A Re-election Jobs Report?
A Commentary By Lawrence Kudlow
Did the big March jobs report put President Obama back on the road to re-election? If so, he can thank the GOP, whose tax cuts saved him from himself.
You could hear cheering all the way from the West Wing when the Labor Department showed a 216,000 gain in non-farm payrolls, the biggest number in quite some time. Plus, the unemployment rate continued its decline to 8.8 percent. Not so long ago it was nearly 10 percent.
Corporate payrolls have now increased by 478,000 for the first three months of the year. Over the past three months, the average payroll gain has been 159,000, which is more than twice the monthly gain in 2010. If payrolls stay on track, that would mean nearly 2 million jobs created in 2011.
So sure, the White House must be very happy. In fact, everybody should be happy at an improving jobs picture.
But here's the sublime irony. The wake-up in job creation is a function of Republican policy. After all, for two years the Obama Democrats spent themselves into oblivion, with over $1 trillion of so-called big-government stimulus. Didn't work. By the end of last year, that failed stimulus wore off, and it was replaced by Republican tax cuts.
Remember that in mid-December, after his election shellacking, President Obama signed a deal that extended the Bush tax rates across the board. The top marginal rate stayed at 35 percent. Investment tax rates for cap-gains and dividends held at 15 percent. Most businesspeople I know -- folks who work in both large and small companies -- welcomed the tax-rate freeze as a sign that maybe the war against growth, capital formation and small business was either coming to an end or at least a two-year truce.
So, presto, the jobs numbers start jumping in the new low-tax year.
The most important telltale sign for jobs is the household employment survey, which includes most of the nation's small businesses. It's the survey that signals real turning points in job creation since it's the small-business owner-operators who are most sensitive to changing marginal tax rates.
And clearly, tax incentives matter: For March, the household survey jumped 291,000. Year-to-date, household employment is up 658,000, and is on track for a 2.6 million gain for the year. This small-business jobs push is also what's driving down the unemployment rate.
So it looks like Republican tax cuts have saved Obama from himself. And the GOP ought to stay on this tax-cutting path as it moves toward limiting the budget. Full-throated flat-tax reform to lower marginal rates and broaden the base will create brand new incentives for growth and jobs.
The GOP also should be on the warpath for full-fledged corporate-tax-rate reduction. Get rid of the GE loopholes and knock the rate down to 15 percent. As they continue to advance on the spending-cut front, Republicans should balance out their message with strong pro-growth tax cuts.
That said, there is a big glitch in the economic and jobs story: It's called inflation -- especially oil- and gas-price increases, but also food-price hikes. And there are new signs of price increases for all manner of goods and services. Inflation is the economy's Achilles' heel.
Crude oil just hit $108. Nationwide gasoline is now around $3.60.The CEO of Wal-Mart warns of major retail price increases, saying they are already showing up in dairy and cotton products, with more coming in transportation. Consumer product companies are raising prices. Hershey's chocolate is raising prices. And while the ISM manufacturing report in March showed strong business conditions, 85 percent of survey respondents reported higher prices.
And the energy-price hikes are already depressing consumer incomes. Average hourly earnings in the jobs report have been flat for the last two months, even while the consumer price index has been steaming ahead at a 5.6 percent annual rate over the past three months. In fact, measured over three-month periods, a real-wage income proxy, which includes average hourly earnings and hours worked adjusted for the consumer price index, has actually declined four consecutive months. This is a warning that inflation is taking its toll.
Both Democrats and Republicans in Washington must understand that over-easy Fed policy has depressed the dollar and reignited inflation. Politicians in both parties should be fighting for stable money. On the energy front, deregulation to unleash drill, drill, drill is more important now than ever.
So while there's good news on jobs, the battle for the economy has not yet been won. And the November 2012 election is still a long way away.
COPYRIGHT 2011 CREATORS.COM
Views expressed in this column are those of the author, not those of Rasmussen Reports. Comments about this content should be directed to the author or syndicate.
Rasmussen Reports is a media company specializing in the collection, publication and distribution of public opinion information.
We conduct public opinion polls on a variety of topics to inform our audience on events in the news and other topics of interest. To ensure editorial control and independence, we pay for the polls ourselves and generate revenue through the sale of subscriptions, sponsorships, and advertising. Nightly polling on politics, business and lifestyle topics provides the content to update the Rasmussen Reports web site many times each day. If it's in the news, it's in our polls. Additionally, the data drives a daily update newsletter and various media outlets across the country.
Some information, including the Rasmussen Reports daily Presidential Tracking Poll and commentaries are available for free to the general public. Subscriptions are available for $4.95 a month or 34.95 a year that provide subscribers with exclusive access to more than 20 stories per week on upcoming elections, consumer confidence, and issues that affect us all. For those who are really into the numbers, Platinum Members can review demographic crosstabs and a full history of our data.
To learn more about our methodology, click here.