Outside the Beltway

Government Employment and the Great Recession

Steven L. Taylor
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Via The Atlantic:  Our Historic Austerity—in 1 Crazy Chart

As Ben Bernanke put it, "people don’t appreciate how tight fiscal policy has been." And how much that’s knee-capped the economy. Take jobs. Bernanke points out that total public sector employment—local, state, and federal—has fallen by over 600,000 during the recovery alone. As point of comparison, it rose by 400,000 during the previous one.

Regardless of one’s position on stimulus, or of public sector employment in general, one cannot ignore these numbers when assessing the way the recovery has gone.  First, there is the raw number itself and, second, there is historical comparison.

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40 responses to “Government Employment and the Great Recession”

  1. john personna Avatar
    john personna

    A total spending chart shows big response to the recession, and then a sudden stop.

    Ah well, whatever we might have done, I think the short term is over.

    It’s time to design good budgets, and see where size falls out of that, rather than just demanding more or less.

  2. al-Ameda Avatar
    al-Ameda

    Bernanke points out that total public sector employment—local, state, and federal—has fallen by over 600,000 during the recovery alone.

    Well, this – reduced government employment – is exactly what conservatives wanted all along. What vexes conservatives is that this has had a measurable negative effect on economic and employment growth since the depth of the recession in 2009. Conservatives wanted reduced government employment, however they did not believe that it would have the negative effect on employment and economic growth that it has. This also tells us that without stimulus spending we would not have experienced the modest economic growth that we’ve had since 2009.

  3. Dave Schuler Avatar
    Dave Schuler

    Part of the reason behind the phenomenon being described is due to employment contracts of state and local governments. Unlike the federal government they don’t have the ability simply to issue new credit and, generally speaking, they are compelled by law to balance their budgets.

    As a practical matter that means that they only have a limited number of alternatives when employee compensation must rise by terms of a contract negotiated in happier times. The alternative that has been most commonly chosen is to trim the number of employees.

  4. edmondo Avatar
    edmondo

    Bernanke points out that total public sector employment—local, state, and federal—has fallen by over 600,000 during the recovery alone.

    Did Bernanke point out how many new government contractors their are now compared to previous recoveries? Governments don’t hire anymore, they outsource.

  5. john personna Avatar
    john personna

    @edmondo:

    Yeah, that’s why I offered the spending chart above.

    I guess it offers something for everyone. Depending on how you squint, we might now be above or below the past trend-line.

    Of course, adjusted for GDP … while the tail-off is pronounced after 2009, the jump from the 2000’s is also undeniable.

  6. Pinky Avatar
    Pinky

    @edmondo: Government transfers are a much bigger component of fiscal policy.

  7. Tillman Avatar
    Tillman

    The stimulus was not well-crafted policy. The feds could have underwritten some of the states’ debt in order to stabilize the fallout in government employment while contracts were renegotiated, but no, they went to tax cuts for the middle class.

    Hey, I’m middle class, I like less taxes, but I’d prefer a job.

  8. Pinky Avatar
    Pinky

    @Tillman: The stimulus wasn’t really crafted to be tax cuts for the middle class. A lot of it was tax credits for an expansion that never happened – and a lot of those were really channels for getting money to poltiical allies. That happens a lot, and I’m not saying it happened more this last time than any other time; I’m just saying that characterizing the stimulus as tax cuts for the middle class is misleading.

  9. David M Avatar
    David M

    @Pinky:

    Might want to read up on the tax portion of the stimulus again. Probably close to 20% of it was specifically middle class tax cuts.

  10. superdestroyer Avatar
    superdestroyer

    @al-Ameda:

    The point that sane conservatives would make is that since the economy is recovering, the desire to add those employees back must be resisted. Adding government employees during the good times, makes the recession more severe and makes the deificts bigger.

    What progressives should admit is that many government employees are unnecessary and many of the missions taken on by the government should be dropped.

  11. Moosebreath Avatar
    Moosebreath

    “Regardless of one’s position on stimulus, or of public sector employment in general, one cannot ignore these numbers when assessing the way the recovery has gone.”

