December 13, 2005
Perception vs. Reality on the U.S. Economy

By Jon Kyl

Even after the devastation of Hurricane Katrina, and the resulting spike in the cost of energy, the U.S. economy is doing remarkably well by virtually every statistical measure. So why, one might wonder, do we so often see negative headlines in the news?

Consider some data released last week:

· More than 215,000 jobs were created in November, and 4.5 million since May of 2003. “To put the November increase in perspective,” noted Kathleen Utgoff, commissioner of the U.S. Bureau of Labor Statistics, “from January through August of this year, payroll employment growth averaged 196,000 per month”;

· The nation’s unemployment rate, at 5 percent, is stable and lower than the average of the 1970s, ‘80s and ‘90s;

· Gross Domestic Product for the 3rd quarter was higher than expected - 4.3 percent - and has been growing near that average for more than two years;

· Sales of new homes reached an all-time high in October, as did minority ownership; and

· According to the Department of Labor, the productivity of American workers rose at an annual rate of 4.7 percent over the summer. Productivity is the key to raising living standards, as increases allow employers to compensate their workers more without having to raise the price of the products they sell (which would fuel inflation).

So why, in the face of all this good news, is there negative public sentiment about the state of the economy? Consumers have been concerned about gas prices, but they are going down. Another reason may be the skyrocketing cost of health care. Overall, worker compensation has grown along with other indicators. But for many Americans, that hasn’t translated into a big increase in take-home pay, because much of the extra compensation is in the form of more costly health insurance. If a worker gets a 4% raise next year - and earns the national median weekly wage - health care costs will eat up 28% of the raise.

Fortunately, President Bush has developed a comprehensive health care agenda and has called on Congress to pass association health plans, so small businesses can purchase insurance at the same discounts as big companies. Other proposals would expand the development of health information technology. Because too many doctors are being sued out of business, it’s imperative that Congress also pass national medical liability reform. More broadly, Health Savings Accounts will provide patients with greater say in decisions regarding their own health care.

The federal government must also continue the policies that have created our current economic growth. That includes a continuation of the lower tax rates that helped fuel the economic expansion. Armed with the conviction that the economy grows when people are allowed to keep more of their own money, Congress and the President responded to the economic slowdown at the start of the decade with pro-growth tax cuts for families, investors, and small businesses.

Despite the criticism of those whose definition of “fiscal responsibility” is to raise taxes, last week’s data make clear that these cuts worked, even better than expected. By spurring economic growth, they’ve even increased revenue to the federal government enough that (despite too much federal spending) we remain on track to reach the goal of cutting the budget deficit in half by 2009.

More importantly, they’ve helped America weather a very difficult five years, during which we’ve been hit with a stock market decline, recession, terrorist attacks, corporate scandals, high energy costs, and devastating natural disasters. History is replete with examples of even some such events sparking massive economic calamities. Instead, we’re charging ahead with a growth rate that remains the envy of the world. If we have a crisis, it’s only one of confidence, which is perhaps understandable in a time of war, but is certainly in contradiction to the real state of the economy.

Sen. Kyl serves on the Senate Finance and Judiciary committees and chairs the Senate Republican Policy Committee. Visit his website at

Senator Jon Kyl

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