October 23, 2022 Reading Time: 3 minutes

The latest U.S. Jobs Report for September 2022 may look good, but a peek under the hood shows major weakness in a fragile economy. Things will get worse before they get better. And those most affected by the worsening economy are everyday Americans, small business owners, and entrepreneurs, without whom capitalism’s prosperity crumbles.

Of course, Democrats fearing upcoming election loss are hiding behind the record-low 3.5 percent unemployment rate to ignore the reality that inflation-adjusted average hourly earnings fell by 3 percent over the last year, the 18th consecutive monthly decline. These earnings have risen slower than inflation, essentially after the $1.9 trillion, March 2021 American Rescue Plan that was supposed to “stimulate” the economy. 

Unfortunately, trillions more taxpayer dollars have been appropriated since then, further fueling the fire of money-printing by the Federal Reserve, which is a major cause of 40-year high inflation that won’t soon moderate without a more aggressive tightening policy.

The trickle-down effects of high inflation from money-printing funding excessive deficit-spending are keenly felt by American families, who have experienced an estimated loss in real income per capita of $4,200 since January 2021. And 40 percent more say they may not be able to pay their bills, compared to a year ago. 

Americans are forced to make tradeoffs they should never face.

But with prices for food at home up 13.5 percent, shoppers must choose between eating healthy or paying the bills. Many are choosing less-healthy eating habits, creating health concerns in an already fragile healthcare system dominated by failures from government intervention. Reduced purchasing power has forced other tradeoffs, such as 93 percent of working Americans having a side hustle

The dismal state of the nation is squashing people’s potential to prosper. 

In addition to the average working American, businesses are hit hard. GAP, Peloton, Tesla, Microsoft, J.P. Morgan, and countless others have laid off hundreds to thousands of workers as they grapple with the effects of this recession. More importantly, 75 percent of small business owners say inflation is hitting their profit margin and 56 percent don’t see inflation abating until at least summer 2023, forcing them to raise prices, cut overhead costs, and minimize labor hours. 

Unable to compete with big corporations that can keep costs lower, small businesses and entrepreneurs are seriously threatened. If the Fed doesn’t act more aggressively to substantially reduce its bloated $8.8 trillion balance sheet, lowering the high inflation it largely created, Americans will continue to suffer. This economy especially hurts the poor, who are stripped of their dignity without a well-paid job and the ability to afford necessities for their family.

There must be a liberty-friendly, pro-growth approach moving forward, removing government barriers that have crippled the success of capitalism. 

This should include cutting government spending, taxes, and regulations to help quickly balance the budget, to stop fueling the Fed’s destructive policies. Congress should pass rules-based policies of a spending limit with a maximum growth rate of population growth plus inflation to cut bloated government spending, and a monetary policy rule, short of eliminating the Fed. 

At the very least, Republicans should help undo the damage from a reckless government that has added nearly $7 trillion in deficit spending over the last couple of years. Of course, this violates the Statutory Pay-As-You-Go Act of 2010. Last year, the Biden administration waived PAYGO, like the Trump administration inappropriately did in prior years, in pursuance of the American Rescue Plan Act. But with a now evenly divided Senate, Republicans have the power to oppose similar proposals that would drive the nation into deeper debt. 

To pull America away from the grips of a recession and the shackles of inflation, the government must get out of the way of the productive private sector. So long as the government continues egregious progressive policies, the hardworking Americans fueling the economy will be unable to do so, making for a government-dependent and economically unfree status that capitalism, with limited government, once helped them escape.

Vance Ginn

Vance Ginn, Ph.D., is founder and president of Ginn Economic Consulting, LLC and an Associate Research Fellow with AIER. He is chief economist at Pelican Institute for Public Policy and senior fellow at Americans for Tax Reform. He previously served as the associate director for economic policy of the White House’s Office of Management and Budget, 2019-20.

Follow him: @VanceGinn.

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