As promised, here’s a closer look at the jobs report released today by the Department of Labor. If we take the 69,000 total apart and look at the separate categories of private sector employment there’s an interesting picture:
We can see more clearly now which jobs ARE being created, and which are not. Healthcare added 33,000 jobs, transportation and warehousing added another 36,000. Manufacturing was up 12,000. Temporary professional services gained 9,200. Full time professional services dropped about 1,000. The financial sector added 3,000 jobs, retail added 2,300, and wholesale jobs increased by 15,900.
The drag? We lost 13,000 government jobs, 9,000 leisure and hospitality jobs, and 28,000 construction jobs. [BLS Table B]
Here’s where the ideological wheels meet the real world road.
If the ultra-conservative ideology is correct, then the reduction of government jobs should boost the overall economy? That’s the theory, and one espoused by Republican candidate Mitt Romney:
“Romney, by contrast, would make immediate, drastic moves toward austerity. His deficit plan would slash federal spending to 20 percent of GDP by 2016, and as low as 18 percent of GDP in later years—well below historic averages. In addition, Romney’s plan bets that lower tax rates will spur economic growth, boost the economy, and return the country to an era of budget surpluses and prosperity.” [NatlJournal]
That’s the plan, cut government programs (reducing the federal payroll), privatize Medicare (vouchers), and send everything that can be packaged into block grants back to the states. So, we’d have to ask: If we have shed about 1,000,000 public sector jobs in the last few years — then why haven’t we seen more robust gains in private sector employment? [FTimes] If during the Obama Administration some 600,000 public sector jobs have been eliminated, where is the vaunted economic growth that was supposed to happen?
Reuters offered an analysis of the drag on the economy created by the loss of public sector employment last April:
The result? The last three years of job losses at the state and local government level has been the most dramatic since Labor Department records began in 1955, according to a Reuters analysis.
Public-sector employees tended to have more job security, which in some ways helps during weak economic climates, as their steady demand for goods and services spread through the economy. The recent trend, conversely, can make things worse.
“If public-sector employment had grown since June 2009 by the average amount it grew in the three previous recoveries (2.8 percent) instead of shrinking by 2.5 percent, there would be 1.2 million more public-sector jobs in the U.S. economy today,” said the Economic Policy Institute in a recent report, which included federal employees in the calculation.
Yes, we’ve come right back to the demand side of the classic market equation. The lost demand for goods and services created when public sector jobs were eliminated is a drag on the economy especially during a recessionary period. There is an argument to be made that the job security and spending capacity of public sector employees, health inspectors, teachers, firefighters, police officers, public health nurses, highway department employees, etc. acts as one of those automatic stabilizers cushioning the shocks to a retracting economy.
The illogical extrapolation of this notion is that “Gee, then all we need are public employees…” No. What we need are infrastructure construction and maintenance, and public services, which not only meet the needs of the community but also serve to sustain demand for goods and services in local economies during tougher times. The magic word is Balance.
The question we now need to ponder is what will get the economy moving forward at a more rapid pace? Tax Cuts for wealthy Americans? Infrastructure spending and small business incentives to boost employment in the construction and other sectors?
Republican members of the House of Representatives are fond of asserting they’ve passed some 30 “jobs” bills. However, in their enthusiasm to repeal the Affordable Care Act, to repeal Dodd-Frank, to reform Medicare out of existence, to preserve taxpayer subsidies for fossil fuel corporations, to cut taxes for the top 0.5% of American income earners, and to slash funding for infrastructure programs (all of which they have characterized as “Job Creating” measures) – their proposals would cost a potential 700,000 jobs in H.R. 1; approximately 300,000 jobs lost in regard to H.R. 2; and, perhaps a total of 1.7 million jobs lost by 2014 per H.Con.Res. 34. [Gavel]
There is an alternative available, S. 1549. It is stalled in the United States Senate, tagged with the all too familiar Republican filibuster. There are some component which could have a positive impact on the economy much sooner than waiting for the tax breaks for billionaires to trickle down to the local county road department. *(See American Jobs Act)
One component is the Buy American provision, requiring that items procured for the maintenance or construction of public works be made in America. There could be some “wiggle room” for negotiation to allow for the acquisition of items which are no longer manufactured here, but this topic should be a started for further discussions.
Another component would give business owners some tax breaks: “amends the Internal Revenue Code to: (1) reduce employment and self-employment tax rates in 2012 to 3.1%; (2) allow employers a tax credit for payroll increases in the last quarter of 2011 and in 2012; (3) extend the 100% bonus depreciation allowance through 2012; (4) delay until 2014 the 3% withholding requirement on payments due to vendors who provide services to federal, state, and local governmental entities; and (5) increase the work opportunity tax credit for hiring unemployed veterans. ” If tax breaks are the bread of conservative life, why would this be controversial?
There’s an infrastructure component which has drawn more fire: “Makes specified funds available to the Secretary of Transportation (DOT) for: (1) grants-in-aid for airport planning and development and noise compatibility planning projects under the airport improvement program (AIP); (2) Federal Aviation Administration (FAA) Next Generation air traffic control system advancements; (3) highway and bridge restoration, repair, and construction projects and for passenger and freight rail transportation and port infrastructure projects; (4) grants for high-speed rail projects, capital investment grants for intercity passenger rail service, and grants to reduce congestion on intercity rail passenger transportation; (5) capital grants to the National Railroad Passenger Corporation (Amtrak); (6) transit capital assistance grants; (7) capital projects for existing fixed guideway system modernization, replacement and repair of buses and bus-related equipment, and construction of bus-related facilities; and (8) discretionary capital investment grants for surface transportation infrastructure.“
This is where the cat-calls about “nostrums of statism” begin from the right. However, we are indeed a nation with antiquated air transportation systems, and love Amtrack, or not, it is invaluable in the NE corridor transportation grid. We’ll probably not find too many members of the Republican caucus taking the bus — but thousands of their constituents take the bus daily to get to their jobs.
The cri de coeur from the right hand side of the political aisle really increases in volume when it’s suggested that the federal government could step in to help school districts, cities, and counties retain or rehire teachers, police officers, and firefighters laid off because of local and state budget cuts. Speaking of “nostrums,” there’s little more vague or exaggerated than claims that if tax rates for the upper upper upper income earners are further reduced, then POOF! the economy will improve and state and local revenues will rise with the Yachting Tide. The Speaker of the House of Representatives announced that the first stimulus bill was a failure before the money even got out the door, however the Republicans piously intone their mantra that we should at least wait another four years for the “benefits” of the Bush Tax Cuts to kick in.
The magic formula “Tax Cuts + Deregulation” was in effect for eight years of the George W. Bush Administration….. and we’re still waiting. In fact we’ve had nearly thirty years of tax cuts and deregulation.
We can narrow it down and look at the last decade, and the economic picture of the efficacy of the Magic Formula simply isn’t there.
What is readily apparent is that some sectors of the economy are doing better than others. Federal spending for infrastructure would more immediately benefit business owners in the construction sector and the employees who would be hired. Arguing that these aren’t “permanent” jobs is silly. There are precious few “permanent” jobs in a sector dependent on winning bids and hiring sub-contractors.
It’s also clearly visible that we cannot continue to decimate our public sector. “Stack’em deep and teach’em cheap” is not a productive educational maxim. Nor can we encourage business growth in our retail sector by seeking to minimize or privatize our public safety sector. Commercial and industrial activity is curtailed if workers can’t find affordable and reliable transportation to and from the workplace.
Once again: Austerity never begat Prosperity.