Numbers, Theories, and Qualities: The Latest Unemployment Numbers

Senate Majority Leader Harry Reid (D-NV) issued this statement regarding the unemployment numbers for the past month:

“The unemployment rate is falling as we saw the thirtieth straight month of private sector job growth, with the economy adding nearly one hundred thousand new jobs. While our recovery is still moving too slowly for many Americans, job growth would likely have been even stronger if Republicans had not blocked Democratic efforts to hire more teachers, firefighters and police officers.”  (emphasis added)

Yes, the unemployment rate has fallen and, yes we do need to note that Americans leaving the workforce makes variations in statistical interpretation rational.  Bloomberg News sums up the immediate situation:

“The economy added 96,000 workers last month following a revised 141,000 increase in July that was smaller than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for a gain of 130,000. Unemployment fell to 8.1 percent, and hourly earnings were unchanged.” [Bloomberg]

Before the spin-meisters in the Village get all over the numbers and fall into and over one another interpreting what this Means — in terms of style points for political campaigning —  let’s have a reality check.

#1.  We have a mixed economy.  I know, believe me I know, that it is fashionable to rant about our Free Market Capitalist Free Enterprise system, but we’ve never had a pure free market capitalist system and we wouldn’t want one if it were handed to us.

There are some transactions in which public cooperation is more economically rational than private competition.   In a perfectly free theoretical Free Market System government would have no role at all, so we would have no police departments — only private security firms.  There would be no public fire departments — only private fire brigades.  New York City tried a privatized fire fighting system in the 19th century and it was not a happy experience.  Since some insurance companies were paying the firefighting brigades, the competition rapidly devolved into chaos as firefighters expended too much effort fighting off competing fire companies and too little fighting the fires. [FireInfo]  Contemporary attempts to replicate 19th century privatized firefighting units have been singularly unsuccessful.  [NYT, Westchester]

If we agree that every child in America should have at least 12 yrs of basic education, then we have to have a delivery system.  Public schools train future members of the labor force.  Current palaver about “vouchers” and “scholarships” to private schools is merely a euphemistic way of saying “public money to schools,”  only the schools in this instance are privately held.  It’s still public money.

There are practical reasons for public-private sector cooperation especially in the realm of research and development, and the cooperation mitigates some of the initial risk for the private sector.   If the expenses incurred in basic research and subsequent product development can be shared, then R&D which might be too expensive or beyond the capacity of single firm (especially a smaller one) can still be practical.

In a perfectly free theoretical Free Market System there would be no public-private sector partnerships for research and development, no cooperative activities between and among research universities and business interests.   In reality, neither research universities nor private sector corporations live in a vacuum.  Collaborative research is responsible for much of the technological advancement in the 20th century.

A mixed economy also provides the infrastructure and subsidies necessary to foster commercial development and economic growth.  New York City takes prominence over Boston in the 19th century as a shipping center because the Erie Canal provides the transportation infrastructure necessary to get interior products to their port.  Chicago takes prominence over St. Louis in the mid 19th century as its rail hub surpasses the older river cities as part of the nation’s commercial and industrial infrastructure.  And, as noted herein before, government investment in canal, rail, and highway systems allow for commercial and industrial growth.

We’ve fought about the necessity for, and role of, central banking since Andrew Jackson’s era, but in the reality of the 21st century it ought to be reasonably clear to all but the most radical that central banking operations are a more stable way to implement monetary policy than trying to rationalize a system of competing bank notes, including the Dixies.

#2. Both our public and our private sector are components of our total economy.   Reality Check Time: We are a mixed economy; we have both a public and private sector; therefore, transactions in BOTH the public and private sector are counted toward our gross domestic product.  Here we come to the point Senator Reid is trying to make — depletion in the transactions (contracts, paychecks, etc.) in the public sector depresses the transactions possible in the private sector.   Senator Reid is correct in reporting that the Republicans in the House and Senate have blocked consideration of his American Jobs Act which would restore some public sector jobs and creating funding channels for infrastructure maintenance and construction sector jobs.

If we reduce the number of teachers, police and law enforcement officers, firefighters, school nurses, public health inspectors, agency accountants, IT specialists, Department of Motor Vehicle clerks, Insurance Commission auditors, highway maintenance personnel, social workers, welfare eligibility specialists, Emergency Medical Technicians, …. (a) not only do we not get the level of services we should expect in a 21st century developed nation, but (2) our tax dollars aren’t recycled into our state and local economies.  We can assuredly reduce the size of government until we can drown it in a bath tub — BUT in doing so we realistically risk sending our own state and local economies down the drain with it.

