All political eyes focus on the economy; they should instead look at government. The reason is that, if left alone, the economy does quite well. Yet government rarely leaves it alone or in better shape than it found it.
Last Friday’s employment report (based on BLS’s survey of employers) was notable for its blandness. As BLS’s report stated: “Both nonfarm payroll employment (+29,000) and the unemployment rate (4.2 percent) changed little in September…Employment in all major industries changed little over the month.” “Little changed” applied to other employment variables: long-term unemployment, labor force participation, and those employed part-time for economic reasons.
The “little changed” is notable because recent economic data has been pretty solid. Although last month’s employer survey showed only an increase of 46,000 private sector jobs, a survey of households found 400,000 jobs added; what’s more, since July there have been 1.1 million new entrants into America’s workforce.
In Q2, the economy grew at a real rate of 2.2 percent; this followed 2.5 percent growth in Q1, and 2.1 percent in 2025.
Last week, American companies reported September’s job cuts were the fewest since 2022 and unemployment benefit applications were the lowest since July. And while manufacturing grew slightly slower, it still grew, continuing a nine-month expansion — its longest run since 2022. Even the inflation bugbear, while not hibernating, moved more slowly. August data showed core CPI rising 0.3 percent monthly and at a 2.4 percent annual rate (lowest since March 2021), while core PCE, the Fed’s go-to gauge, rose 0.2 percent monthly and 3 percent year-over-year.
On top of this, comes new AI technology that promises untold future productivity leaps (which spur real standard of living increases) and is already delivering trillions in new investments, an estimated $9 trillion to $10.3 trillion through 2032.
Of course, these economic indicators are mere whispers compared to the breathless shouts emanating from the political sphere. In the political sphere, “affordability” is all the rage, and all the politicians are suitably outraged over it — or rather, the lack thereof. In the political sphere, data centers and AI are the scourges of today.
That the economy in general is the biggest routine political factor is not surprising. Its performance affects everyone. The perfect political promise still applies: Peace and prosperity.
This juxtaposition between what is actually happening and potentially approaching in the economic sphere and what is being voiced in the political sphere is more than just a sharp contrast. It should also be a constant reminder: While the economic sphere is a primary driver of political outcomes, the political sphere is a primary inhibitor of economic outcomes — at least favorable ones.
Don’t believe it? Just run through today’s biggest economic headlines.
The biggest economic worry since March 2021 has been inflation. That’s five and a half years; it’s also not a fault of the economy, but a drag on it. Inflation is the result of too much money chasing too few goods. To paraphrase Milton Friedman: Persistent inflation is always and everywhere a monetary phenomenon. And who is responsible for the supply of money? As Ludwig von Mises observes, “politicians,” who “are helpless in the face of the crisis they have conjured up.” In the United States, it is the Federal Reserve in particular that is responsible for the money supply, a government institution created in 1913.
Speaking of too much money chasing things, another major headline is federal spending. Already too high in 2019, it leapt almost 50 percent during COVID in 2020 and never retrenched to pre-crisis levels. The result? Deficits routinely over $1.6 trillion annually. If government borrows to cover it, its increased borrowing drives up interest rates, and increased debt results in higher future debt service costs — and more government spending. If government raises taxes to cover it, then this drains resources from the more productive private sector.
In common parlance, federal spending is out of control and has been for some time. It obviously is also a purely government and political issue. The U.S. has piled deficits on deficit for three decades. Even as fraud has continued unabated — estimated at between $233 billion and $521 billion by GAO and undoubtedly higher.
What’s the biggest price concern in today’s headlines? Gas. Yes, it’s high (though in inflation-adjusted dollars, not as high in real terms as it seems). Why is it high? It’s not due to anything that the economy has done, such as massive fallout from bad investments or economic miscalculations. Gas is high because Iran’s terrorist government has constricted oil’s flow through the Strait of Hormuz, and its terrorist Houthi allies have done the same with the Bab el-Mandeb Strait.
High gas is indeed an economic problem, raising the cost of everything that uses it, but its cause is purely due to government actions — even if foreign governments’.
Government is similarly the cause of the economic problems arising from overregulation and private sector mandates — a primary reason for the millions migrating from states where these are highest to states where they are lowest.
In 1992, Clinton’s presidential campaign summed up their strategy and the economy’s political power: It’s the economy, Stupid. It worked. Yet it told only half the story. A weak economy was the political driver, but government was its cause: Bush broke a promise to not raise taxes, then taxes hurt the economy.
The other half of the explanation — then and now — would be: “It’s the government, Stupid” …Or most aptly and most often, “It’s the stupid government.”
J.T. Young is the author of the recent book, Unprecedented Assault: How Big Government Unleashed America’s Socialist Left, from RealClear Publishing. Follow him on Substack.