Government in US continues historic contraction
UPDATE: This from the New York Times.
FOR the first time in 40 years, the government sector of the American economy has shrunk during the first three years of a presidential administration.
The latest job numbers out today show only a modest uptick in private sector employment, but they also give another indicator of the on-going, historic contraction in government work.
From April of last year to April of this year, the Bureau of Labor Statistics found that government at all levels shed another 215,000 jobs.
That continues a sort of stealth austerity movement that began in earnest as the Obama administration’s stimulus program — which provided massive subsidies to state and local agencies — began to phase out.
We’ve seen it reflected here in the North Country, as school districts, counties, and state agencies have implemented hiring freezes, left empty positions unfilled, and laid off hundreds of workers.
The trend has slowed in recent months, which suggests that the public sector may be stabilizing. This could reflect the fact that most state income tax revenues have finally recovered to levels approaching record highs in 2008.
But property tax revenues — which fund school districts — continue to lag and that may be reflected in continuing job cuts among teachers in the US. Layoffs among K-12 teachers took the largest hit within the public sector over the last year.
In most parts of the country, the downsizing of government may have slowed the recovery, but it doesn’t appear to have derailed it entirely. Yet in some pockets, the trend may be more damaging.
While most states saw employment expand significantly in the last year, Wisconsin lost a net total of 23,900 jobs and the vast majority of them — 17,800 — were cut from government agencies.
That’s not exactly priming the pump.
One question going forward is whether the national debate over stimulus vs. austerity might not be a little too simplistic. Perhaps most of the country is recovering, albeit too slowly, without a new wave of government hiring or spending.
But there might be some parts of the US — Florida, Nevada, North Carolina, Wisconsin — where some economic caffeine is still needed.
There are also many pockets within states that are lagging badly, from inner city neighborhoods, to rural small towns — and those areas have been stung particularly badly by government layoffs.
What do you think? Is it a good thing overall that our government is getting smaller? Should there be another stimulus? How about a targeted stimulus plan that identifies parts of the country that need a boost? As always, comments welcome.
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Given that fact I would say go ahead and borrow more now. It might do some good. If you are very conservative you would like this idea, once borrowing costs become so high that they swamp out all other government spending, the power and scope of government are done, they only exist to collect taxes to pay the debt. Right now I think 16-18% of all of our taxes go to interest on the debt. Take that to 50-60% and there is not much money left to do foolish things like invade other country’s. Running an out of control deficit is actually a way to neuter future government’s from doing much of anything.
hermit: I’m standing by my non-tax-cutting Obama statement.
It may be a matter of what you define as a tax cut. I define it as the private sector working not giving his or her money to the government.
I see something about a $400 tax credit. Not the same. That’s taking someone else’s $400 and giving to some one else. #4 way of spending. The worst kind. And it’s not a tax cut.
“I would go farther, we don’t have the ability to really cut the debt on our own volition, to do that we would have to raise taxes AND decrease spending, we won’t ever do that of our own accord.”
No. You can increase revenue by increasing business activity. Collecting more money because of more business activity or adding more tax payers is a solution that does not require tax increases or require the cutting of spending.
wrong again, jdm. about everything.
i’ll explain why below, but i actually hope no one bothers to read it. a much better use of everyone’s time is to skip over everything jdm-related and go read krugman’s blog or go for a walk or clean your bathroom or whatever. all you learn from jdm is how untethered to reality some tea partiers can be.
now down to business. first, from jdm’s 10:40 comment:
no.
well, i mean, who knows what point you really were or weren’t after, but the point you’re making at 10:40 pm (about the efficiency of different kinds of spending) is totally not the point you were making in the comment i dinged you for, at 10:50 am (which is that government stimulus via spending isn’t possible).
if the government wasn’t able to borrow, then i would agree with your 10:50 argument. but of course the government can borrow, and that’s precisely why your argument falls on its face.
so i didn’t bring up the borrowing point to nitpick, i brought it up to show that your entire comment was misguided, and in service of my argument that debt-financed government stimulus spending is exactly what we need.
oh, and it’s such a howler that it also nicely demonstrates why no one should pay you any credibility.
second, you, um, sure have an interesting way of thinking about tax cuts at 10:51 pm. here’s pro-publica’s breakdown of tax cuts in the stimulus. looks like there are a lot of provisions there that would result in private sector entities giving less money to the government. tellingly, the page is even titled “The Stimulus Plan: The Tax Cuts.”
only on planet jdm is a tax cut not a tax cut.
zeke: Be real! What can you find that is American made? Walmart is the largest retailer in the world! Tell me you and other people don’t do a vast majority of your shopping there. True your not buying American made but Walmart has no choice when stocking their shelves!
zeke: I just tired of this false “prime the pump” propaganda! In 1969 I work for a frabricating company in Oswego. I made a very good wage. One project I remember was a conveyor system for GE. The system coated the insides of color picture tubes for TV’s. When completed the unit went to the Syracuse area to be used in a local plant. Now when people purchased a GE color TV just think of how many jobs and people in THIS country benefited! That my friend is priming the pump!
