The President-Elect & Congress: Where Do They Start?
Dr. David Mielke, Retired Dean of the College of Business at Eastern Michigan University
A couple of weeks ago the October report on new jobs created and unemployment rate was released. There were 161,000 new jobs created and the unemployment rate dropped to 4.9%. That was cheered by many that the economy was gaining steam and the Federal Reserve would be on track to raise interest rates in December. Yet the economy remains pocketed by weaknesses that have left many feeling they have been left behind—a big factor in the presidential election Job gains have been steady, but pay raises have only recently become widespread and millions of Americans are working part-time but would prefer full-time work. Remember that the jobs created number include both full and part-time jobs. Is there another view of the job market and what is necessary to spur the economy? What is necessary in the first 100 days of the new administration—spur infrastructure spending as both candidates promised? Tax reform? Eliminate the crush of regulations? Repeal and replace Obamacare? Immigration reform? What is the “Right Thing to do?” Let’s look at some issues:
- Although the unemployment rate that has been touted dropped to 4.9% in October, an alternative gauge of joblessness, the U-6 rate, fell to 9.5%. The U-6 rate counts not only the officially unemployed but also part-timers who’d prefer full-time work and people who stopped looking for jobs. The 9.5% rate is the lowest since 2008.
- There were 5.89 million American employees in part-time jobs but wanted full-time work.
- CNS News reported that 94,609,000 Americans aren’t in the labor force, 425,000 more than in September and the second highest number on record.
- The labor force participation rate, which includes the share of working age people who are employed or looking for work, slipped to 62.8% from 62.9%, as the number of people in the work force declined. That means that 62.8% of the civilian population over the age of 16 is either working or actively looking for work, while the other 37.2% is not working or even looking.
- 78% Americans in their prime working years, 25-54, now have jobs, the highest proportion since November 2008, but that’s down from 80% before the downturn.
- When President Obama took office in January 2009, just over 80 million Americans were not in the labor force. That number has steadily risen during his 2 terms to the current 94 million level. The number hit a record 94,708,000 in May this year.
- Growth in the economy, essential for creating more jobs, picked up to 2.9% in the third quarter this year, much faster than the 1.1% pace in the first half of the year. Economists foresee only modest growth in the fourth quarter, leaving growth at an anemic rate of about 1.8% for the year—about on par with growth every year under the Obama administration.
There is no question that the economy needs to pick up speed and create more jobs—especially full-time and to draw more Americans into the job market, either employed or looking for work. The question is what should the new administration do to make that happen. There is a long list of potential changes. But what should be its first priorities? The federal government could increase infrastructure spending. The Republicans have been working on tax reform legislation for some time. Trump has promised to reverse many of the new regulations imposed by the Obama administration. He and the Republican leadership have promised to repeal and replace Obamacare. There is the promise to build the wall along the Mexican border. But what should be the priorities to kick-start the economy in 2017? What is the “Right Thing to do?”
The first step and perhaps the easiest to accomplish is to reverse the many regulations that are seen as stifling growth of the economy, for example the restrictions on fracking and oil and gas exploration, relaxing the new EPA restrictions on coal fired power plants and reviving the coal industry, rolling back the mileage requirements for the auto industry and the overtime and other labor restrictions imposed by the Labor Department, just to name a few. At the same time Congress should work to pass tax reform, not only to reduce the corporate tax rate from the highest in the developed world, but also for individuals and to release the massive amounts of profits US corporations have been keeping abroad to avoid US taxes. Congress should pass a real budget for 2017 and get past the continuing resolutions that have been part of standard operating procedure for so many years, and yes, that may include some infrastructure funding under state control, increases in defense spending and money to secure the border. At the same time Congress should begin working on the plan to repeal and replace Obamacare, but that is not a first 100 day priority, although providing information about the possible changes is important to assure voters that it will happen. Immigration reform is a potential longer term objective after the border has been secured. The thought of entitlement reform has taken a back seat during the election and is not on the front burner, but needed for the long term vitality of the economy. However, reviewing the disability requirements that have helped move more people out of the workforce should be on the agenda as well as the move by Obama to remove the unemployment compensation requirement to be looking for a job or be in a training program in order to receive unemployment benefits. There is a lot of work to be done by President Trump and Congress. It is important that they get positive results in the first 100 days to spur the economy and to increase job opportunities. But where do they start?