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Feelin’ Fine

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.

17 comments

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  1. georgebalella says:

    So let me get this right. You are saying we SHOULD be laying off public workers and not hiring them… WE ARE saying doing THAT will cause the reecession to get worse. WE ARE … WE HAVE let 600K public workers go. We ARE doing what YOU recommend and the economy is getting worse and it is Obama’s fault??? For doing what YOU recommend? For doing or allowing this to happen unlike ANY other post WW2 recession I would expect you’d be praising Obama for finally.

    You said, “We are still in the slowest recovery since the Depression,” BINGO… ands this is the first time we’ve had so many public sector lay offs in a recession… CONNECT THE DOTS. Who’s ideology do these facts not fit? Because taxes are at an all time low, banking regulations are at an all ttime low, union membership is at an all time low, free trade is the rage, corporate profits are at an all time high, money is being recognized as “speech”, corporations are considered people… these are all things YOU would recommend. So now YOU have to be specific in explaining why our economy stilli is stalled and how more government firing and budget cutting will some how improve things?

    The economy runs on demand and part of that demand is middle class jobs and wages and part of it is government spending. Until these demand deficits are fixed…. things will not improve. Likewise any push further in the neoliberal economic direction will decidedly make things worse.

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  2. JimK says:

    Sometimes it’s like a comedy show. Not always, but sometimes a commenter comes along, and I genuinely laugh. This is one of those times.

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  3. Xetrov says:

    You said, “We are still in the slowest recovery since the Depression,” BINGO… ands this is the first time we’ve had so many public sector lay offs in a recession… CONNECT THE DOTS.

    As someone in the old MW was fond of saying, there is a direct correlation between the Earth warming up, and the pirate population decreasing. CONNECT THE DOTS.

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  4. Hal_10000 says:

    george, we massively cut government in ’46 after the war and the economy boomed. Republicans refused to pass Bill Clinton’s “stimulus” bill in ’93 and the economy boomed. We engaged in monetary austerity in ’82 and the economy, after a severe hangover, boomed. Meanwhile, the Keynesians had the wheel continuously from ’61 to ’79 and drove us into a ditch. We had unending fiscal stimulus from ’29 to ’37 and the economy didn’t recover. Japan has two decades of massive stimulus spending and all they have to show for it is a huge pile of debt.

    I am sick and tired of it being taken as gospel that government spending stimulates the economy. I have yet to see a conclusive case for this.

    And even if that were not the case, you are completely missing the point: we are out of money. We can’t afford massive government, even if such busy work were desirable.

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  5. InsipiD says:

    So let me get this right. You are saying we SHOULD be laying off public workers and not hiring them…

    So what you’re saying is that we should employ people in government for their own good regardless of whether it benefits us at all? We should decrease the value of everyone’s pay to employ people just to employ them?

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  6. Dave D says:

    Have we determined that Georgie is NOT Muirgoo on meds?

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  7. georgebalella says:

    Hal,

    Point by point rebuttal;

    - “george, we massively cut government in ’46 ……” Yeah AFTER the economy was booming NOT during the recession….. we DID cut in 1937 and the GDP fell and we LOST jobs….

    - “Republicans refused to pass Bill Clinton’s “stimulus” bill in ’93 and the economy boomed. ” Approxiamtely 500,000 government jobs were added in Clintons 1st two years and taxes were RAISED not cut. http://1.bp.blogspot.com/-bTXF-FPkIfs/TwfMOwdzUsI/AAAAAAAAQqU/8mOKPtFumGw/s1600/govjobs.jpg

    - ” We engaged in monetary austerity in ’82 and the economy, after a severe hangover, boomed. ”
    We had lost 2 million jobs by the end of 82 and then we started hiring more government workers in 83 and 84 and the total jobs numbers increased…. not sure how much “austerity there was. You got any numbers?

    http://1.bp.blogspot.com/-bTXF-FPkIfs/TwfMOwdzUsI/AAAAAAAAQqU/8mOKPtFumGw/s1600/govjobs.jpg

    - ” Meanwhile, the Keynesians had the wheel continuously from ’61 to ’79 …. ” I’m pretty sure we had a republican president from Jan of 1969 to Jan of 1977…. But it’s all Carters fault? When Carter handed things over to Reagan we were GAINING 100 or 200,000 jobs a month NOT losing 800,000 a month. Don’t pretend these are comparable recessions/

    -” We had unending fiscal stimulus from ’29 to ’37 and the economy didn’t recover. ”

    I am sick and tired of it being taken as gospel that government spending stimulates the economy. I have yet to see a conclusive case for this.

    And even if that were not the case, you are completely missing the point: we are out of money. We can’t afford massive government, even if such busy work were desirable.

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  8. Hal_10000 says:

    George, to make discussions easier, blockquote is your friend:

    - ” Meanwhile, the Keynesians had the wheel continuously from ’61 to ’79 …. ” I’m pretty sure we had a republican president from Jan of 1969 to Jan of 1977…. But it’s all Carters fault? When Carter handed things over to Reagan we were GAINING 100 or 200,000 jobs a month NOT losing 800,000 a month. Don’t pretend these are comparable recessions/

    Uh, did you forget when Nixon said, “we are all Keynesians now?” Keynesianism was dominant in his administration, as you can tell from the inflation and spending numbers.

    Yeah AFTER the economy was booming NOT during the recession….. we DID cut in 1937 and the GDP fell and we LOST jobs

    Point (1), the economy was not booming during WW2. Just ask anyone who dealt with rationing and shortages. The economy appears to boom during a war because unemployment is zero (thanks to the draft) and numbers march upward. But that money is being spent on bombs and tanks, not improving the lives of citizens. Point (2) is the one data point the Keynesians always haul out. 1937! 1937! That was after eight God-damned years of stimulus spending and millions of hires through federal makework programs. Isn’t the stimulus supposed to, at some point, work? Or do we have to keep stimulating forever?

