Some Pre-Thanksgiving Good News
By David Henderson
I’ve noticed a few encouraging developments in the last few days that don’t merit their own blog post but do merit items in an overall post.
First, the decline in unemployment benefits. (HT2 co-blogger Scott Sumner.)
Fewer jobless Americans are relying on unemployment insurance amid tighter state rules on obtaining the benefits and a strong job market.
The share of jobless people receiving unemployment benefits fell after the 2007-09 recession and has stagnated at a historically low level since. Last year, 28% of jobless people received benefits, down from 37% in 2000—a period of similarly low unemployment.
Among the main reasons, experts say: After the last recession ended, state legislatures passed policies reducing unemployment benefits and tightening eligibility requirements.
Ten states cut the duration of benefits, five adopted stricter work-search requirements and several trimmed the average weekly-benefit amount, according to the National Employment Law Project, or NELP, which advocates for low-wage workers.
This is from Sarah Chaney, “Fewer Jobless Americans Tap Unemployment Benefits,” Wall Street Journal, November 14, 2019. If you think this is bad for workers, then I recommend a little Econ 101. It’s great for workers who would prefer pay to government handouts, and it’s good for the economy overall by reducing the incentive to stay unemployed. Larry Summers recognized that latter fact in “Unemployment,” in David R. Henderson, The Concise Encyclopedia of Economics.
It’s nice to see, in this era when governments stick their hand in almost everywhere, even making it hard for those of us in California who like Uber, Lyft, and plastic straws (oh, and the freedom to build houses), that some governments have reined in a part of the welfare state.
Second, U.S. real GDP grew at an annual rate of 2.1 percent in the third quarter, as was just announced this morning. That’s up from the previous estimate of 1.9 percent.
Third, the IRS is auditing what appears to be a record low number of tax returns. See Natasha Sarin and Lawrence H. Summers, “Shrinking the Tax Gap: Approaches and Revenue Potential,” Taxnotes, November 18 2019. (HT2 Timothy Taylor.) If Sarin’s and Summers’s data can be trusted–and I think they can–then the underreporting percentage is highest at the top end, people making $10 million or more. (See their Table 1.) Why do I think this is good? Because the U.S. government tilts the tax system strongly against high-income people and this evens it up a little.