The Government Creates Jobs

October 22nd, 2012 at 8:11 pm

There are a few things politicians of all stripes say that should drive you as nuts as they drive me.  One I’ve been inveighing against since OTE was born is the bass akwards formulation: “just like families, the federal government must tighten its belt in hard times” (the subject of one of my first posts).  This one’s particularly invidious both because it makes folksy sense and because it’s precisely because families are tightening that the public sector, specifically to federal gov’t, needs to loosen.

But challenging that damaging aphorism for first place is this common point of agreement between politicians as diverse as Obama and Romney: the government doesn’t create jobs.

That’s not just patent nonsense.  It’s economically damaging in lots of ways.

Every month the jobs report prints the numbers showing that this assertion is off by, at last count, 22 million or 16% of total payrolls:

Government Jobs in Sept 2012:

Federal: 3 million
State: 5 million
Local: 14 million
                Local Education: 8 million

Source: BLS Sept Jobs Report

Yet, as this spot-on editorial from the NYT reports this morning, in the last debate, both candidates tripped over each other to deny that government creates jobs.*

I get that Gov Romney lives in a world where facts are mere inconveniences, but the President, very righteously IMHO—these jobs are often essential to our communities—goes around the nation pointing out that we need to staunch the layoffs of teachers, police, maintenance workers, and other members of the government workforce.  So, “the government doesn’t create jobs”—but we need more of them.

The global point here is that it’s actually very bad economics to enshrine the private sector as the place from which all good things flow and conversely, the public sector as the evil one incarnate.  The last few recessions—the bubble/bust ones—originated in private sector excesses, facilitated by vastly inadequate public sector oversight, which was itself borne by fetishistic, Greenspanian adoration of private over public, including the myth that the financial sector would self-regulate.

Unless we shed such ideological blinders, we’ll continue to make the same mistakes.  In fact, this dynamic—vilification of the public sector; deification of the private—is in no small part behind the shampoo economy of the last few decades (bubble, bust…repeat).  It’s also a great source of confusion to claim that 22 million jobs are a figment of our collective imagination.

Again, I’m used to the Republicans’ flights from reality.  D’s really shouldn’t go there with them.

*The NYT editorial cites this same study I posted on months ago by EPI measuring the private sector multiplier of public sector jobs.  It’s not just that, of course, the public sector creates jobs.  It’s that those jobs have positive spillovers into the private sector.

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7 comments in reply to "The Government Creates Jobs"

  1. Tom says:

    What about government contracting. I worked as a contractor on the space program for almost 40 years. Did the government not finance the space program?
    how many companies made millions off the space program, again, all being financed by the federal government. Anyone who says the government does not create jobs has no clue to what they are talking about.

  2. foosion says:

    I’d just like to express my complete agreement with this post.

    To me, “just like families, the federal government must tighten its belt in hard times” was likely the low point of the Obama administration in terms of policy. It shows a major misunderstanding of economics, pandering to the uninformed prejudices of the public, the adoption of a Republican talking point and the reason our economy is doing as badly as it is today.

    The notion that government jobs aren’t real jobs is absurd on its face. Government is teachers, police and firefighters. Faceless bureaucrats and DMV workers is rounding error. This people perform valuable services and spend money, supporting other sectors of the economy.

    How can Obama not understand any of this? (Not a rhetorical question – you were there.) From published reports, the kindest version is his view of political feasibility.

  3. JohnR says:

    Very nice – especially “shampoo economy”! Did you come up with that one yourself, because I prefer to steal from the original source whenever possible…

  4. Auros says:

    What I find most annoying is the Weaponized Keynesians. Apparently, in GOP-World, when the gov’t buys military hardware, that creates Good-Payin’ Jobs!(tm) But when the gov’t buys bridges, or power lines, or water pipes, or maintenance of our national parks, all the people involved in that kind of thing? They’re still unemployed. As are the people whose goods and services they spend their paychecks to employ.

    The only way I can explain it is that they’ve been affected by some Sith mind trick. These aren’t the jobs you’re looking for. Move along.

    • David Bowman says:

      Space program jobs, National parks jobs, roads and bridge construction jobs… These represent only a fraction of what is needed for a meaningful recovery. Romney is right Government can’t create enough jobs to phase the recession, Government can however create the economic environment that leads to jobs in the private sector. Rich guys with enough capital to expand or invest in their own, or others’ companies will take their ball and go home until such time that the waters are ready for upward economic direction. Same for average guys with an idea and lots of fortitude to succeed. They will just keep their day job because the risk is simply too high. I can’t figure out why so many people don’t have the ability to understand that. Maybe more understand than I give credit for. We will find out soon enough.

      • Auros says:

        In terms of creating conditions in which business can thrive, the fundamental problem right now isn’t regulation or uncertainty, it’s lack of demand. And gov’t doesn’t _need_ to hire EVERYONE in order to fix that problem — you hire the people you actually need to address current problems, and they go out and spend money, which means businesses see demand pick up, so they start investing and hiring again, and you get a virtuous cycle.

        Also, it’s worth noting that an “average guy with an idea” is _more_ likely to leave his day job and pursue it if doing so doesn’t mean that if he fails, his family starves and his kids don’t get to go to college. Oh, and he’s also more likely to leave his day job if he can get healthcare from some reasonable source other than a large employer. That’s why there are more businesses started, on an annualized and per-capita basis, in “socialist” Norway than in the US. ( )