Private-sector job creation, at long last!
It comes with several cautionary notes, but the addition of 216,000 net new jobs in March, which followed February's 192,000 figure, provides the best proof that the heretofore weak economic recovery has reached a new, very important plateau. As the economy continues to improve, the pace of job creation is bound to accelerate, and we can more quickly recapture the 8 million jobs that were lost during the Great Recession.
The improving employment picture also is a development that could render Gov. Walker's call for deep budget cuts unnecessary. More on that point a bit later.
From the Halls of Congress to the White House, officials were preaching caution about the latest numbers. "There will surely be bumps in the road ahead," stated Austan Goolsbee, head of the White House Council of Economic Advisors. But for two consecutive months, the private sector has now created more jobs than necessary to account for changes in the labor market, and the full percentage point drop in the official unemployment rate over the past four months is a sign that the decline in joblessness is being driven by growing employment, not by people getting discouraged and leaving the workforce.
I chalk this up to the steps that were taken in December by Congress and President Obama, which maintained the current (lower) federal tax rates and created other hiring and business incentives. During the past few weeks, as I commented on the collective bargaining controversy, I was criticized by some who feel we should increase taxes on the wealthy (who, by the way, already pay the lion's share of federal income taxes).
The wealthy, including General Electric, should pay most of the taxes, but the best way to increase government tax receipts is to achieve sustainable economic growth. More private-sector jobs mean more taxpayers feeding government coffers. Eventually, a growing economy also results in more business formation and more business entities paying taxes as well. This was the case in the economic booms of the 1980s and the 1990s.
I can hear the chorus now. But didn't President Clinton raise taxes in 1993, and didn't a booming economy follow? Yes and yes, but you're ignoring something historic that occurred in the 1990s – the information technology boom. The Internet, computer software development, and other cyber innovations made certain that ample wealth was created and plenty of capital was available to deploy. And Clinton was wise not to raise tax rates back to their historic highs; he played ball between the 40-yard lines and otherwise did nothing economically extreme to undermine prosperity.
Clinton also encouraged free trade (NAFTA and other agreements), reformed welfare, and cut capital gains tax rates, resulting in a flood of revenue to the government by incentivizing the very economic activity that triggers capital gains taxes. All of this, plus the election of a Republican-controlled Congress, helped keep a check on any extreme impulses in both political parties and led to the first balanced federal budget in a generation.
If the current economy keeps improving, I expect President Obama to win a second term, but with the GOP in control of both the House and the Senate – similar to the division of power that existed in the prosperous late 1990s. That seems to be the best prescription to finally get federal spending under control and to prevent the debt crisis that is predictable if we don't begin to govern ourselves with more discipline. We've now seen what happens when either political party is in control of both houses of Congress and the executive branch, and it's not pretty.
Some still want to talk about the increasingly dim prospect of a double dip recession, and others are worried about the inflation genie. I have to admit, the way the Fed is printing money, I'm worried about the latter, too, but a more brisk hiring pace means that the people who run businesses are increasingly optimistic. That counts for something.
With a growing number of taxpayers, the state might find itself with more revenue than projected. If up-to-date revenue projections exceed the assumptions that Gov. Walker used to craft his controversial 2011-13 budget blueprint, the state won't have to cut as much from aid to local governments and school boards, no matter what happens in the fight over collective bargaining. I'm certain that Democratic Party legislators are tracking tax collections very closely; even though they are in the minority, they will have more leverage in advance of potential recall elections, especially if they decide to stay put and fight it out.
They can also argue the folly of Walker's proposal to expand school choice to the middle class. School vouchers have not delivered on promises of better educational outcomes, and the best you can say about them is that they result in the same level of academic "achievement" for less money per pupil. Maintaining the status quo would free up millions that instead could be allocated to local municipalities and school boards.
I appreciate the Governor's determination to get our fiscal house in order, but no executive budget ever gets passed as presented. Thanks to a growing economy, there are some potential compromises to be made.
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