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  9. georgebalella says:

    Uh, did you forget when Nixon said, “we are all Keynesians now?” Keynesianism was dominant in his administration, as you can tell from the inflation and spending numbers.

    OK so now you make a discussion switch from party to policy… I am actually good with that because I couldn’t care less which party puts forth good policy. But when you want to blame everything on democrats right now realize most of their legislation was never voted on thanks to record filibustering and that which passed was watered down. The stimulus included only 450 million of new spending NOT more like 1 trillion some would recommend, again we cut public jobs by 600 K, the tax rates are at an all time low, the health care bill had NO public option, no significant finance or banking reform has passed ect ect… this is NOT a dmeocratic policiy regime.

    And what about Nixons regime was more keynsian then the post FDR regime? How do you explain the post FDR boom with even MORE Keynsian policies than anything during the nixon era? See there is much factual inconsitency with your position Hal. Basically, any bad economy you’ll attribute to democratic policy and any good economy you attribute to free market policy. What Hal was are best economy in the 20 th centurty? What decades??? What was our worst??? We’ve clearly had three major policy regimes since 1900. The Laissez faire first 30 years leading to the Great Depression, the FDR and post FDR democratic policy leading to 50 years of shared prosperity and the Reagan/ Thatcher economy that we now find ourselves in dominated by corporate policy.

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  10. georgebalella says:

    oint (1), the economy was not booming during WW2. Just ask anyone who dealt with rationing and shortages. The economy appears to boom during a war because unemployment is zero (thanks to the draft) and numbers march upward. But that money is being spent on bombs and tanks, not improving the lives of citizens. Point (2) is the one data point the Keynesians always haul out. 1937! 1937! That was after eight God-damned years of stimulus spending and millions of hires through federal makework programs. Isn’t the stimulus supposed to, at some point, work? Or do we have to keep stimulating forever?

    Now Hal you are just re-writting history or ignoring the facts. The economy wasn’t booming right after 4 years of Hoover and the republican lead great depression because it was SO massively destroyed. To expect it to have recoverd in a couple of years is ridiculous. Yet indeed we saw > 10% GDP in some years and massive improvements in the unemployment numbers right from the start of FDR’s first administration.

    How high did you expect the GDP numbers to be???

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  11. Dick Fitzwell says:

    The economy wasn’t booming right after 4 years of Hoover and the republican lead great depression because it was SO massively destroyed.

    That’s exactly the point. Hoover’s timid Keynesianism set a bad example for FDR to take and run with. That spending kept us mired in a depression for years. Don’t forget the tax rate hike in 1932.

    Love your graph. C+G+I+(X-M)=GDP. Naturally, a feeble minded individual who believes that the GDP is the best measure of the state of the economy would decry government spending. You believe that gov’t spending (G), since it adds to GDP, must be a boon to the economy. Preposterous! Bring on a $20 trillion stimulus! That will make us all rich!

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  12. georgebalella says:

    Ok Dick think about what you just wrote,

    Hoover’s timid Keynesianism set a bad example for FDR to take and run with.

    Does that fit with the facts of what happened with the economy under Hoover and FDR? NO… not at all… It amazes me how you guys can just re-arrange the facts to fits your narratives when your own explainations do not make a lick of sense.

    Likewise Dick you suggest that GDP is a poor measure the state of the economy suggesting you’ve thought this through and thus have a better measure. Please , do tell what is that measure?

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  13. CM says:

    Uh, did you forget when Nixon said, “we are all Keynesians now?” Keynesianism was dominant in his administration, as you can tell from the inflation and spending numbers.

    Romey is likely to get more Keynesian stuff through than Obama has for the past couple of years, simply because the Republicans won’t obstruct. Or do you disagree?

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  14. Hal_10000 says:

    Romey is likely to get more Keynesian stuff through than Obama has for the past couple of years, simply because the Republicans won’t obstruct. Or do you disagree?

    I don’t disagree at all. I think Romney is likely to engage in more stimulus, as ill-advised as that may be.

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  15. CM says:

    I don’t disagree at all. I think Romney is likely to engage in more stimulus, as ill-advised as that may be.

    Where are the economists advising him/them on another theory? By all accounts McCain’s economists were saying the same thing as Obama’s back in 2008 too.

    As someone in the old MW was fond of saying, there is a direct correlation between the Earth warming up, and the pirate population decreasing. CONNECT THE DOTS.

    Europe is realising that you can’t have austerity AND growth. How are they NOT connected?
    How can layoffs NOT be connected to slow growth? Layoffs mean less jobs, less money that people can spend. Are you really trying to say that the ability of people to spend money is in no way related to economic growth??

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  16. Dick Fitzwell says:

    George–

    Which facts have been rearranged? You seem to think that gov’t spending is some magical cure-all solution for an ill economy. Would it be good if the gov’t hired 100 people to dig ditches and another 100 to go behind them and fill the ditches in? If all else remains static you would see a boost in GDP, wouldn’t you? Must be a good thing, right?

    I know this is falling on deaf ears but I’ll post it anyway.

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  17. Xetrov says:

    Europe is realising that you can’t have austerity AND growth. How are they NOT connected?
    How can layoffs NOT be connected to slow growth? Layoffs mean less jobs, less money that people can spend. Are you really trying to say that the ability of people to spend money is in no way related to economic growth??

    He said the economic recovery is slow BECAUSE of the state-sponsored layoffs. No other reason given. Are you really trying to say that the decrease in Pirates is directly responsible for Global Warming?? Stop trying to put words in my keyboard, I’m not your enemy.

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