Alan Blinder, Princeton Economist, continues to make a mistake regarding government jobs. Writing about Our National Jobs Emergency in the Wall Street Journal yesterday he repeated the error I wrote about in this post.
Every day brings new proposals to slash government spending. But as I noted on this page last month, those are ways to kill jobs, not create them. As a matter of fact, despite all the cries of “big government” or even “socialism,” public-sector employment has been falling.
Over the past two months, while private businesses were adding a measly 130,000 new jobs to their payrolls, governments at all levels were shedding 87,000 workers. Looking over a longer period, public employment at all levels is down by 522,000 jobs over the last two years. Does that make sense in a jobless recovery?
The answer is yes, it makes perfect sense. As I noted in my response to him last month:
Public spending should not be accepted based on the idea that it creates jobs.
Justifying expenditures because it creates jobs is not any better when evaluating public spending than it is when evaluating private spending. When you spend money, is creating jobs a key factor in your decision? No. You justify your spending based on the direct benefits you receive.
Whether the economy is in a ‘jobless recovery’ is a red herring and irrelevant to whether or not government should shed jobs.
The answers to the following two questions are what’s relevant:
1) Is the value created from these jobs worth it? Though a better way to ask this question when you’re spending someone else’s money is, would you pay for these jobs if it was your own money that you were spending? (If so, why aren’t you?) Hint: The value should be created as a product of the work performed.
2) Can the government afford these jobs?
Government revenue is down because the economy is hurting and folks are out of work. When a business experiences revenue declines, shedding jobs to keep the firm viable is a tough, but responsible, response. Financial insolvency or bankruptcy is not responsible and hurts many more people. Life is full of hard choices.
When individuals experience declines in income, they shed expenses also. They typically do not continue to spend by borrowing from credit cards in hopes that their spending will help the economy. Some do and we all know it doesn’t end well.
Let’s say my income declined and I consider cutting my expenses by eating more home cooked meals. I don’t consider if my action will further hurt the economy. Quite frankly, I’m not smart enough to know if it will or not. Neither is Blinder, though he believes he is.
I am smart enough to make responsible choices for my situation. I ask the two questions. Is it worth it? Can I afford it?
Once folks like Blinder harness government to serve purposes beyond these two questions, it’s hard to go back. The Blinders of the world will tell us we need government jobs to help the economy in bad times and they will tell us we need government jobs, for whatever reason (e.g. to solve something they believe the market is not addressing), in good times. For them, there always seems to be good, though dislocated, reason for growing government and no acceptable reasons for decreasing it.