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How Public Sector Layoffs Killed 750,000 Private Sector Jobs

As ThinkProgress has noted time and again, the unemployment rate would be up to a percentage point lower if all levels of government hadn’t engaged in severe austerity, shedding hundreds of thousands of jobs. The last three years have been the worst for public employment on record.

As a recent study by the Economic Policy Institute showed, these job cuts ripple through the economy, also harming private sector job creation. In fact, EPI estimates that public sector job cuts have likely cost the private sector 750,000 jobs:

The economic “multiplier” of state and local spending (not including transfer payments) is large – around 1.24. This means that for every dollar cut in salary and supplies of public-sector workers, another $0.24 is lost in purchasing power throughout the rest of the economy. Teachers and firefighters stop going to restaurants and buying cars if they’re laid off, which reduces demand for waitstaff and autoworkers and so on. Add these two influences together (supplier jobs and jobs supported by this multiplier impact) and roughly 0.67 private sector jobs are lost for every public sector job cut. This means that the public sector being down 1.1 million jobs has likely cost the private sector 751,000 jobs.

For comparison’s sake, here is the level of public sector employment during the three most recent recessions:

As former White House economist Jared Bernstein wrote, “It’s obviously nuts to maintain, as some do, that the government doesn’t create jobs. It creates millions of them, and we very much need them if we’re going to educate kids, drink water, put out fires, have public safety, etc. But public sector jobs also create private sector jobs upstream and downstream. It’s all connected, man.” Republicans, meanwhile, continue to cheer on public sector layoffs, which disproportionately hurt women and minorities in the workforce.

NEWS FLASH

Google’s Marissa Mayer To Become CEO Of Yahoo | Marissa Mayer, a woman who has been at Google since its earliest days, was today named the new Chief Executive Officer at Yahoo. In the heavily-male Silicon Valley, Mayer, 37, will be one of few women in charge: The New York Times has reported that “On average, fewer than one in 28 of the highest-paid tech executives is a woman.” Mayer is used to being surrounded by men, though; she was also Google’s first female engineer when she began there.

NEWS FLASH

CHART: Employers Aren’t Trying Hard To Find New Employees | Republicans have repeatedly claimed that unemployed Americans aren’t looking hard enough for work — usually implicating unemployment benefits as a discincentive — but Mike Konczal at Next New Deal just pointed to recent studies suggesting the GOP is laying the accusation on the wrong suspect. It turns out that the amount of effort employers have put into finding new hires collapsed with the recession and has yet to recover. “Recruiting intensity” is a measure of employer behavior that encompasses advertising expenditures, screening methods, hiring standards, and the attractiveness of compensation packages. Those in turn affect the number and quality of people applying to job openings, the speed with which their applications are processed, and their acceptance rate when job offers are actually made:

Republican Senator Calls Creator Of GOP Anti-Tax Pledge ‘Isolated Politically’

Sen. Tom Coburn (R-OK) and ATR President Grover Norquist

Last week, former President George H.W. Bush was asked about the anti-tax pledge circulated by Grover Norquist of Americans for Tax Reform — a pledge which nearly all Congressional Republicans have signed — and replied, “who the hell is Grover Norquist, anyway?” Today, in the New York Times, another long-time Norquist foe took a similar shot at the pledge.

Sen. Tom Coburn (R-OK) — who has publicly feuded with Norquist about whether eliminating tax subsidies for oil companies constitutes a tax increase — wrote that Norquist is “increasingly isolated politically” due to his refusal to endorse increasing revenue to reduce the nation’s deficit:

[R]ather than forcing Republicans to bow to him, Mr. Norquist is the one who is increasingly isolated politically. [...] The problem with the pledge is that it is powerless to prevent future automatic tax increases and has failed to restrain past spending. The “starve the beast” strategy to shrink the size of the federal government by cutting revenue but not spending was a disaster. Every dollar we borrow is a tax increase on the next generation.

And in a debt crisis, higher interest rates and the debasement of our currency would be additional tax hikes. In that sense, no one is doing more to violate the spirit of the pledge than Mr. Norquist himself, who is asking Republicans to reject the very type of agreement that could prevent future tax increases.

Norquist responded by saying, “When Coburn stands up and says, ‘I want to raise taxes,’ he stands alone.” (Last year, Coburn opined that his liberal colleagues are more “intellectually honest” when it comes to the deficit.)

