Economic Trends 
October 2020 | Creighton Institute for Economic Inquiry  

Welcome to our October report covering results from Creighton’s two September economic surveys. Creighton’s monthly survey of supply managers and procurement experts in nine Mid-America states indicates economic growth is in a range indicating the regional economy is rebounding, but current employment remains below pre-COVID-19 levels. The overall index from Creighton’s monthly survey of bank CEOs in rural areas of 10 states climbed modestly from August’s weak reading. However, the overall index remains well below growth neutral.
Creighton University
Jack MacAllister Chair in Regional Economics
From the Desk of Professor Ernie Goss
Read Biden’s Lips: “More New Taxes”
What Is a Fair Share of Taxes?

In an effort to bolster the likelihood of his election, presidential candidate, George H.W. Bush proclaimed “Read my lips, no new taxes” at the 1988 Republican National Convention. In sharp contrast, 2020 Democrat presidential hopeful, Joe Biden essentially shouted, “Read my lips, more new taxes.” Biden argues that the U.S. economy needs more spending, and requires more taxes.

He bases his tax hike plan on three factors or allegations: 1) the Trump 2017 tax cuts hurt the economy, 2) high income earners should pay a greater and a “fairer” share of taxes, and 3) the U.S. economy needs more than $5 trillion in additional federal spending over a decade to pay for his proposed new spending programs.

Are Biden’s assertions accurate?
1) Trump tax cuts hurt economy.  Biden and his team allege that the December 2017 tax cuts reduced tax collections to levels jeopardizing growth with consequent massive fiscal deficits. However, for the two years after the tax cuts, total federal government receipts climbed by 5.3% compared to a much slower 2.2% for the two years prior to the 2017 tax cuts.
As a result of the slashing of the corporate income tax rate, corporate tax collections fell by 11.4 in the two years after the 2017 cuts. However, this decline is smaller than the 25.4% fall for the two years prior to the 2017 cuts. Furthermore due at least in part to the corporate tax reductions, business investment soared by 11.9% for the subsequent two years in contrast to 4.7% for the two years preceding the 2017 tax cuts. 
Moreover, economic performance, as measured by GDP, accelerated after the tax cuts from 9.7% for 2017-19 compared to 5.9% for 2015-17. Furthermore, the Census Bureau reported in September that the median household income advanced by a massive 6.8% in 2019—the largest annual increase on record. Biden is clearly wrong on this count.
2) High income earners do not pay their fair share.  According to the National Taxpayers Union, the top 1% of income earners in 2017 netted 21% of the nation’s adjusted gross income, but paid 38% of U.S. personal income taxes. On the other hand, bottom half of income workers netted 11% of the nation’s wages, but they paid only 3% of personal income taxes. In fact, fully 32% of filers in 2017 paid no income tax. From the perspective of high income earners, Biden is likely wrong again. 
3) Biden needs new tax collections. The Wall Street Journal reported that Biden’s spending proposal would “total $5.4 trillion in new spending over the next 10 years” based on an analysis by the Penn Wharton Budget Model, a nonpartisan group.  “This is the largest proposed spending increase by a presidential nominee since George McGovern,” says Kent Smetters, a Wharton economics professor who oversees the budget model project. Biden is correct here.
Number of the Month


Former President
Jimmy Carter celebrated his 96th birthday on October 1, 2020. 
He has now become the longest-lived of all those to hold the nation’s highest political office.

Goss Eggs 
Recent Dumb 
Economic Moves

Disney, this week, announced layoffs of almost 30,000 jobs, much of those in Los Angeles where the city’s lockdowns restrict Disneyland’s ability to reopen. Not surprisingly the latest unemployment rates were 5.1% higher for closed-down LA than wide-open San Diego. Remarkedly, COVID-19 death rates per 1,000 in population were 1.67 for LA and 0.56 for
San Diego.
Index in Growth Range for Fourth Straight Month: Worker Shortages Reported by 40% of Supply Managers

September survey highlights:
  • The regional Business Conditions Index expanded to its highest level in more than two years. 
  • The regional employment index climbed to its highest level since June 2019.
  • Four of five supply managers reported their firms were experiencing difficulty finding and hiring qualified workers.  
  • Approximately 62.9% of supply managers reported shipping bottlenecks and difficulties in receiving materials and transporting output.
  • Business confidence remains very healthy.

Rural Mainstreet 
Index Index Climbs for September:
Almost One-Fourth of Bankers Report Rural Economy Recovery

September Survey Results at a Glance:
  • Overall index advanced for seventh straight month, but remained below growth neutral. 
  • Bank CEOs estimate farm income, including government support, to be down 1.5% from last year at this time. 
  • Almost one of four bankers, or 23.1%, reported their local economies were back to pre-coronavirus levels.
  • Approximately 38.5% of bankers reported the CARES Act and the PPP programs provided crucial support for their local economy.
  • Economic confidence climbed to its highest level since the COVID-19 onset.

View the complete Rural Mainstreet Report.
The Outlook

Professor Goss' Forecast - October 2020:

  • The yield on U.S. long-term Treasury bonds, along with mortgage rates, to climb by as much ¼ % (25 basis points) by the end of 2020.
  • The October job additions will be healthy but somewhat disappointing in comparison to September’s.
  • Annualized and seasonally adjusted Q3 GDP will range between 14% to 15%.

Goldman Sachs - September 11, 2020: 

  • Goldman Sachs upgraded its forecasts for the U.S. economy and now expects GDP to reach 35% in the third quarter of the year, making it by far the most bullish bank on Wall Street. Goldman Sachs is predicting U.S. Q3 GDP to be 35% due to a better than expected August jobs report.
  • The bank said in a note on Thursday: "We upgraded our near-term growth forecasts based on the much stronger-than-expected August jobs report and the solid summer data more generally."
  • The U.S. added 1.37 million jobs in August, higher than an expected addition of 1.35 million jobs.
  • The bank said data is pointing to higher real spending in August, another factor prompting its GDP upgrade. 
  • Bloomberg economists are expecting U.S. GDP to be 21% in Q3. 
  • View more here
Unemployment Line - Graphic
The Good

  • The nation added 661,000 jobs and the unemployment rate declined to 7.9% even as the Census Bureau shed 34,000 temporary jobs.
  • The sales of previously owned housing rose to an annualized, seasonally adjusted 6,000,000 units in August, the fastest pace since December 2006.
  • Purchasing management indices (PMI) for both ISM’s national survey and Creighton’s Mid-America indicate healthy manufacturing growth.
  • Amazon announced it would open 1,500 small warehouses in the nation’s suburbs.
Increasing Gas Prices
The Bad

  • Core retail sales fell 0.1% in August. Higher gas prices pushed overall retail sales up 0.6%.
  • The U.S. trade deficit for August climbed 3.5%.
  • The U.S. budget deficit hit an all-time high of $3 trillion for the first 11 months of fiscal 2020.
Keep An Eye On

U.S. BEA’s 3rd Quarter GDP report.  On October 29, just in time for the presidential elections, the Bureau of Economic Analysis will release it third quarter GDP numbers. Expect 15% annualized and seasonally adjusted gain which will be good for Trump’s re-election.

ISM’s Creighton’s Mid-America PMIs. On November 2, ISM and Creighton release manufacturing survey results for October. Expect healthy values from both.

Creighton’s Rural Mainstreet report. On November 19, Creighton releases its November survey of bank CEOs in rural areas of 10 states in the Rocky Mountains and Plains states.
Ernest Goss, Ph.D. 
Email: [email protected]