COVID-19 restrictions have been bad for Minnesota’s economy despite historic surplus

Minnesota’s record-breaking budget surplus has induced mixed reactions from state leaders. But among those celebrating the surplus as a testament to our growing economy and effective handling of COVID-19 is Gov. Tim Walz. As reported by the Duluth News Tribune,

Gov. Tim Walz and Democratic legislative leaders on Tuesday celebrated the surplus and said it stood as a testament to the state’s successful response in managing the COVID-19 pandemic. And they urged lawmakers to use the money to add additional supports for workers and families in the upcoming session like paid family medical leave and additional funds for child care.

“It’s crystal clear our economy is strong and growing,” Walz said, noting that his administration’s actions to quell the spread of the coronavirus hadn’t stalled out the economy. “I made it very clear early on that … was a false choice that you could do those things and protect and grow the economy and today’s numbers support that.”

Certainly, the budget surplus is good news for the state government. However, it hides the economic pain that has been imposed on Minnesotans for most of 2020 and 2021, and therefore should not be taken as a sign that restrictions did not affect our economy.

As American Experiment research has shown, the big reason tax revenue collections haven’t been affected by the pandemic is because high-income individuals –– who pay the majority of taxes –– did not suffer significantly from the pandemic. Instead, job losses and income losses have been concentrated among low-skilled workers, especially those in the hospitality industry, which was heavily targeted by lockdowns.

Not to mention that during the pandemic, most individuals got an influx of cash due to federal stimulus, as well as expanded unemployment insurance. These are partly to account for increased spending, hence high sales tax revenues –– and to some extent corporate taxes.

To see how Minnesota’s economy has been affected by his COVID-19 measures, Walz needs to look at the evidence pointing to massive job losses and record business closures, especially in the hospitality industry.