Of course, many Republicans still cling tightly to the pledge, but a growing number are refusing to sign or breaking their prior commitment to Norquist and his organization. In fact, dozens of candidates supported by the National Republican Congressional Committee have declined to sign it.

Health

STUDY: Child Abuse and Hospitalization Rates Rise With Increased Foreclosures

As many foreclosed-upon Americans face tough times, a new study shows that the housing crisis has had another dangerous side effect: child abuse. The study — which will be published in the August issue of Pediatrics — shows that the number of hospital-documented child abuse cases corresponds with increases in the mortgage delinquency rate. According to the study:

Between 2000 and 2009, rates of physical abuse and high-risk traumatic brain injury (TBI) admissions increased by 0.79% and 3.1% per year, respectively… Abuse and high-risk TBI admission rates were associated with the current mortgage delinquency rate and with the change in delinquency and foreclosure rates from the previous year.

Essentially, the study found that for every 1 percent increase in the 90-day mortgage delinquency rate, there was a 3 percent increase in the rate of child abuse requiring hospital admission. Researchers collected data from from about 40 U.S. hospitals and connected the information to unemployment, foreclosure, and mortgage delinquency figures in each hospital’s geographic region.

The study’s lead researcher, Dr. Joanne Wood, said she started the study because her colleagues were seeing an increase in cases of child abuse requiring hospitalization. Wood discovered that children whose families had a more insecure housing situation were far more likely to be abused.

Wood’s findings come at a time when many states are attempting to pass foreclosure reforms and homeowner protection measures, but are being met with fierce opposition from banks.

Steven Perlberg

GOP Rep. Walsh Says Welfare Is ‘Destructive For Poor People’

Rep. Joe Walsh (R-IL), who found himself in hot water this month for saying a double-amputee veteran is not a “true hero,” has a message for poor people: government assistance is actually hurting you.

During a town hall meeting in Elmhurst yesterday, a constituent asked Walsh about corporate welfare provisions in the farm bill currently before Congress. Walsh denounced corporate welfare, but used the opportunity to highlight his belief that government assistance is “destructive” for those in need.

WALSH: Corporate welfare is every bit as destructive as welfare for poor people. And we do both of them.

Watch it:

Far from being “destructive”, government assistance is directly responsible for keeping seven million Americans out of poverty. Without government assistance, the poverty rate would have nearly doubled to 28.6 percent in 2010, according to the Center on Budget and Policy Priorities:

Still, House Republicans are poised to make Walsh’s mindset national policy. Last week, they voted to cut food stamps by $16.5 billion in the final version of the 2012 farm bill. Up to three million Americans may lose access to food stamps as a result.

Though Walsh professes to hate welfare of all kinds, there is a major form of corporate welfare he does support: taxpayer subsidies for oil companies.

How Romney Would Make It Easier For American Companies To Avoid Taxes, Outsource Jobs

Republican presidential candidate Mitt Romney’s plan to overhaul the American corporate tax code would “exacerbate the worst features of our current tax system” by giving corporations more than $1 trillion in tax breaks and providing an incentive to outsource jobs and stash profits overseas, according to Seth Hanlon, the director of fiscal reform at the Center for American Progress Action Fund.

While the United States already provides an incentive for companies to store profits in offshore tax havens instead of investing those profits at home, Romney’s plan to shift the U.S. to a territorial tax system would make the situation even worse, Hanlon wrote in a report published today:

Gov. Romney’s proposed exemption for foreign profits would exacerbate the worst features of our current tax system. It would:

Enhance the tax code’s rewards for moving jobs and investments overseas

Provide a gratuitous windfall to some of the very companies that have already shifted jobs and profits overseas

Further invite the offshore tax haven abuse that deprives the U.S. Treasury of tens of billions of dollars in revenue every year

The current system already encourages investment overseas, since corporations are allowed to defer tax payments on foreign profits until they “repatriate” them to the United States. Romney’s plan would exempt companies even from this tax, which will cost the U.S. $130 billion over the next decade. “When combined with Romney’s proposal to slash the top corporate rate from 35 percent to 25 percent, which would cost more than $900 billion, it pushes the total corporate tax cuts in the Romney plan to over $1 trillion,” Hanlon writes.

