December 13, 2005
Perception vs. Reality on the U.S. Economy
By Jon Kyl
Even after
the devastation of Hurricane Katrina, and the resulting spike
in the cost of energy, the U.S. economy is doing remarkably well
by virtually every statistical measure. So why, one might wonder,
do we so often see negative headlines in the news?
Consider
some data released last week:
·
More than 215,000 jobs were created in November, and 4.5 million
since May of 2003. “To put the November increase in perspective,”
noted Kathleen Utgoff, commissioner of the U.S. Bureau of Labor
Statistics, “from January through August of this year, payroll
employment growth averaged 196,000 per month”;
·
The nation’s unemployment rate, at 5 percent, is stable
and lower than the average of the 1970s, ‘80s and ‘90s;
·
Gross Domestic Product for the 3rd quarter was higher than expected
- 4.3 percent - and has been growing near that average for more
than two years;
·
Sales of new homes reached an all-time high in October, as did
minority ownership; and
·
According to the Department of Labor, the productivity of American
workers rose at an annual rate of 4.7 percent over the summer.
Productivity is the key to raising living standards, as increases
allow employers to compensate their workers more without having
to raise the price of the products they sell (which would fuel
inflation).
So why,
in the face of all this good news, is there negative public sentiment
about the state of the economy? Consumers have been concerned
about gas prices, but they are going down. Another reason may
be the skyrocketing cost of health care. Overall, worker compensation
has grown along with other indicators. But for many Americans,
that hasn’t translated into a big increase in take-home
pay, because much of the extra compensation is in the form of
more costly health insurance. If a worker gets a 4% raise next
year - and earns the national median weekly wage - health care
costs will eat up 28% of the raise.
Fortunately,
President Bush has developed a comprehensive health care agenda
and has called on Congress to pass association health plans, so
small businesses can purchase insurance at the same discounts
as big companies. Other proposals would expand the development
of health information technology. Because too many doctors are
being sued out of business, it’s imperative that Congress
also pass national medical liability reform. More broadly, Health
Savings Accounts will provide patients with greater say in decisions
regarding their own health care.
The federal
government must also continue the policies that have created our
current economic growth. That includes a continuation of the lower
tax rates that helped fuel the economic expansion. Armed with
the conviction that the economy grows when people are allowed
to keep more of their own money, Congress and the President responded
to the economic slowdown at the start of the decade with pro-growth
tax cuts for families, investors, and small businesses.
Despite
the criticism of those whose definition of “fiscal responsibility”
is to raise taxes, last week’s data make clear that these
cuts worked, even better than expected. By spurring economic growth,
they’ve even increased revenue to the federal government
enough that (despite too much federal spending) we remain on track
to reach the goal of cutting the budget deficit in half by 2009.
More importantly,
they’ve helped America weather a very difficult five years,
during which we’ve been hit with a stock market decline,
recession, terrorist attacks, corporate scandals, high energy
costs, and devastating natural disasters. History is replete with
examples of even some such events sparking massive economic calamities.
Instead, we’re charging ahead with a growth rate that remains
the envy of the world. If we have a crisis, it’s only one
of confidence, which is perhaps understandable in a time of war,
but is certainly in contradiction to the real state of the economy.
Sen.
Kyl serves on the Senate Finance and Judiciary committees and
chairs the Senate Republican Policy Committee. Visit his website
at www.kyl.senate.gov.
