The 300,000-plus new jobs that U.S. businesses created last month may mean that America’s prolonged employment drought is finally coming to an end.
It also proves, in my opinion, that President Bush’s pro-jobs tax cuts are working, and that critics of across-the-board income tax reductions to spur faster economic growth and job creation were wrong — again. Democrat John Kerry planned to pound Bush between now and Election Day on the anemic jobs picture, but the latest Labor Department statistics show that businesses have begun hiring in earnest again and economists think that trend will continue for sometime to come.
There was very little that was wrong with the Bush economy except its seeming inability to produce many jobs, though the unemployment rate was never as terrible as Kerry and other Bush foes had suggested.
Even allowing for discouraged workers who had dropped out of the labor force, the nation’s 5.6 percent jobless rate is relatively tame by most historical standards and considered full employment by most economists.
Having “5.6 percent is pretty damn good,” said economist Kevin Hassett of the conservative American Enterprise Institute. “When I showed up at the Federal Reserve Board in 1992, 6 percent was considered full employment then.”
When the jobless rate was running at 6.6 percent in February 1994 — one point higher than it was last month — the Clinton administration was hailing the number as the greatest thing since sliced bread.
Clinton’s Labor secretary, Robert Reich, crowed that “the American job machine is up and running again,” and President Clinton decided not to extend unemployment benefits at that point.
Now, with unemployment much lower than it was back then, these same Democrats want yet another increase in jobless benefits that will cost U.S. taxpayers billions more.
Also worth pointing out: the national unemployment number distorts the labor force picture in many states where jobs are more plentiful because they have kept the lid on taxes to maintain a business-friendly, pro-jobs environment.
You won’t hear this on the nightly news, but the unemployment rates in many of the key battleground states in this year’s election are surprisingly low. In Florida, the jobless rate was 4.6 percent; in Iowa, it’s 4.1 percent; Minnesota, 4.7 percent; New Hampshire, 4. 2 percent; and Pennsylvania — a huge, 21-vote electoral prize — is at 5.1 percent.
Indeed, unemployment in 12 out of the 17 biggest battleground states was running well below the national average.
Unfortunately, the often-emotional jobs issue has led to a plethora of myths and misconceptions in this election cycle, many of them pushed by Kerry and his supporters.
One of the most specious charges is that the lack of jobs is the direct result of American industries outsourcing jobs abroad. In fact, relatively few jobs have been lost to outsourcing in the past three years or more.
Government statistics show that outsourced jobs account for no more than 1 to 2 percent of the nation’s unemployed.
In fact, job losses in a dynamic economy are the norm as old industries die and new industries are born or find new technologies to make more things with fewer workers at a lower cost to consumers.
“From 1993 to 2002, total U.S. employment grew by 17.8 million,” says Brink Lindsey, director of the Cato Institute’s Center for Trade Policy Studies, in a new study on job losses and trade. “But during that decade, 310 million jobs were eliminated — and replaced with 328 million new jobs. Job losses are an inescapable part of a dynamic market economy.”
Kerry has come up with a proposal to raise taxes on businesses that choose to outsource some or all of their products abroad.
“But if you do what John Kerry is proposing it will make matters worse,” says former White House economic adviser Larry Lindsey. “What Kerry suggests doing on the outsourcing is to tax foreign sources of income more heavily. Most of that foreign source of income comes from sales of American-made goods that are sold abroad.”
“For example,” Lindsey told me, “Microsoft Japan sells software made in America and takes profits overseas. The local subsidiary books the profits. If you tax them more heavily, you will punish American workers. It makes sales of American products overseas more heavily taxed and thus less competitive.”
Missing from the demagoguery over outsourcing is the fact that most of the goods manufactured abroad by U.S. companies are not reimported into the United States. They are sold to foreign consumers, and those sales help to strengthen U.S. firms here to expand or maintain their domestic operations, which in turn boost stock prices and investment dividends.
It is good that we have this economic debate every four years or so in our elections, but it seems that the same myths get repeated over and over again. That tells us something about the sorry state of the news business when it comes to informing Americans about how free markets really work for all of us.