Spending Restraint Fosters Economic Growth

FEBRUARY 5, 2013 | by NATHAN BENEFIELD

Critics, and likely election challengers, of Gov. Tom Corbett point to the singular fact that the state's unemployment rate is higher than the national average (though not significantly, nor significantly changed from last year). These critics claim this is the result of fiscal restraint in the last two state budgets. But focusing on this one data point ignores the broader economic trends found in the same Bureau of Labor Statistics data.

To begin with, the unemployment rate is determined by calculating the number of "unemployed"—those actively seeking work—by the total labor force (those with jobs plus unemployed). Thus the "unemployment rate" can rise if people lose jobs, or if more people enter the labor force by starting to look for work or move to a new state. The latter is the case in Pennsylvania—more people are entering the labor force, and most are getting jobs.

Here are some facts about Pennsylvania's growth:

Last year

  • The number of employed persons grew by 143,537. Pennsylvania's growth rate was more than double the national average.
  • Over the past year, Pennsylvania nearly matched the other 49 states combined in new labor force participants. PA's labor force growth rate was 17 times the growth in the other 49 states.

Last Two Years

  • The number of employed persons grew by 165,997. Pennsylvania's growth rate was slightly higher than the national average.
  • Pennsylvania's labor force growth rate was 4.5 times the growth in the other 49 states.

Corbett's Two Years vs. Rendell's Second Term

  • Job growth (reported by employers, which differs somewhat from household survey data described above) was 91,100 over the past two years. From January 2007 to 2011, Pennsylvania lost 136,600 jobs.
  • Pennsylvania's unemployment rate is down 0.1 percent since January 2011. It had grown 3.8 percent in the prior four years.

This trend shouldn't be surprising. The historical evidence demonstrates that government spending doesn't stimulate economic growth. Pennsylvania's jobs record demonstrates the old axiom that you can grow the economy or you can grow the government, but you can't grow both.



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