Senator Reid continues:

“At the end of the day, too many people in Nevada and across America are still struggling to get by. The best way to speed up our recovery is for Republicans to stop their knee-jerk obstruction of every effort Democrats put forward, and start working across the aisle to find common ground. Next week, the Senate will vote to give employers incentives to hire veterans, so our heroes are not left out in the cold when they return home. This is a common-sense jobs bill, and I hope Republicans will join Democrats in supporting it.”

While I am always a bit leary of yet another tax cut — businesses have gotten 18 of them in the last three years — the 2011 Veterans Tax Credit bill did have some positive effects,  [NYT] and there’s nothing wrong with trying to enhance it.  The perpetual problem with tax breaks for hiring is the obvious — no one hires anyone except when the demand for a product or services exceeds the staffing levels necessary to create the product or provide the service.   But, I repeat myself for the four hundredth time.   There’s a bit more from Senator Reid:

“The Republican leader said his single most important goal was defeating President Obama. To speed up our recovery, it’s time for Republicans to put politics aside, and join Democrats to make the middle class their top priority.”

The emphasis on middle class employment is appropriate, because in their fervor to reduce government costs they’ve reduced public employment — especially at the local level — they’ve laid off middle income job holders, those teachers, firefighters, police and law enforcement personnel…

The liturgy of the Pure Market Fundamentalists insists that public employees must be “feeding at the public trough,” they must put “their paychecks above their calling…”  The liturgy makes for lovely theoretical sound bites; however,  it’s really difficult to sell to a teacher who’s still grading papers or modifying tomorrow’s lesson plans at 10:00 pm.  It’s hard to explain to a firefighter who’s been on his feet in unimaginable and almost unendurable  conditions for hours on end.  It’s a hard point to make to a police officer who’s spent her entire day trying to protect the most of us from the worst of us.

Priorities

Theorizing is fine. It’s a great form of intellectual stimulation.  However, theorizing and idealizing never inspected a restaurant or a walk in clinic.  Theorizing never kept a gaggle of 27  Second graders on task. Theorizing never put out a fire, never treated a heart attack victim before transportation to a hospital, and never showed up to treat automobile accident victims on the scene.  Theorizing never caught a burglar, never cleared a drug dealer out of a neighborhood, never brought a rapist to justice, and never even directed traffic after a major athletic event.

Theorizing and idealizing never built a bridge, never constructed a new highway, never finished a new airport control tower.  Theorizing never does maintenance on a bus people ride to get to work. Theorizing never repaired a dam, never filtered waste water, and never laid a new pipeline for drinking water.

Elegant economic theories are elegant economic theories, just don’t ever expect one to DO anything.  Given my druthers, I’d prefer a theory which supports getting things DONE.  When I pay my state, local, and federal taxes I want to get something in return in the economic transaction.  I like police and fire protection; I want kids who can read and do arithmetic. I want my clinics and restaurants clean and healthy. I want my roads smooth, my drinking water pure, my sewer system to function, and my local library open and stocked with books.

In short, when I pay my federal, state, and local taxes, I want it to be an economic transaction, one in which I get what I pay for.  If I want police and fire protection I’ll pay for it — even when my car isn’t being burgled or my house isn’t on fire — because I am paying for a potential service which is to be available when I do need it.   When I pay my federal, state, and local taxes I am not contributing to some ethereal element — I want those smooth roads, those functioning water and sewer systems, those manageable classrooms, and those books on the shelves in the library.   In other words, I fully expect a rational economic transaction.

I am paying, in fine, for the Quality of My Life.   And, Quality should be a Priority, as I sit in a real world with real issues, and real needs, and real economic transactions.  Human beings have the remarkable capacity to create a theory about nearly every aspect of our condition, but when an economic theory is propounded merely in the service of individual avarice then it diminishes us and the quality of our lives, politically, socially, and economically.

I’d prefer we remain in the reality-based universe in which classic economics teaches the demand side is just as important as the supply side, and one in which we acknowledge the reality of our mixed economy as the driver of the greatest economic engine on the planet.  Then, we might get some more people back to work.

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