Gary, I don’t do a vast majority of my shopping at Walmart. Other than food, personal hygine products, gasoline and a few items for a recreational hobby I don’t buy much of anything. I certainly would never buy food at WalMart. I do believe if people have money they will spend it. Sometimes that is good sometimes it is not. I also believe if people do not have any money they will not spend any money.
hermit: I suppose you read the links that you provided.
They are almost all (I say “almost” in case I missed something), one-time kick backs for certain types of purchasing behavior.
In other words, they have already expired.
Here’s a good one: “First time home buyers who bought between April 2008 and June 2009 get a “tax credit” which they must pay back over the next 15 years.”
I guess you missed the fine print, hermit.
I would categorize almost all of the tax credits in the link to be targeted political tactics, rather than real economic stimulus.
Call it a “tax cut” if you want, it misses the overall economic stimulus effect of a true, across-the-board, keep your income, tax cut.
They’re all gimmicks. And I believe almost all are long since expired.
Here’s another one under small business capital gains:
“The provision allows a 75% exclusion for individuals on the gain from the sale of certain small business stock held for more than five years. This change is for stock issued after the date of enactment and before Jan. 1, 2011.”
Wow. That must have helped 23 people. And it’s already too late if you missed it.
This one has gone on and on. It seems to me that there are times (like now) when we should borrow money to stimulate the economy, and there are times (like during the fat Clinton and early Bush years) when we should be paying down the debt so we could be ready for the next down turn. that’s the Keynesian model. The new conservative model is to pump up the economy in fat times and cut way back when things go wrong. that’s the old boom and bust system on steroids. The only advantage of the boom and bust system is that if you make a bundle during the boom years and get out at the top…..
The main problem with contraction in government employees is that not enough of the contraction is taking place at the high end instead of the low end. I include teachers at the low end and the State Education Department at the high end.
Also, comparing the pay of teachers and Sheriffs to State Troopers, the pay scale is out of whack.
The entire Criminal Justice System seems to be in favor of a less educated public so that it can arrest more people and fill the jails, and thus argue they are needed more than ever to save us from ourselves.
Wait, this happened not under Saints Reagan or Bush II but under a “socialist”? I’m so confuseddddd.
The only reason that the employment figures are bad is that thw government is laying off employees. This was unnecessary. We need more teachers rather than less. There are lots of roads and bridges that need to be repaired. We can pay down the debt laager when times are good (as they will be).
Gee, how’d I miss this one.
One comment, made several times before re govt.
What would you say about the prospects of a national economy that increased govt. borrowing by 10 X in three years, increased taxes by a like amount, compelled most of it’s working age male population into government service, and utilized these workers to build, then destroy projects made from the nation’s supply of precious national resources?
In this case, the nation was the United States between 1940 and 45, and the immediate result was the elimination of virtually all unemployment and a huge jump in corporate profits: the long- result was 35 years of virtually unbroken prosperity.
We could recreate this effort, with less borrowing and no killing, on infrastructure and sustainable environment projects, were we the people we used to be.
Anyone who does not believe that government cannot substantially improve the economy (as well as substantially screw it up if poorly done), probably likely also believes that the earth is the center of the solar system, climate change is a myth, and that if you wish upon a star, your dreams will come true.
The interesting part of the WWII plan is that we HAVE been fighting two wars for 10 years and we have borrowed all of the money to fight those wars.
The government simply transfers resources from one place to another, in the case of massive borrowing it is moving resources from the future to now, which you can make a case for in hard times like we are having.
The question is how much can we do and for how long? After wwII business had confidence in the future and spent accordingly, government can indeed help, but the actual economy is driven by the private market at its core. 2/3 of our spending is from consumers making decisions to buy things, if they don’t feel confident in the future they won’t buy things and businesses won’t hire people to make things.
Sure we could move to a socialist model but they have not been overly successful either, not in the long run.
There is no magic bullet, there is no one answer, sometimes things just stink. No country or government has ever defeated the ups and downs of the cyclical economy. We all argue about these presidential candidates like they can make this huge difference in the economy, they can’t.
