[Vision2020] The Myth of Job Creation

[Art Deco]

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October 21, 2012
The Myth of Job Creation

The headlines from the last presidential debate focused on President Obama
challenging Mitt Romney on issue after issue. There was a less noticed, but
no less remarkable, moment when Mr. Obama agreed with Mr. Romney on
something — and both were entirely wrong.

The exchange began with a question about the offshoring of American jobs.
Part of Mr. Obama’s answer was that federal investments in education,
science and research would help to ensure that companies invest and hire in
the United States. Mr. Romney interrupted. “Government does not create
jobs,” he said. “Government does not create jobs.”

It was a decidedly crabbed response to a seemingly uncontroversial
observation, and yet Mr. Obama took the bait. He said his political
opponents had long harped on “this notion that I think government creates
jobs, that that somehow is the answer. That’s not what I believe.” He went
on to praise free enterprise and to say that government’s role is to create
the conditions for everyone to have a fair shot at success.

So, they agree. Government does not create jobs.

Except that it does, millions of them — including teachers, police
officers, firefighters, soldiers, sailors, astronauts, epidemiologists,
antiterrorism agents, park rangers, diplomats, governors (Mr. Romney’s old
job) and congressmen (like Paul Ryan).

First, the basics. At last count, government at all levels — federal, state
and local — employed 22 million Americans, with the largest segment working
in public education. Is that too many? No. Since the late 1980s, the number
of public-sector workers has averaged about 7.3 for every 100 people. With
the loss of 569,000 government jobs since June 2009, that ratio now stands
at about 7 per 100.

Public-sector job loss means trouble for everyone. Government jobs are
crucial to education, public health and safety, environmental protection,
defense, homeland security and myriad other functions that the private
sector cannot fulfill. They are also critical for private-sector job growth
in two fundamental ways. First, the government gets its supplies from
private-sector companies, which is why Republican senators like John McCain
have been frantically warning about the dire effects on job creation if
Congress moves ahead with planned military spending cuts. (Republicans
insisted upon the cuts as part of their ill-advised showdown over the debt
ceiling.) Second, government spending on supplies and salaries reverberates
strongly through the economy, increasing demand and with it, employment.

That means the economy suffers when government cuts back. A
report<http://www.epi.org/blog/years-recovery-state-local-austerity-hurt/>by
the Economic Policy Institute examined the effect of recent cutbacks
at
the state and local level — including direct loss of government jobs and
indirect loss of suppliers’ jobs; the jobs that should have been added to
keep up with population growth; and the reduction in purchasing power from
other cutbacks. If not for state and local budget austerity, the report
found, the economy would have 2.3 million more jobs today, half of which
would be in the private sector.

The government does not create jobs? It most certainly does. And at this
time of state budgetary hardship, a dose of federal fiscal aid to states
and localities could create more jobs, in both the public and private
sectors.




-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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