The Economy Revs Up
Wall Street Journal Editorial Board
The Labor Department reported Friday that the U.S. created 228,000 net new jobs in November, in the latest sign that the American economy is growing at a healthier pace. Could it be that “secular stagnation” isn’t inevitable and that better policies make a growth difference?
There’s little doubt now that the economy has reached a higher growth plane over the past nine or so months. Growth in GDP hit 3% in the second and third quarters, and all signs point to another in the fourth quarter. That would mark the first such string of 3% quarters since 2014, after which growth fell back to the 2% range.
The rising growth is touching most industries and parts of the country. Manufacturing is healthy—note to Donald Trump and Commerce Secretary Wilbur Ross —thanks to growth abroad and rising exports. The housing market is doing well overall, and consumer confidence is high.
The best news may be the surge in small business optimism that began with the election and has persisted, as measured by the National Federation of Independent Business. Small business confidence has been depressed compared with the typical economic expansion, but NFIB’s hiring index reached an all-time high in November, and the sentiment is making a difference in the labor market.
The 228,000 new jobs in November isn’t gangbusters but it is healthy considering the growing tightness in the labor market. The jobless rate stayed at 4.1%, as new people entered the labor market, but the economy will need more workers to keep growing. Unemployment hasn’t been this low since it was 3.9% in December 2000, before the dot-com bubble burst.
Some of our friends, including Stanford’s Ed Lazear on these pages Friday, point to the still-low labor participation rate as a sign of labor slack and room to grow. If rapid growth persists, rising wages and more opportunities will pull people off disability and out of their parents’ basements.
That’s plausible, and we hope it’s true because Labor Department statistics show there is little slack in the market for current workers. The jobless rate among college graduates is down to 2.1%, which has to be near full employment and is close to the lowest since before the 2008 recession. Even more striking is the rapid decline in the jobless rate among workers over age 25 without a high school diploma. (See the nearby chart.)
These folks are supposed to be the least employable in our skills-based, information economy. Yet in November the jobless rate for these workers fell to 5.2% from 5.7% in October and 6.5% in September. That is lower than any time since the Bureau of Labor Statistics began tracking this figure in 1992.
Why has the economy improved? Faster growth abroad has helped, and central banks continue to be accommodating by any historical measure. One of the threats to the expansion will be when monetary officials raise rates and pare back their balance sheets, as the Federal Reserve is beginning to do.
But the biggest change has been in U.S. economic policy, notably the Trump Administration’s deregulatory efforts and the boost they have given business confidence. Barack Obama’s economists dismissed regulation as a minor concern, and even called it a boon to growth, but the costs of compliance were real and added to uncertainty. Businesses held back because they didn’t know how or when government might strike next, which contributed to historically low levels of capital investment in this expansion.
That has begun to change, and the main promise of tax reform is to create the incentive to produce an investment surge. The bet is that this will increase the pace of growth, with new investments in labor productivity that will lift wages. Wage gains have been modest so far—2.5% over the past year—but if labor markets stay tight that is bound to improve.
There are risks to this growth scenario other than monetary policy. One is a burst of trade protectionism from the White House, starting with a U.S. withdrawal from Nafta. Another is a labor shortage exacerbated by a decline in immigration that forces companies to hire human capital abroad. The latter two would be self-inflicted wounds that Mr. Trump has every political incentive to avoid.
But for now U.S. economic portents look as good as they have in years. If Congress can get its tax reform over the finish line without watering down its pro-growth elements, “secular stagnation” may go down in history as one more failed progressive diagnosis.
Read more at The Wall Street Journal.
Manufacturing CEO survey shows record high optimism on prospect of tax reform
December 12, 2017
The National Association of Manufacturers said Monday its latest quarterly CEO survey reflects historically high optimism on expectations for the passage of tax reform in Washington.
The trade group said CEO optimism — hitting a high mark in 20 years of the survey — should send a message to legislators that failure to enact the bill would be a blow to American business.
“These incredible numbers demonstrate the absolute urgency of getting tax reform signed into law because manufacturers are saying loudly and clearly that more jobs, better pay and manufacturing growth are on the horizon,” said Jay Timmons, president and CEO of NAM. “This also serves as a warning to lawmakers: Fail to get this done, and American manufacturing workers will suffer the consequences of inaction.”