    Clearly, you have not read Doug’s monthly comments on the unemployment reports, or his quarterly reports on GDP.

  12. stonetools Avatar
    stonetools

    Let’s be clear . Everything that the Republicans did with blocking further stimulus had to do with running that black man out of the White House after he dared to get elected. It didn’t help that said black man bent over backward to achieve a “bipartisan” solution on the stimulus, and as a result ended up with a stimulus that was smaller and less job-centered than it should have been.
    To this day I maintain that the worst decision of Obama’s presidency was not to push for a bigger stimulus ( or having achieved a smaller stimulus, not making it VERY clear that it would have been bigger and better absent Republican opposition). It opened things up for the Republican ” Where are the jobs” hypocrisy of summer 2010 and then for the greatest disaster to befall the Democrats in decades-the 2010 Tea Party surge, and subsequent redistricting . And all because Obama thought he could coax the Republicans into reasonable bipartisan solutions through force of personality. Oh well.

  13. john personna Avatar
    john personna

    @this:

    Dear downvoter, Keynes himself did not argue for perma-stimulus.

    Keynes developed a theory which suggested that active government policy could be effective in managing the economy. Rather than seeing unbalanced government budgets as wrong, Keynes advocated what has been called countercyclical fiscal policies, that is, policies that acted against the tide of the business cycle: deficit spending when a nation’s economy suffers from recession or when recovery is long-delayed and unemployment is persistently high – and the suppression of inflation in boom times by either increasing taxes or cutting back on government outlays. He argued that governments should solve problems in the short run rather than waiting for market forces to do it in the long run, because, “in the long run, we are all dead

    I am actually being Keynsian by saying that the time for stimulus was 2009 and 2010,, and now less so.

    Nothing in Keynes economics says that you can simply stimulate whenever you want more growth.

  14. superdestroyer Avatar
    superdestroyer

    @john personna:

    Democracies are incapable of truly implementing Keynesian stimulus because the stimulus becomes permanent and develops its own constituency, and elected leaders are incapable of raising taxes and cutting spending during the good times.

    since elected leaders cannot control their spending during their good times, they cannot increase spending during the bad times.

    The only solution is remove taxation and spending from economic planning. The government should set taxes to meet the spending needs of the goverment, not run deficits, and force people to decide between bigger government with higher taxes or smaller government with lower taxes.

  15. Gustopher Avatar
    Gustopher

    What the graphs don’t show is the impact this has had on families. How many lives have been permanently damaged by this, as people have been pushed into long term unemployment, had their retirement savings wiped out, and will likely have been pushed out of the middle class?

    That is the real cost of the Republicans push for austerity.

  16. stonetools Avatar
    stonetools

    @john personna:

    What Keynes actually said was that the right time to apply stimulus was when it”s needed, not according to some abstract timetable of when it’s most “seemly”, and out of concern with the “long run” (you know what he said about the long run). Right now, the economy is bumping along with unemployment at 7% . That’s not remotely acceptable for the millions of long term unemployed ( although it may be just fine for a retired guy contemplating his investments in a booming stock market).
    The very least we should do is to repeal the sequester and rehire those 82,000 federal workers. I would want more, but at least we should stop trying to wreck the economy in order to un-elect the Kenyan usurper. I’ll at least take that.

  17. john personna Avatar
    john personna

    @stonetools:

    So, you don’t think this is short term contraction, just sub-optimal expansion.

    If you were going to stimulate sub-optimal expansion, to make it better (as Bush tried in the mid-2000s) how would you do it? Like Bush with tax cuts? Or would you do it with spending that you’d unwind later (producing later lay-offs) in the cycle?

    Again, I am fine with well-designed budgets and well-designed programs, but I want you to build from them, not too them.

    It really is the worst case to say “we should do X because we need to spend money.”

    As opposed to “we really should do X, even if that costs money.”

  18. john personna Avatar
    john personna

    @superdestroyer:

    We should be able to satisfy everyone with a simple rule. Any forward year’s tax should equal the previous 5-years moving average of spending. That allows emergency spending, but says you need to make tax catch up.

