiven, which is what happened after the 2010 tax bill under the Obama administration cut the payroll tax by 2 percentage points.

"Regardless, there is a need to get businesses operating and workers working again by reopening society so problems related to the lives and livelihoods of Americans along with our fiscal solvency aren’t put further at risk.”
Ginn said Trump's moves could put more money in taxpayers’ pockets as well as helping people find jobs as state and local governments loosen their lockdowns.

“This could happen by deferring the payroll taxes and employers not withholding it to possibly pay it later and then by the $300 per week in enhanced [unemployment insurance] not being so high that 68% of Americans who make less than the $600 per week previously provided,” he said. “Again, the key is to get businesses operating again and for workers to be connected to a job that will help to increase economic activity on the supply side that is critical for us to have a stable and strong recovery.”

Ginn said that more can — and must — be done to speed economic recovery.

“Families across America are struggling from being unemployed and being uncertain whether they can keep their business open or when they will get a job or be called back,” he said. “In order to help the American people, we need accurate and reliable COVID-19 data that includes timely demographic information to understand more about its contagion and effects so hospitals aren’t overwhelmed and vulnerable populations are assisted with necessary resources as governments reopen society for everyone else. Along with that, there is a need to rightfully provide funding to businesses that were stripped of their resources from governments during lockdowns.”

The TPPF supports a targeted, short program called the Workplace Recovery Act, which covers businesses‘ net operating losses so they can keep workers onboard and rehire others until this lockdown situation is over.

“Fortunately, Congress could reauthorize the available $1.3 trillion from its other already passed legislation for this program and scrap the rest of the measures under consideration that aren’t targeted or timely,” Ginn said. “In addition to state and local governments reopening society and Congress passing the Workplace Recovery Act, there is a need for governments to get their budgets under control by reducing wasteful spending so that this redistribution of incomes through the government sector doesn’t further slow economic activity. 

“Another thing is ending unnecessary regulations, particularly those that were suspended during the lockdowns,” he continued. “By following this approach, American families can have some calm from increased certainty about their future during a chaotic time, which is what the president seems to be trying to provide even as Congress does its best to make the situation worse.”

Ginn earned his doctorate in economics at Texas Tech University and has taught at Texas Tech and Sam Houston State. He joined the Texas Public Policy Foundation in 2013 and worked there until joining the Trump administration in 2019. He returned to the foundation in May.

Ginn said his goal at the TPPF is to preserve the state as a place where Texans can build their careers, raise their families and live their lives freely.

​https://lonestarstandard.com/stories/548530015-texas-economist-explains-benefits-of-trump-s-executive-orders-for-covid-19-unemployment-relief#.Xz2ZjJo4Ogs.twitter

On Saturday, August 8, President Trump signed four executive actions in response to a Congressional stalemate on the next round of COVID-19 relief. This brief covers the memorandum deferring some employees’ payroll taxes to Social Security without affecting the program.

Background on payroll taxes:

There are two types of payroll taxes:

Social Security rate is 12.4% on wages capped at $137,700—half is paid by the employer, half is paid by the employee (though employers typically pass on this tax in the forms of lower wages and higher prices).
Medicare rate is 1.45% for both the employer and employee with no wage cap.
Employee payroll taxes are withheld by employers and paid on their behalf.

The CARES Act (March) deferred payments of employer payroll taxes until either 2021 or 2022.

Details of the August 8 memorandum on deferring payroll taxes to Social Security:

Defers employee payroll taxes to Social Security from September 1 to December 31or until an unspecified later date, without penalty, interest, or additional tax.

Applies only to those earning before tax less than $4,000 biweekly ($104,000 annually).

Requests that the Secretary of the Treasury “explore avenues, including legislation” to permanently eliminate these deferred payroll taxes.

The stated intention of this action are to:

“put money directly in the pockets of American workers”
“generate additional incentives for work and employment”
Economic effects questionable from increased uncertainty & fiscal effects are uncertain:

This is effectively a no-interest loan from the government (i.e., taxpayers) to workers, with uncertainty about if, and when, it will be repaid.

