The national economy is on the verge of recession. Inflation is at a 40-year high and continues to be a major concern for the economy. Out-of-control spending, which is a leading cause of inflation, has been the hallmark of President Joe Biden’s administration, which has added $5 trillion in new budget deficits. When President Biden assumed office, the national debt was $27 trillion, whereas the debt currently stands at $31 trillion and growing.
With high inflation, continued supply-chain disruptions, and excessive spending, the economy may be headed toward recession. Thankfully, as a result of prudent budgeting and fiscal conservatism, Iowa is prepared to weather a national recession.
Even so, the growing concern over the national economy affects Iowa. Iowa has a diverse economy, but the state is also greatly influenced by commodity prices. Economist Ernie Goss, director of Creighton University’s Economic Forecasting Group, recently identified a growing concern for many in the region: the need for qualified workers. Iowa’s unemployment rate continues to be low, but the challenge of hiring more workers is real.
The Federal Reserve is attempting to fight inflation by raising interest rates, but continued government spending and poorly considered policies such as the Biden administration’s approach to the energy industry are driving the economy down. Foreign economic instabilities also threaten the nation’s wellbeing.
Although Iowa’s economy will not be immune to a national recession or other outside pressures, the fiscal condition of the state is solid. Since assuming office, Governor Kim Reynolds and the legislature have made a commitment to prudent budgeting and conservative fiscal policies.
Consequently, Iowa’s economy was able to withstand the “black swan” economic downturn caused by the COVID-19 pandemic. During the pandemic, Governor Reynolds kept the economy open responsibly, and the legislature kept spending under control. Iowa’s economy came out of the pandemic much stronger than many other states.
Since 2018, Governor Reynolds and the legislature have also enacted prudent tax reforms. This year, the legislature passed the most extensive tax-reform measure in state history. A low flat income tax rate of 3.9 percent will phase in by 2026, and the corporate income tax will be gradually reduced until it reaches 5.5 percent.
Because these tax reforms were balanced with prudent budgeting, Iowa has a $1.9 billion surplus for fiscal year 2022, which is larger than the prior year’s surplus. Iowa also has $830 million in reserve funds, which is the statutory limit. Finally, the Taxpayer Relief Fund has a $1.6 billion balance, which is projected to increase to $2.6 billion in fiscal year 2023.
Regulatory reform measures from Governor Reynolds and the legislature will strengthen the economy. A recent occupational-licensing reform law will eliminate barriers for those seeking career opportunities. Our elected officials will continue to advance pro-growth tax and regulatory reforms in the upcoming legislative session.
The combination of prudent budgeting, lower tax rates, and eased regulations is creating a stronger, more-competitive economic climate that will attract new people and jobs to Iowa. In short, Iowa’s fiscal house is resting on a strong foundation as a result of fiscally conservative policies, and the state will be able to withstand a national recession.