  19. stonetools Avatar
    stonetools

    I think that there are plenty of infrastructure projects out there to be funded. We could do so through an infrastructure bank, which would mean that projects could be properly planned and funded, with minimal political interference. There are federal agencies to be fully funded and made fully effective. There are job training and relocation programs to help re-integrate the long term unemployed into the economy. There’s a lot that could be done, and it that isn’t be done now because Republican politicians (and their constituents) hate Obama, some because he is black, others because he is Democrat, and many because they think government should be in the business of helping only the rich, not the poor or the working class or minorities. That’s the flat truth, and it has ZERO with whether there is more that the government could efficiently do. The reality is that there is more to do.

  20. john personna Avatar
    john personna

    @stonetools:

    I’m afraid that is just the generic list that stimulus boosters always use.

    It actually has never worked. Infrastructure jobs now use high mechanization and low employment ratios. Mass jobs training produce graduates who do not in fact find jobs. Etc.

    People are even getting that the high speed trains are a bust, with both cost overruns and little true economic benefit.

  21. john personna Avatar
    john personna

    Does Federally-Funded Job Training Work? Nonexperimental Estimates of WIA Training Impacts Using Longitudinal Data on Workers and Firms

    We study the job training provided under the US Workforce Investment Act (WIA) to adults and dislocated workers in two states. Our substantive contributions center on impacts estimated non-experimentally using administrative data. These impacts compare WIA participants who do and do not receive training. In addition to the usual impacts on earnings and employment, we link our state data to the Longitudinal Employer Household Dynamics (LEHD) data at the U.S. Census Bureau, which allows us to estimate impacts on the characteristics of the firms at which participants find employment. We find moderate positive impacts on employment, earnings and desirable firm characteristics for adults, but not for dislocated workers. Our primary methodological contribution consists of assessing the value of the additional conditioning information provided by the LEHD relative to the data available in state Unemployment Insurance (UI) earnings records. We find that value to be zero..

  22. superdestroyer Avatar
    superdestroyer

    @stonetools:

    YOu cannot “bank” the infrastructure projects because the surrounding areas are changing. Thus, the projects need to be planned continuously and the environmental work needs to be updated. Also, infrastructure employees few actual people since construction being so capital intensive these days.

    Infrastructure projects need to be done due to their own merit and independent of the jobs aspect.

  23. Ben Wolf Avatar
    Ben Wolf

    Job training inherently assumes the problem with unemployment is the unemployed, rather than a technical malfunction of the econimy.. Even if more people are better trained this will not increase employment as you still have too many people competing for too few jobs. Keynes believed mass unemployment a policy failure rather than a personal/moral one and advocated the government spend whatever was necessary to overcome distributional/savings problems and create full employment; Abba Lerner would later expand on this approach in crafting the rules of what he termed Functional Finance:

    1) Governments must intervene as markets can reach equilibrium while at less than full employment.

    2) Money is a creature of the state and must be actively managed.

    3) Broadly shared prosperity should be government’s priority, not achieving budgetary balance.

    4) Taxation should be levied to control aggregate demand, not to raise an arbitrary level of revenue.

    5) The principles of Sound Finance (which totally dominate our current policies) apply to households and businesses, not sovereign governments. Attempting to run the nation’s budget in such a way is ultimately self-defeating.

  24. Wr Avatar
    Wr

    @superdestroyer: Why “must” we agree with something so patently stupid?

  25. superdestroyer Avatar
    superdestroyer

    @Wr:

    that the government has many zero-value employees is beyond doubt. That the government tries to do too much and do it in a half-ass manor is also without question. What is amazing is how progressives will defend every bit of government waste instead of be willing to organize a more efficient government.

  26. superdestroyer Avatar
    superdestroyer

    @Ben Wolf:

    Many economist have shown that the government cannot respond fast enough to actively manage the economy and will end up making many wrong decisions. Also, as the U.S. becomes a one party state, giving the government that much control over the economy could easily turn the U.S. into Chicago, writ large, where the point of the government will be to reward supporters and their friends and punish people who resist the government.

  27. C. Clavin Avatar
    C. Clavin

    one cannot ignore these numbers when assessing the way the recovery has gone.