Each quarter, the NAM surveys 14,000 large and small manufacturers to gain insight into their economic and hiring outlook. Of those who participated in the fourth quarter study, 94.6 percent said they were positive about their own company’s outlook.
Nearly 63 percent said comprehensive business tax reform would encourage their company to increase capital spending, and more than half said they would expand their businesses (57.9 percent).
“The single most important thing that we need to see out of tax reform is permanent, more competitive tax rates,” said Austin Ramirez, president and CEO of HUSCO International, a Wisconsin-based hydraulic and electro-hydraulic component manufacturer. “I compete against competitors in Asia and Europe who are operating in a different paradigm with lower tax rates, and the high rates in the U.S. make us less competitive.”
Almost 54 percent of CEOs in the survey said they would hire more workers, and nearly half (48.8 percent) said they would increase employee wages and benefits.
“Tax reform will enable us to provide our employees with better salaries, wages and benefits which will have a real impact to improve the standard of living for them and their families,” said Bruce Pulkkinen, senior advisor and former president of the third generation, family-owned architectural woodworking company, Windham Millworks in Maine. “We can’t accept the status quo anymore.”
NAM CEO Timmons anticipates tax reform would increase the amount of available manufacturing jobs from today’s 350,000 to 2 million jobs by 2025.
“If we get it right, we’ll grow this economy. The president calls it ‘rocket fuel,’ I agree with that. Couple that with regulatory reform reducing the burdens on manufacturers who are simply trying to do the right thing and make ends meet and hire new people,” Timmons said on CNBC’s “Power Lunch.” “I think there’s no end in sight to how we can grow this economy.”
Commerce Secretary Wilbur Ross told CNBC this optimism is not unique to the manufacturing sector.
“President Trump’s policies of deregulation, free and fair trade and now tax cuts have created an environment where businesses want to invest, grow and create jobs here at home,” Ross said.
Read more at CNBC.
The Simple Truth About America’s Awful Tax Code I Learned As A Fortune 500 CEO
Senator David Perdue (R-GA)
In business, it all comes down to your return on investment (ROI). Decisions are made based on what is best for the company’s bottom line. Unfortunately, America’s current tax code is telling companies they will get a better ROI by investing their resources in another country.
First, within the United States, we don’t have a level playing field across all industries. I led two Fortune 500 companies. One of them, Dollar General, today pays an effective tax rate of 37 percent. The other, Reebok, pays an effective rate of 19 percent. This is not because of loopholes exploited by these businesses. It is an amalgamation of 100 years of Washington toying with the tax code to incentivize certain industries without ever revisiting whether these incentives actually accomplished their intended goal, or were still relevant.
By design, the United States tax code dictates how business decisions are made. Because of Congress’s failure to continually update the code to keep up with the changes in the global economy, American consumers, companies and workers are being significantly disadvantaged.
At the same time, our international tax structure is jeopardizing domestic growth and crushing corporations’ ability to be globally competitive. We have one of the highest corporate tax rates in the developed world and we still have a tax on repatriated earnings. Essentially, that is a double tax that has locked more than $2.6 trillion in U.S. profits overseas. Personally, this tax on repatriated earnings prevented me from investing where I wanted to — here in America.
Again, these profits trapped overseas could be put towards meaningful investments in plants, equipment, training and helping people change from one job to another. That’s a big need in the United States as we go from an industrial age to an information age. Instead, our tax code has contributed to 30 years of missed opportunities to grow the economy and develop our workforce.
In 1986, the United States changed the tax code to lower the corporate rate and make us more competitive. Since then, America has done nothing, while other countries such as Ireland, Germany, the UK and Japan all dramatically lowered their rates and did away with their repatriation tax. There are now plans to lower the corporate rate in both France and the Netherlands. This raises the stakes even higher for the United States.
As the global economy grows ever more interconnected, more and more of U.S. corporate profits are earned abroad. With other countries lowering their corporate rates and ending their repatriation tax, it is easy to see why American companies are targets on the global acquisitions market. Look at the last decade.
Since 2004, American companies lost more than $500 billion combined on the global acquisitions market. In fact, according to the Business Roundtable, American companies were the target for mergers and acquisitions 31 percent of the time, while they were the acquirer 16 percent of the time. If our corporate tax rate had been 20 percent, it is estimated that 3,200 companies would have stayed in America during that time.