“now down to business.”
hermit, if it so pointless to respond why do you keep doing it?
Save your strength we don’t need you to over-analyze JDM’s comments.
You both think you are right. You prefer a very hands on approach he prefers a very hands off approach we get it.
OwVN: In fact, I believe both, that the government cannot substantially help the economy and the earth is not the center of the universe.
I think the private sector is where the economy will be healed, and the government serves best when it stays as much out of the as is possible.
Paul: thanks for getting it I think you summarized it well.
The government I think can help the economy in the short run, just by borrowing money and spending it. However, “priming the pump” assumes you have a working pump. The whole point is that we use the government to get the private sector moving not we use the government as a permanent economic engine. Without a functioning confident private sector, nothing will work. I think we can look at our own communities to see that is true. Look at my County SLC, basically we are a government centered county, the engine of economic activity is government transfers into the county and within the county. We have had permanent structural unemployment of between 8- 10% for probably the past 10-15 years, and high rates of poverty. Without private economic activity everything stagnates, which is what we see happening and then when government does contract as it is now, you are in real trouble.
JDM-
Congratulations on being half-right. So you think that the dramatic and long-term recovery of the U.S. economy corresponding to the onset WWII of BIG, REALLY BIG GOVERNMENT tax-borrow-and-spending was a happy coincidence, I guess.
OwVM: I think WWII helped pull out of FDR’s depression.
from the continuing annals of jdm: wrong about everything…. compare this:
with what’s on the propublica page (bracketed comments and emphasis are mine):
so, surprise! jdm has gotten it dead wrong again. the obama stimulus removed the repayment provision that has been passed under bush.
word of advice: if you’re going to talk smack about missing the fine print, then you should, you know, actually read the fine print correctly yourself. it’s kind of embarrassing otherwise.
because i don’t think it’s pointless, of course.
i want everyone to know that jdm is a crackpot. i want everyone to know that his views shouldn’t be taken with the least bit of seriousness. i want everyone to know that this is a guy who’s gone so far down the ideological rabbit hole that he’s lost contact with reality. i want everyone to know that if you vote tea party, then this is the kind of crackpottery that you’re signing up for.
now i may already know this and you may already know this, but surely not everyone knows it. and so the thing to do is to keep plugging away. for some reason liberals especially aren’t very good at driving their point home over and over, but i think that’s what you have to do in political discourse. i’d love it if we all knew to just ignore him, but i don’t think that’s the case and i’m willing to keep taking a few for the team.
Did you guys look at the update? It is really interesting, the first time in 40 years we have a real net decrease in government.
JDM is not that crazy he is simply presenting pretty standard conservative views and not all of them are wrong. You have to take these positions seriously and deal with them one way or the other. I mean its okay to disagree but I don’t think you can write them off as extremist or crackpot.
…no matter how extremist and crackpot they actually are. Jes’ cause they’re like so much a part of the crazisphere.
i don’t think jdm is a crackpot because he has (extremely — or maybe better, severely) conservative views, i think he’s a crackpot because he refuses to tether those views to facts and evidence.
look at how the debate in this thread has gone, at least as involves him and me. we’ve got a guy who seems really confused about the fact that the federal government can borrow money, who doesn’t think that obama’s stimulus contained any tax cuts (even when by his own definition of tax cut, it plainly contained loads of them), and who can’t even correctly read one of the basic provisions of the bill. i’m not talking about differences of opinion here, they’re flat out mistakes.
does jdm strike you as someone who’s out to genuinely try to understand how the world works? of course not. for him — and with so much of the right wing too — empiricism is subservient to ideology. for that, i think crackpot is a perfectly fair term to use.
Not to mention his “I think WWII helped pull out of FDR’s depression.”
Like World War II wasn’t an example of massive government spending having an extremely positive effect on the economy.
hermit: “i want everyone to know that jdm is a crackpot”
I think they are ol enough to decide for themselves.
hermit: “does jdm strike you as someone who’s out to genuinely try to understand how the world works?
Is hermit thrush, for that matter? Is anyone on this blog trying to do that? I know I am.
Thank you, Brian Mann, for allowing respectful discourse on differing views on your blog.
old enough
hermit: “and who can’t even correctly read one of the basic provisions of the bill.”
I not only read the bill, I posted portions of it on this blog.
hermit: “empiricism is subservient to ideology. for that, i think crackpot is a perfectly fair term to use.”
