Yglesias

Yes, Public Sector Cutbacks Are Hurting The Economy

I’m reading on right-wing blogs that it was somehow “deceptive” of me to post accurate statistical information about the fact that the private sector labor market is showing okay growth while the public sector labor market is deteriorating. You see, net private sector job losses since the start of the recession have been larger! This is true, which is why I never said otherwise. That’s for the very good reason that the total scale of government employment is pretty small relative to private sector employment:

We have, in other words, many more people working at CVS than the DMV. Which is great. That’s your modern day mixed market economy. Most people work in the private sector. That means the scale of private sector shifts is almost always going to outweigh the scale of whatever’s happening in the public sector. But look at growth rates and zoom in on the Obama era:

When the President was inaugurated, we were already in a steep recession with giant private sector job losses. At the time, the government sector was doing its normal non-cyclical thing. The rate of private sector losses slowed, and since the beginning of 2010 private sector employment has been enjoying slow-but-steady growth. It turns out, however, that once you look past the spikes around the census that these private sector gains are being partially offset but steady job losses in the public sector.

In a normal time, you might think of this as “crowding in.” Reduced government spending frees up funds for private purposes. And reduced government employment frees up personnel for private purposes. But that’s not a plausible interpretation of today’s events with high unemployment and lots of economic slack. Nobody is saying “God, my company really needs to hire some janitors but there are no unemployed people around to hire; if only they’d lay off some of the guys who mop floors at the local federal building I’d be able to expand.” Instead what’s happening is people are saying “hey—my company sells goods and services at a profit, so I’d expand operations if some of these unemployed people were hired to repair roads and this had more money to spend at my shop.”