I have lived in Asia and Europe, and have worked on every continent except Antarctica. Four decades of business experience has proven, time and time again, that America has the best workforce in the world. Our workforce is unique, innovative, self-starting and — regardless of obstacles — it gets the job done. However, today’s corporate tax structure is penalizing our workers. We have to reduce the tax burden before it cripples our workforce even further.
If we change the business tax code by lowering the corporate tax rate and eliminating the repatriation tax, there will be renewed investment in our economy. This change will create jobs, increase wages, boost workforce development and grow the economy. The policy non-profit Tax Foundation has projected that all of these changes, which are included in the current United States Senate plan, would create nearly 1 million new jobs.
The United States is on the cusp of an economic turnaround. Consumer confidence is at a 16-year high and manufacturer optimism is at a 20-year high. There is an expectation being priced into the bond and stock markets that something will happen on tax this year, and it’s imperative that Congress act accordingly. Changing the tax code by Christmas is the single greatest thing we can do to ignite economic growth next year.
This sense of urgency is sorely missing in Congress. In the real world, you have to get things done as fast — or faster — than your competitors. As a former Fortune 500 CEO, I competed with other major companies like Nike and Walmart. In the business world, you don’t think about things theoretically, you act instinctively.
Countries around the world have already lowered their corporate rates. Now the United States is playing catch up and we cannot wait any longer to deliver results. We need to change the tax code to grow the economy, put people back to work, increase wages, and over the long-term, help reduce the national debt. Otherwise we will continue to be outpaced by our competitors and American workers will pay the ultimate price.
Read more at NBC Think.
David Perdue strengthens ties with Trump even as some colleagues fight
The Atlanta Journal-Constitution
After President Donald Trump spent a recent morning trading barbs with Tennessee U.S. Sen. Bob Corker on Twitter, reporters on Capitol Hill swarmed his Republican colleague David Perdue.
Most of the journalists stuck to a similar theme: What did the Georgia freshman senator think of the president’s personal attacks on his friend and mentor? Did that mark a turning point in Perdue’s steadfast support of Trump?
Perhaps more than any of his colleagues, Perdue has defended Trump’s almost every move, brushing aside questions about his ally’s most provocative actions, pronouncements and tweets. The news media and general public, Perdue says, should not get bogged down in the controversy of the day but instead focus on the president’s broader policy agenda, which in many ways mirrors Perdue’s own.
Perdue wouldn’t take the reporters’ bait following Trump’s tussle with Corker.
“Look, every U.S. senator is entitled to their own opinion,” he said, declining to criticize either man. “I have a different opinion. We have a person in the White House who is a person of destiny, coming in at an important time where we need to break some eggs in Washington.”
Trump’s public clashes with several of Perdue’s Senate GOP colleagues has caused some in the upper chamber to back away from the president. But Perdue has taken a noticeably different tack, standing squarely and unflappably with the commander in chief through even his most embattled moments.
“My approach is to continue to encourage (Trump) to stay focused on his agenda because the message I get home in Georgia is ‘Why are you guys in the Senate not supporting his agenda?’ ” Perdue said in an interview last week. “You could always talk about what he said in this tweet or that tweet, but when you back up and look at what’s happening in the country, that’s what people back home are really paying attention to.”
The strategy has helped Perdue fortify his ties to the West Wing and give his legislative priorities a boost, including a proposed overhaul of the country’s immigration system.
Perdue’s relationship with the president stretches back to 2014, when both were businessmen and relative political unknowns.
The Sea Island resident had just emerged the winner following an ugly GOP primary runoff to capture Saxby Chambliss’ former U.S. Senate seat, and Trump had summoned Perdue to Trump Tower to discuss his journey from the boardroom to the ballot. Little did Perdue know at the time that Trump was mulling a run for president.
The relationship grew from there.
Perdue was one of the earliest and most prominent elected officials in Georgia to become a Trump acolyte. Several Perdue allies ended up on the real estate magnate’s campaign, including Nick Ayers, who went on to become Vice President Mike Pence’s chief of staff.
After Trump’s November victory, Perdue’s name was briefly floated as a possible pick for secretary of commerce. It was ultimately his cousin Sonny who ended up with a Cabinet post, but Perdue’s star has risen since Trump’s inauguration.
