OK. So yesterday, Obama said this in an economy speech. I’ll give the entire quote so you don’t think it’s out of context:
We’ve created 4.3 million jobs over the past 27 months. The private sector is doing fine. Where we’re seeing problems is with state and local government, often with cuts initiated by governors or mayors who are not getting the kind of help they’re accustomed to from the federal government.
(Aside before I get into this. That’s a pace of 159,000 jobs a month. That’s decent, but barely above population growth. We are still in the slowest recovery since the Depression, no matter how much you manipulate the stats.)
As you would expect, the Right Wing is jumping all over the statement that the private sector is doing fine while various left-wingers try to defend it. The problem is that it’s not the dumbest thing in that sentence. The second half — about the loss of government jobs — is the more disconcerting phrase. Ezra Klein, linked above, explains the numbers and thinking behind the statement:
Since Obama was elected, the public sector has lost about 600,000 jobs. If you put those jobs back, the unemployment rate would be 7.8 percent.
But what if we did more than that? At this point in George W. Bush’s administration, public-sector employment had grown by 3.7 percent. That would be equal to a bit over 800,000 jobs today. If you add those hypothetical jobs, the unemployment rate falls to 7.3 percent.
Both of those numbers, it should be said, are holding all else equal: If more workers had reentered the labor force, the unemployment rate could be higher. And if there were 1.4 million more Americans with jobs, they’d be spending money and creating jobs for other people. So private-sector employment could be higher, too.
Barack Obama continues to push “jobs” legislation that would, in effect, shovel money to the states to encourage them to hire. And according to people like Klein, this would bring the unemployment rate down at least a full point. But I find this thinking dangerous and misinformed for three reasons:
First, as I have sad many times, you should not be using George W. Bush as your standard. The point of the 2000’s was that government grew way too fast and became far too large and bloated. It was a bubble as much as housing was. The contraction in the public sector is necessary; it’s the result of a bubble popping. You do not respond to this by re-inflating the bubble. You do not “help” states that have just gotten their fiscal house in order by giving them money to hire new workers and create massive future obligations.
That’s the thing people forget about stimulus: it becomes part of the baseline. Today’s “shovel ready project” is tomorrow’s continuing support. Today’s hire is tomorrow’s retiree. With states already groaning under the burden of employee benefits, a wave of new hires is not what they need.
Second, the idea that hiring government workers will stimulate the economy and even, in the words of Pelosi, “pay for itself”, requires assumptions even a Keynesian would blush at. Presently, the government collects 15% of GDP. That means you would need an economic multiplier of six for these things to pay off. That’s twice what even the most optimistic Keynesian imagines and almost six times what many economists believe.
Finally — and most importantly — government is not a jobs program. When government creates jobs, it is a side effect of government doing the things that we, the people, have decided government should do. And our goal should be to have government do those things with the minimum number of jobs. If it is using too many people to accomplish its goals, that is simply wasting money and wasting human potential on busy work. It is paying people to, effectively, dig holes and fill them up again.
The purpose of a police department is to enforce the law, not to “create jobs” for cops. The purpose of a fire department is to fight fires, not to “create jobs” for firefighters. The purpose of our military is to fight wars, not to “create jobs” for soldiers. Hell, we could drive the unemployment rate to zero by starting a war and drafting everyone. Does anyone think that’s a good idea? Then why is it a good idea to do it on a smaller scale? It’s fine that people can find careers in government, but that’s incidental to government doing what government does.
We need to stop thinking of government as some kind of gigantic jobs program. Creating jobs is not the purpose of government nor is it something government is particularly good at. It stinks that 600,000 people have lost their jobs. But what stinks more is having hired them in the first place when there was no long-term ability to retain them. And it would be a stench beyond measure to engage in yet another unsustainable wave of hiring.