Romney’s reforms could also cost America jobs and invite further abuse of offshore tax havens, Hanlon writes. Because corporations would know they are permanently free from paying American taxes if they invest abroad, Romney’s plan would encourage such investments. Those investments would lead to 800,000 jobs in other countries, “potentially displacing U.S. jobs.” Economist Kimberly Clausing, Hanlon notes, “estimates that under a territorial tax system, even more profits of U.S.-based companies would shift to tax haven countries,” a problem that already costs the average American taxpayer $434 a year.

Bain Capital, the company Romney founded, routinely outsourced jobs to low-wage countries like Mexico, China, and Ireland while Romney was its chief executive, and it also utilized offshore tax havens in Bermuda and the Cayman Islands to help investors avoid American taxes. Now, his corporate tax reform plan would make it even easier for companies to do the same under the guise of “competitiveness.”

How The House Farm Bill Guts Important Food Safety Protections

ThinkProgress has already documented the hypocrisy in Rep. Steve King’s (R-IA) attempt to overturn California’s prohibitions on foie gras and inhumanely produced eggs, while insisting that the state can ban birth control. But King’s amendment to the latest farm bill — introduced very shortly before its near-literal midnight passage — doesn’t only affect California. It threatens to destroy state regulations on food safety altogether, according to an analysis by the nonpartisan Environmental Working Group’s legal expert Heather White:

[T]he amendment would “prohibit any state or local government” from “impos[ing] a standard or condition on the production or manufacture of any agricultural product sold or offered for sale in interstate commerce” if 1) production of the agricultural product also occurs in another state; and 2) the standard is in addition to the production or manufacture to federal law and the laws of the state is which such production occurs.”  This impenetrable language simply means that states would be prevented from regulating just about any agricultural product in commerce – contrary to the well-grounded constitutional principles of state police power to protect the health and safety of its citizens within the state.

Foodborne illnesses already kill 3000 and sicken roughly 48 million Americans annually. CAFOs, also known as factory farms, were likely responsible for the incubation of swine flu, which has killed almost 11,000 Americans and about 25,000 people worldwide to date. This is because the horrific conditions factory farm animals are kept in function as “perfect breeders” for new and more deadly strains of illness. Further, according to a Humane Society investigation, factory farms “produce immense quantities of animal waste and byproducts, which threaten water and air quality and contribute to climate change.”

These aren’t problems that the federal government alone can address. Researchers for a consortium of major universities found that state regulations play by far the most important role in regulating food safety. “State and local agencies are much closer to consumers than federal agencies and must respond to food safety concerns in their communities, even when the problems originate elsewhere,” they found.

In short: King’s amendment removes the single most effective barrier to the spread of foodborne illnesses, multiplying the House Farm Bill’s already devastating consequences for hungry Americans. While the King Amendment isn’t likely to survive conference with the Senate, its prospects would improve if the GOP takes over the Senate.

NEWS FLASH

STUDY: African Americans, Latinos Pay 3 Percent More Than Whites For Homes | African Americans and Latinos pay 3 percent more than white homebuyers for their homes, according to a study of from the National Bureau of Economic Research that looked at two million home sales in four cities. The higher prices were not tied to income, wealth, or credit rating, suggesting discrimination may be a factor, the study said. Black and Latino buyers are also likely to spend less time looking for houses because of the “expectation of discrimination,” another factor in higher prices. As ThinkProgress has previously noted, blacks and Latinos were twice as likely to have been affected by the housing crisis after banks and mortgage servicers were found to use discriminatory practices in issuing loans. (HT: Suzy Khimm)

Econ 101: July 16, 2012

Welcome to ThinkProgress Economy’s morning link roundup. This is what we’re reading. Have you seen any interesting news? Let us know in the comments section. You can also follow ThinkProgress Economy on Twitter.

  • A rising number of American companies believe that the European economic crisis is hurting their sales. [Reuters]
  • Top British regulators will testify before Parliament today on the LIBOR rate rigging scandal. [New York Times]
  • The Justice Department is building several criminal cases related to the LIBOR debacle. [Reuters]
  • Students are covering a larger share of college costs, according to a new survey by student lender Sallie Mae. [Washington Post]
  • A majority of Americans believe the U.S. should have a tougher trade policy with China. [Financial Times]
  • The Consumer Financial Protection Bureau announced today that it will soon begin regulating credit reporting agencies. [CNN Money]
  • Credit card companies and major banks have agreed to pay $6 billion to settle charges that they fixed fees paid by retailers. [Associated Press]

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