The change doesn’t affect incomes for unemployed workers and may not increase disposable incomes of employed workers who will likely save any income increase or the employer with withhold the funds to eventually repay the payroll taxes, unless they’re forgiven by Congress.

The action could add about $150 billion to the FY21 budget deficit, which weighs on the economy, depending on whether Congress cuts the payroll taxes owed, as funds will be transferred from the General Fund to cover the reduction in payroll taxes to Social Security.

There is much uncertainty from the memorandum by employers about how they will handle the employee payroll tax deferral. It’s not clear when the deferred taxes are due or how they will be paid (directly by employees or through employers). These questions should be resolved soon, as Secretary Mnuchin recently indicated employers can choose whether to withhold the taxes.

The memorandum doesn’t change the cost of hiring employees, so it will not increase the number of jobs available. That is inherently constrained by limited business activity from government-mandated lockdowns.

Recommendations to improve the economy and the livelihoods of Americans:

Safely reopen society by ending state and local government-mandated lockdowns.

Get businesses operating and workers working again, such as with TPPF’s Recovery Act.

Eliminate wasteful programs to rein in excessive government and end unnecessary regulations.​

https://www.texaspolicy.com/overview-of-executive-action-on-deferring-employee-payroll-taxes/

On Saturday, August 8, President Donald Trump signed four executive actions in response to a Congressional stalemate on the next round of COVID-19 relief. This brief covers the memorandum allocating federal Disaster Relief Funds (DRF) to enhance state unemployment insurance (UI).

Background on UI:

The federal-state UI system was created in 1935 as a form of social insurance run by—and usually funded by—states from collected business taxes, with the Department of Labor overseeing it.

Most states typically fund UI at half of lost wages for about 26 weeks while workers search for jobs (Texas requires the unemployed to report applying for at least 6 jobs per week).

The federal government can provide extended UI for 13 or 20 weeks longer and split that cost with states. However, the 2009 American Recovery and Reinvestment Act was the first time the federal government covered it all and lasted until 2013 when extended UI was provided for up to 99 weeks.

Congress passed the 2020 CARES Act that included federal funds for enhanced UI of $600 per week until July 31. Separately, the federal Pandemic Unemployment Assistance program extends the UI period for 13 weeks, for a new maximum of 39 weeks.

Economists find that 68% of eligible workers received enhanced UI greater than their lost earnings. Other economists highlight how high unemployment benefits can encourage layoffs, discourage work, and delay productive economic reallocation.
Details of the August 8 memorandum that provides enhanced UI by the federal government:

Directs up to $44 billion from the Federal Emergency Management Agency’s (FEMA) Disaster Relief Fund (DRF) to fund enhanced UI.

Offered $300 per week in enhanced UI if the state increased their UI by $100 per week. This requirement was then clarified so that an unemployed person could receive the enhanced UI if they already receive at least $100 per week from the state UI.

Enhanced UI terminates for work weeks ending on December 6, 2020 or when funds run out, whichever occurs first. An estimate predicts funds could run out after about five weeks.

Economic effects are minimal until an end to lockdowns & fiscal effects are neutral given DRF:

Fiscally neutral because money is in the DRF but would change if natural disasters occur this year (e.g., hurricanes) requiring more than $25 billion in spending—the amount retained in the DRF.

Federal enhanced UI is now tied to state UI if an eligible person receives more than $100 per week from the state UI. An economist estimated that nearly 1 million unemployed people currently receive below $100 per week so wouldn’t get the extra $300 per week.

Enhanced UI payments won’t start until at least late August, meaning many people who were dependent on the new total UI will receive only the normal state UI. The decline to the historical amount of the state UI could help incentivize people to search for work during or after lockdowns.

There’s evidence that enhanced UI may not have discouraged searching for work because jobs have been limited during lockdowns, so decreasing it may not have much effect until ending lockdowns.

Recommendations to improve the economy and the livelihoods of Americans:

Safely reopen society by ending state and local government-mandated lockdowns.

Get businesses operating and workers working again, such as with TPPF’s Recovery Act.

Eliminate wasteful programs to rein in excessive government and end unnecessary regulations.

https://www.texaspolicy.com/overview-of-executive-action-on-enhancing-unemployment-benefits/