By Lewis K. Uhler and Peter J. Ferrara, National Tax Limitation Foundation
Fall is traditionally a time to count our blessings. Fortunately the latest economic figures show we have much to be thankful for in America, regardless of the COVID-19 shutdown, which has been extended and expanded unnecessarily by “Blue state” governors and mayors.
With the August report released last Friday, American unemployment has declined from 10.2% to 8.4% which reflects 1.4 million new jobs last month, the second largest monthly decline since the pandemic shut downs started. This news reflected the booming recovery and the sustainability of the economic policies flowing from the sweeping rate cut of tax reform: The Tax Cut and Jobs Act of 2017. And remember that the Trump/Republican tax cut for virtually every American tax payer did not receive a single Congressional Democrat vote.
The tax reform legislation reduced taxes for the middle class as well as businesses large and small. The corporate tax rate was slashed from the highest in the world among industrialized nations at nearly 40% (counting state as well as federal taxes) down to 21%. Non-corporate professional and small businesses income enjoyed an innovative “pass through” tax of approximately of 20%.
Low income workers, and families who pay little by way of federal income taxes, benefited from the tax cut with an increased standard deduction and child tax credit as well as lower rates. But they benefited by the broader economic effects of the tax reform as well. African Americans, Hispanics, and Asian Americans set records for the lowest unemployment in history. The same held for single women and teens, while the work force of America expanded rapidly as more people left unemployment and returned to “manning the oars”.
As the President’s Council of Economic Advisors reported last Friday:
- Just a few months ago America had an unemployment rate of 3.5% – the lowest in 50 years – jumping to a peak of 14.7% in April due to devastation wrought by COVID-19. But between April and August the unemployment rate fell by 6.3 percentage points to 8.4%. For perspective, following the Great Recession of 2008-09, it took nearly a decade for the unemployment rate to fall by 6.3 percentage points. President Trump’s economy accomplished this in just 4 months.
- In July, the unemployment rate was 10.2% – 0.2 percentage points higher than the peak unemployment rate during the Great Recession in October 2009. It took over 2 years at that time to achieve an unemployment rate of 8.4%, something which we have now achieved in one month. With nearly half of the job losses from March and April recovered by August, this report shows that the economic comeback is underway and going strong.
- At its peak, temporary layoffs hit over 18 million. Since then, temporary layoffs have decreased to just 6 million, a recovery of nearly 67%.
- Under this administration, America is on track to witness the fastest labor market recovery from any economic crisis in history.
Another historic dimension of the Trump/Republican recovery has stemmed from widespread government deregulation, particularly with respect to the energy industry. Through deregulation, America has become energy independent, leading the world in production of oil and natural gas through fracking and other innovative techniques. As Trump Economic Policy Advisor Steve Moore reports in his book Fueling Freedom: Exposing the Mad War on Energy: “America has more oil and natural gas than Saudi Arabia, Iran, Russia, China, and all the OPEC nations combined.” America also leads the world in reserves of coal.
Manufacturing is energy intensive and therefore very dependent on low energy costs and reliable energy supplies. Trump’s energy independence sparked declining energy prices in the U.S., producing the blue-collar boom in American manufacturing, which has further promoted job and wage increases for working people.
Indeed, this is the V shaped recovery Trump predicted and promised. Who believed this turn around was possible and achievable 5 months ago? Obama taunted this would take a magic wand. It would have under his anti-growth policies, increasing taxes and regulations that Biden has promised as well. But belief in the United States of America – its freedom, its work ethic, its endurance, its creativity – is a far more powerful force than statist bureaucracy could ever imagine, let alone unleash.
Lew Uhler is Founder and Chairman of the National Tax Limitation Committee and National Tax Limitation Foundation (NTLF). He was a contemporary of and collaborator with Ronald Reagan and Milton Friedman in California and across the nation. Peter Ferrara is a Senior Fellow at NTLF. He formerly served in the White House Office of Policy Development under President Reagan, Associate Deputy Attorney General of the United States under President George H.W. Bush, and as the Dunn Liberty Fellow in Economics at the King’s College in New York.