After his signature legislative proposal, a bill to shift the country’s legal immigration rules to a more merit-based system from a family-focused one, sat collecting dust in the Senate for months, Trump single-handedly revived its fortunes by offering his support at a White House event. Components of Perdue’s bill are now being negotiated as part of talks over the fate of so-called Dreamers brought to the country illegally as children.
The White House did not respond to requests for comment about Trump’s relationship with Perdue, but Trump’s legislative director, Marc Short, recently told The Washington Examiner that “there’s been no more ardent supporter of the president” than Perdue in the Senate. “He is somebody who has been eager to help us on battles big and small,” Short said.
When describing his support of the president, Perdue often draws parallels to his own election in 2014. Georgia voters picked him over a host of well-known Republican figures and Democrat Michelle Nunn because they were sick of politics as usual, he frequently says.
When opinions do diverge, Perdue has taken great care not to criticize the president directly while also defending Trump’s executive authority.
When Trump announced this summer that transgender people would no longer be able to serve in the military, Perdue toed the line, even though he later said he personally believes that population should be able to serve as long as the government didn’t pay for any gender reassignment surgeries.
“I don’t think this is the time to have a social agenda conversation,” Perdue told the publication Mic in July. “I think (Trump) is well within his rights (to impose the ban).”
During Trump’s more unvarnished moments, Perdue often reverts to a refrain that Trump isn’t a choirboy and that people should focus on the larger picture: the president’s push to cut taxes and regulatory red tape. In a recent interview, he compared Trump to the United Kingdom’s World War II-era prime minister, Winston Churchill.
Churchill “was nobody’s choirboy at the time, but he was a man of destiny who pulled that country together and survived one of the greatest debacles in their history,” Perdue said.
“Here we’ve got I believe a man that’s willing to break some eggs in Washington,” Perdue said of Trump. “He doesn’t know what the traditions are or the rules or anything else. He’s just trying to get results.”
Georgia Democrats were not impressed with the comparison.
“This ridiculous comparison by Perdue hardly merits a response,” said state Sen. Nan Orrock of Atlanta. “Churchill’s legendary leadership helped defeat the Nazis in WWII, while Trump hasn’t passed a single bill in nine months as president. It’s like comparing Secretariat with Eeyore. One’s a winner and the other is a loser. Sad!”
In some ways, Perdue’s approach to Trump is not all that different from Georgia’s other Republican members of Congress. All have endorsed the president, defended his policies and have voted with his legislative priorities at least 90 percent of the time, according to the political analysis site FiveThirtyEight.
But Perdue is undoubtedly one of the delegation’s — and the Congress’ — most outspoken Trump allies, especially when it comes to the president’s character. Perdue will often describe his interactions with Trump, his family and his Cabinet on personal terms. If a man surrounds himself with such sound company, he says, that speaks volumes about his judgment.
The fact that Perdue has stuck so close to Trump does not surprise many in local GOP circles.
“Georgia Republicans remain as steadfast in their support of President Trump as Senator Perdue,” GOP strategist Brian Robinson said. “He may not reflect the viewpoints of other senators in the caucus, but he does reflect the viewpoints of Georgia Republicans. He hasn’t forgotten where he’s from.”
Trump did well in Georgia last November, carrying the state by more than 5 percentage points. His victory margins were even higher outside metro Atlanta.
“I think the danger in Georgia Republican politics is not being with the president,” Robinson said.
There are very few vocal anti-Trump Republicans actively involved in Georgia politics at the moment, but one former GOP operative worries about the long-term risks of officials such as Perdue embracing Trump so wholeheartedly. The party may have trouble attracting serious, top-tier talent if rhetoric such as Trump’s becomes accepted and encouraged, said Clint Murphy, a former GOP operative who once worked for U.S. Sen. Paul Coverdell and then-gubernatorial candidate Karen Handel.
“I’m just worried that the future of it is just you’re going to have less and less people who are policy-driven and more and more personality-driven and ego-driven politics,” Murphy said.
“It’s concerning because at the end of the day, how you conduct yourself is just as important as what you are trying to accomplish,” he said.
But even Murphy acknowledged Perdue’s embrace of Trump could yield political dividends for Georgia, including more money for the Savannah port expansion.
Higher levels of funding have yet to materialize for the $973 million project, but boosters are hopeful Trump’s campaign promise of a major infrastructure bill could benefit Savannah and the state.
Read more at the AJC.