The United States economy is clipping along, unemployment is below 4 percent and citizens are feeling good about their prospects for the future. All signs suggest a celebratory parade is in order for the growing economy. As the 2018 midterm elections begin to heat up, politicians from both political parties are racing to the front of the parade to establish their leadership or to declare their campaign is the cause of the economic success.
Here’s the reality: It isn’t the government’s or a politician’s parade to lead — it belongs to the American people and American businesses.
Government does not create wealth or jobs. Politicians do not drive economies. People, communities, businesses and private organizations do that.
Presidents, as well as state elected officials, historically get more credit and take more blame for the economy than they deserve. The factors leading to economic success and sustainability are many and complex and can rarely, if ever, be tied to a specific action of government.
The political consulting class recognizes perception is reality when it comes to voters’ pocket-book issues and have all but canonized President Bill Clinton’s famous axiom, “It’s the economy, stupid.” If the economy is booming, the party in power touts its spot at the head of the economic parade. If the economy is stagnate or struggling, the party out of power declares those in office are overseeing a funeral procession instead of a parade. Reality and history show that neither is completely true.
Currently, many Republicans are basing their re-election prospects on the impact of tax cuts on the economy. Many Americans have seen small but important increases in take-home pay, and others have received much publicized bonuses. The “perception” is tax cuts are driving a better economy for all Americans.
Economists across the political spectrum seem to agree with Joel Prakken, chief economist at the economic forecasting firm IHS Markit, who said, “It’s just way too early to see any kind of evidence of faster growth, faster investment, more labor supply — any of that stuff.” The tax cuts will likely have lasting impact on Americans and the economy — but it is too early to know exactly what that impact will be.
This is not to say that government doesn’t play a role in national and local economies. It does. While acknowledging it doesn’t create wealth or jobs, government clearly can have a negative influence. When government oversteps its proper role, picks winners and losers through cronyist connections or overburdens businesses with excessive and burdensome regulations, the chilling impact on the economy is real. The best governing philosophy is to do no harm and then stay out of the way so the American people, businesses and organizations can do what they do best — innovate, create value, serve customers, give back and contribute to vibrant communities.
One negative ramification of government and political parties taking credit is that it further conditions citizens to look to government to solve problems. If it is government that creates success and happiness in good times, then it is reasonable to believe that government is also responsible when things go bad.
It is also true that economies run on confidence and optimism. Hopeful organizations investment in research and development, more staff and physical equipment. Citizens buy, spend and invest when they have confidence in the future. There is an economic story that has to be told and policy that has to be driven in order to encourage companies to spend and invest.22 comments on this story
Utah is fortunate to have a state government that, for the most part, provides a light regulatory touch, sound leadership, responsible spending and future planning. Utah is equally fortunate to have businesses, religious organizations and individual citizens who invest significant resources to support community projects, create job-driving international commerce and promote good causes. The proper role of government is to create space for individuals and organizations to do just that.
When it comes to any economic success parades, it's best to acknowledge and celebrate the individuals, businesses and organizations that are already working and contributing at the front of the parade. Their leadership is what drives the economy, improves communities and strengthens the country.