In some ways, the US economy has already recovered from the pandemic. Real GDP is almost back to where it was in the fourth quarter of 2019 and should beat that mark when the next measurement is released in a few months. Consumers spend money too, with personal consumer spending actually higher now than before the pandemic. The labor market continues to struggle, however, and Democratic-led policies will make things worse.
The rosy numbers of GDP and consumer spending don’t say much about the fundamentals of the economy as they are saturated by trillions of dollars in government spending financed with borrowed money. Businesses need manpower and capital to produce things – we can’t print money or borrow the road to prosperity forever. Policies that discourage people from working and investing undermine the productive capacity of our economy and will make us all poorer in the long run.
One such harmful policy is the federal unemployment insurance bonus. The Initial policy, which went into effect March 2020, offers a weekly unemployment insurance (UI) bonus of $ 600 on top of the usual government-provided amount. The latest version offers a $ 300 per week Bonus and is valid until September some states retire early.
Providing extra income to people who were unable to work due to the pandemic and related government policies made sense, but now Cases fall, Vaccinations are increasing and the economy needs workers. Currently it’s over eight million vacanciesbut the UI bonus is what keeps people from taking one. One recently analysis by Stephen Slivinski and Paul Bernert of Arizona State University shows that in many cities, including Cleveland, Minneapolis, Providence, and San Antonio, maximum weekly unemployment benefits currently exceed average weekly earnings. It should come as no surprise that some people would rather collect unemployment benefits than work when the former are paying more.
The lack of labor is evident in the data. The last two job reports were weak, and there are seven million fewer employees now than in February 2020. The Employees in their prime The participation rate (ages 25 to 54) has also decreased from 83% to 81%. There is a lot of available workforce and a lot of available jobs, and the recovery won’t be complete until millions more people are back to work.
While the UI bonus is damaging the labor market now, other President Biden policy proposals will hurt it in the future if it goes into effect. Biden wants to raise the corporate tax rate from 21% to 28%, which research shows will discourage investment and lower wages. thousands of Stores closed during the pandemic and millions more are try to regain on its feet after a year of capacity constraints. Higher taxes will only hamper their efforts.
Higher corporate taxes also harm consumers through higher prices. The Tax Cuts and Jobs Act (TCJA) passed in 2017 lowered the corporate tax rate from 35% to currently 21%. One result was that many utility companies their tax savings passed to consumers. Arizona Public Service, Atlanta Gas Light Co., Black Hills Energy, and Duke Energy Florida are just a few of the dozen of utility companies that have cut prices or granted multi-million dollar customer discounts in response to the corporate tax cut. As Jim Seward from Black Hills Energy said back in 2019, “As intended, we are proud to pass on all of the savings from the Tax Cuts and Jobs Act to our customers. We appreciate that WPSC is working with us to bring the benefits of corporate tax cuts into customers’ hands as quickly as possible through their energy bills. “
When the corporate tax rate is increased, consumers can expect payments for utility companies increase along with it.
There is also evidence that corporate taxes affect consumer prices in a broader sense. in the a study from 2020, researchers found that consumers bear about 31% of the corporate tax burden in the form of higher prices. They also found that the price increases were greater for lower-priced items and products purchased by lower-income households.
Many prices are already rising, including those of consumer staples such as petrol, casing, and Food. It is unwise to keep raising prices by raising corporate taxes when people’s budgets are already exhausted.
One silver lining of the pandemic is that we’ve learned new things – how to be productive from home, how to speed up the approval process for new vaccines, and how to use technology in new ways. We also eliminated some unnecessary ones Regulations, including telemedicine restrictions and needs certification laws. If we can get out of our way, a stronger economic recovery is within reach.