Empiricism is a theory of knowledge that asserts that knowledge comes only or primarily from sensory experience. (wikipedia)
Ok. If “crackpot” is where your sensory experience leads you, who I am to argue?
i’m (obviously, right?) not making decisions for anyone, i’m trying to persuade. i don’t just state my conclusion, i support it with evidence and arguments.
you missed the “correctly” part. see above.
i mean, just… huh? lots of words have multiple meanings, but i think it’s clear that by “empiricism” i’m not talking about philosophy, i’m talking about “practice based on experiment and observation” (my macbook dictionary). or see the “usage” section in the wikipedia article you mentioned.
the point is that our political philosophies, our conclusions about the way the world works, have to be based in actual facts and evidence. that’s what empiricism is about — the testing of hypotheses by observation. that’s manifestly not how it works with you. your understanding of evidence and reality is completely filtered through your ideology, when it’s supposed to be the other way around. that’s why i think you’re a crackpot.
please try harder!
to finally get away from all this jdm stuff… holy cow is mervel right to flag the times article in the update! this paragraph is kind of amazing:
to me this really drives home a point that matt yglesias has been making the past few years, which is that we’re getting the kind of recovery that conservatives want. decent private sector growth and a diminished public sector.
how does everybody think that’s working out?
hermit: “your understanding of evidence and reality is completely filtered through your ideology”
Yes. And so is yours.
Knuckleheads Law: “As an on-line discussion grows longer Confirmation Bias gets stronger.”
“Confirmation bias (also called confirmatory bias, myside bias or verification bias) is a tendency of people to favor information that confirms their beliefs or hypotheses.[Note 1][1] People display this bias when they gather or remember information selectively, or when they interpret it in a biased way. The effect is stronger for emotionally charged issues and for deeply entrenched beliefs. For example, in reading about gun control, people usually prefer sources that affirm their existing attitudes. They also tend to interpret ambiguous evidence as supporting their existing position. Biased search, interpretation and memory have been invoked to explain attitude polarization (when a disagreement becomes more extreme even though the different parties are exposed to the same evidence), belief perseverance (when beliefs persist after the evidence for them is shown to be false), the irrational primacy effect (a greater reliance on information encountered early in a series) and illusory correlation (when people falsely perceive an association between two events or situations).”
http://en.wikipedia.org/wiki/Confirmation_bias
Once, again the New Deal Time machine explanation, wherein FDR, taking office in March of 1933, somehow went back to 1929, or before, to cause the Stock Market Crash and Depression.
Actually, JDM is partly correct. After 4 years of constant decline in unemployment, bankruptcies, and foreclosures under that wild Liberal tax-borrow-and spending, FDR and Congress got cold feet in 1937, cut back his programs, and the country almost immediately slipped back into early ’30s levels. Fortunately for the American economy, if not for many future American servicemen and their loved ones, Mr. Hitler took care this problem when he started WWII. in ’39. You know, there is a chapter in Stud’s Turkels great “The Good War”, that talks about the reaction of factory workers in a Kentucky town on V-J Day. They cried, and not for joy.
These issues are worth discussing not in hopes of persuading JDM, but rather for to prepare for encounters with the many undecided and ignorant folks not completely in the right wing bag . The country had the same mindset as JDM’s in 1928, and it came around after being beaten over the head with reality long enough.
One thing about my “ideology”. I trust the strength of it enough, that no matter how poorly presented my me, the ideology will prove itself true.
That is why I don’t have to resort to calling those with other views names like “crackpot” or “ignorant”.
If those who think their strong government ideology was able to stand on its own, no matter how poorly presented here, they would not have to level names at me.
I actually find humor in some of the ways people think they are being “persuasive”.
It’s very revealing.
What is fascinating about this government contraction is that it is combined with a really massive stimulus package and a major increase in our debt and deficit.
For the the record, JDM, I lumping “undecided and ignorant folks” as one group, in the sense that they were uninformed and had not yet made up their minds on the issues. This is clearly not a personal attack upon you.
This has got to be one of the weirdest discussions I have seen here. Must be that full moon?
OwVN: you are correct, I apologize for my mistake.
baloney.
though actually your response underscores the difference between us quite nicely.
i don’t just say you’re ignorant or a crackpot or whatever, or that your understanding of reality is filtered through your ideology, i explain why. i cite real-life examples and facts. i point out your failure to account for government’s ability to borrow, your ridiculous belief that the obama stimulus contained no tax cuts, and your inability to correctly process one of the basic provisions of the bill. i make sure my conclusions are rooted in actual evidence and facts.
you do things differently.
in the quote above, you just baldly assert that i’m the same as you, without offering a shred of support for why.
when onewifevetnewt raises the case of wwii ending the great depression as a serious empirical challenge to your economic ideology, rather than coming to terms with this piece of evidence, you just toss off a vacuous platitude.
i have a lot more respect for evidence than that. you and i are very different.
one final point to jdm: when i say “persuade,” i don’t mean that i’m trying to persuade you. i don’t think there’s any hope of that. i’m trying to persuade everyone else.