    Sure you can…if you are a water carrying hack…in fact Doug does in every single economic post he writes.

  28. Ben Wolf Avatar
    Ben Wolf

    @superdestroyer: Didn’t say the economy. I said “money”, and no economist has proved any such thing as you suggest. Neo-classical economists don’t deal in evidence, they prize theory over empiricism.

  29. gVOR08 Avatar
    gVOR08

    @superdestroyer: Krugman has responded to this argument by pointing out that in previous recessions we have indeed stopped stimulus spending, generally too soon. You are perhaps conflating stimulus and deficit, in which case your argument is undercut by the Clinton surplus and the current too rapidly falling deficit.

  30. Pinky Avatar
    Pinky

    @David M: You’re right, of course. I think I blocked out the payroll tax cut from my memory because it was such a horrible idea.

  31. superdestroyer Avatar
    superdestroyer

    @stonetools:

    I find it odd that progressives who are ready to lay off 500K workers from the medical insurance industry and a million workers from defense are so desperate to rehire federal and state employees in make work jobs.

    I suspect that the real push to increase government spending is so themoney will flow through the government workers and into the coffers of the public sector unions who will then give it to Democrats.

    Growing the federal work force is just one more reason the U.S. will eventually be a one party state and everyone will fight over government spending for themselves and sticking others with the bill.

  32. C. Clavin Avatar
    C. Clavin

    Cops, Firefighters, teachers…

    make work jobs.

    If your opinions are based on nonsense…then your opinions are nonsense.

  33. john personna Avatar
    john personna

    @Ben Wolf:

    Do you know what shoots that all to hell?

    It should be well known now that this last decade has brought increasing income inequality in the United States and decreasing income inequality in the world.

  34. john personna Avatar
    john personna

    (That comment fired too soon, continuing…)

    The problem with most technical fixes (be they monetary or fiscal) for the United States is that they treat the US as an isolated system, when it is not isolated at all.

    Not one of Ben’s observations includes that stimulus in the US can, essentially, build another Walmart, and another factory in Shenzhen province, China.

    We need to be more creative now, and recognize that The Average Is Over. (Not that I agree with all Cowen’s observations or prescriptions, but he does hit the broad target.)

  35. Barry Avatar
    Barry

    @superdestroyer: “Many economist have shown that the government cannot respond fast enough to actively manage the economy and will end up making many wrong decisions. ”

    They’re wrong; the reason why is trivial.

  36. Barry Avatar
    Barry

    @john personna: “The problem with most technical fixes (be they monetary or fiscal) for the United States is that they treat the US as an isolated system, when it is not isolated at all. ”

    No, they don’t. Multipliers are adjusted accordingly.

  37. john personna Avatar
    john personna

    @Barry:

    If you mean multipliers can be adjusted for the “loss” of stimulus effect that is “China’s gain” … sure you can put up some math.

    Of course adjusting multipliers in that way does not improve “bang for the buck.”

  38. superdestroyer Avatar
    superdestroyer

    @C. Clavin:

    There are actually many arguments that there are too many fire men. The number of house fires has been going down for years and the number of fire fighters who respond to the smallest of incidents. Since the long term costs of every fireman or policeman is massive, no state or city can afford to have more than the optimum number.

    Once again, progressives push against the use of data and cost-benefit analysis. For a progressive, if the government is spending money on it, it must be good.

  39. superdestroyer Avatar
    superdestroyer

    @Barry:

    The government (and the fed) depend upon lagging indicates. Since it takes at least six months for the fed to determine an economic downturn and then takes months for their to be a response and the response to have any effect, it is obvious that government cannot response fast enough to actually manage an economy (or have fine control of the money supply).

  40. C. Clavin Avatar
    C. Clavin

    @superdestroyer:
    Yeah… And that argument might hold water if the decisions were being made on that basis… But they are not. So it doesn’t .
    The fact is we are down 1,000,000 jobs from every other recovery.
    You are defend that… and also bash the economy recovery under Obama.
    It’s intellectually dishonest.
    Which surprises…given your lack of intellect ,

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