By James Pethokoukis

With his proposed $2.3 trillion American Jobs Plan, President Biden promises to “reimagine and rebuild a new economy.” Hmm. That kind of, shall we say, “ambitious” talk from politicians always makes me think of the economist and philosopher Friedrich Hayek — this quote of his in particular: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” Or as I recently wrote in The Week:

[Reimagining the US economy is] a tall order, even if you intend to spend a couple trillion dollars trying over the next eight years. The current American economy is a technologically advanced, $21 trillion behemoth. And most of it isn’t the government doing stuff but rather the ordinary business of life created by gazillions of daily decisions made by all of us. Politicians, whether in Washington or in statehouses around the nation, should remember that.

Certainly, one should think hard about the state of the “old economy” that existed before the Great Pandemic before embarking upon an expensive journey of reimagination and rebuilding. How, for instance, were American workers doing way back in 2019? It’s an important question because work itself is important. As the new issue of The Economist neatly puts it:

Labour markets are important not just because they allow people to earn enough to put food on their tables. People’s jobs are perhaps the biggest single constituent of their identity. They shape their politics. It is grim to be out of work if you want it, or to be stuck in a job you hate. High unemployment is linked with higher crime and worse health. . . . That makes it fortunate that the world of work before the pandemic struck was actually quite successful.

That last bit might surprise people fed a steady diet of news analysis about inequality, wage stagnation, looming technological unemployment, and the overall precarious nature of modern working life. But this obsession with a “late capitalism” narrative is at odds with the evidence of the state of the pre-pandemic American economy.

It’s a pretty terrific tale of the tape, actually: The US unemployment rate averaged 3.8 percent from the start of 2018 through February 2020, a streak not seen since the boomy late 1960s. And that tight job market drove wages higher, especially for lower-pay workers. No wonder 65 percent of American workers told Gallup in 2019 that they were “completely satisfied” with their jobs, a response averaging 63 percent from 2016 through 2019 vs. 53 percent over the previous 10 years. So not a single-year blip. That Economist piece also highlights 2020 research that shows “in the US, UK and Germany, there is no trend towards increased subjective measures of job security,” countering the claim that the supposedly insecure nature of modern work has created a “precariat” labor force. Even long-lagging productivity showed some life in 2019, registering its fastest rate of increase since 2010.

This isn’t an argument for the status quo, though certainly it is for the wonder-working power of tight labor markets and long expansions. But Washington policymakers should proceed cautiously, taking into account that (a) the US economy has real fundamental strengths that were evident in 2019 and are worth building upon going forward, and (b) the limits of their own capabilities and understanding.

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