Not only did FDR’s policies help to pull us out of the Depression but the formation of the CCC may have been crucial in preparing a nucleus of healthy regimented men prepared to join the army and fight the Axis powers.
http://www.albany.edu/talkinghistory/arch2001jan-june.html
see the June 7 edition
i hear that, mervel, but after thinking some it’s come to seem a bit less remarkable to me.
first, i don’t know that the obama stimulus was really all that massive. i mean, it’s gotten fixed into conventional wisdom that the stimulus was some huge monstrosity, but look at the size of it relative to the bush tax cuts — the tax cuts have had a way bigger fiscal impact. (and of course the stimulus was a one-time thing, whereas the tax cuts keep going year after year after year….)
and the stimulus wasn’t that big relative to the size of the hole in the economy. we’re talking about the worst economic shock since the great depression here. christy romer calculated that we needed about $1.8 trillion in stimulus, and we got less than half of that.
so from that point of view, of course we’ve had a contraction in government! most states by law can’t run budget deficits. but the stimulus wasn’t big enough to offset the plunge in revenue, so they’ve had no choice but to cut back.
this also connects with the point krugman has been making a lot lately, that government austerity in a depressed economy can easily be self-defeating, i.e. make the budget outlook even worse. this is the sort of idea a lot of people reject out of hand because it’s so counterintuitive, but we all need to suck it up, macroeconomics is full of counterintuitive stuff.
ht: “this is the sort of idea a lot of people reject out of hand because it’s so counterintuitive,”
I don’t think it is counterintuitive at all. It is simply common sense that cutting jobs at a time that the economy is in the tank will inevitably result in loss of tax revenue (immediately) and increase costs of government services.
And on the Bush Tax cut thing let’s everyone remember that Obama renewed them. Or should I say the OBAMA TAX CUTS; since Republicans want Obama to accept the blame for a continuing bad economy he should be forced to accept the blame for those tax cuts too. The tax cuts that put $BILLIONS into the pockets of the wealthy while the middle-class is being squeezed out of existence.
For folks that adhere to the idea of more stimulus and reject austerity measures you will get a taste of what that will do to the financial markets today now that Europe is looking at ending its responsible government contraction. The capital markets will not tolerate more debt and increased government spending. No matter what some economists say the markets decide. HT and others get ready for a lot of people to lose money today. Not just fat cats but pensions funds and small investors. As we have learned what hurts wall street really hurts main street.
Thanks to Hermit Thrush for showing us how critical thinking can be used to persuade. Evidence and empiricism (scientific method not assertation) should beat out ideology and ignorance every time. Unfortunately, it seems we have come into an era where this is becoming less and less the case.
“The capital markets will not tolerate more debt and increased government spending.” Paul, the deficit hawks have been screaming about this for years now, and we have historically low interest rates.
Granted, the markets are likely to be muddled in Europe thanks to the Greek failure to elect a clear majority government, but outside of that, I would be very surprised if bond interests soar. Early news is Markets Are Calm After Political Shake-Up in Europe.
first off, good for paul for going out on a limb with an honest empirical prediction. and i completely agree with him that markets, not economists, decide. but walker’s right, paul’s prediction has not been borne out. from walker’s link:
it’s also true that greek markets took a big dive, but that doubtless had a lot to do with the particulars of the political situation there (both far left and far right parties made big gains, and it’s not clear how successful they’ll be in forming a government).
all that said, it’s kind of foolish to read very much into what happens in a single day of trading.
what i actually find most objectionable in paul’s comment is this:
i don’t think there’s been anything responsible about europe’s government contraction at all.
but to be fair, what kind of evidence does paul or anyone else have that austerity has been “responsible” — or even more to the point, successful?
because from where i sit, the evidence overwhelmingly points the other way, to the conclusion that austerity in a depressed economy doesn’t work.
in britain, the tories came to power in mid-2010 and promptly instituted austerity. they are now in a double-dip recession, and their recovery from the original crash has been worse than their recovery from the great depression.
spain has instituted austerity, only to see its borrowing costs soar. to say nothing of its 24% unemployment (and 50+% unemployment for workers under 25).
or how about this:
I think we are kind of in uncharted territory and that is why it is so interesting. I mean all normal economic predictions should have us in inflation by now or at least higher interest rates.