There is nothing I hate worse than a person who comes into an economics discussion with a political point to prove. Unless it is the fast food industry, which is making our kids fat and sick. I hate those guys worse. Or maybe the human traffickers. Those guys are awful and I hate them more than anything. Except people who sadistically abuse animals. Perhaps they are just as bad? Yes, I think they are just as bad. But anyway, the bending economics to fit a preferred political outcome drives me nuts.
So I understand the temptation to bat away the question “Which is better at creating jobs, the government or the private sector?” because its premise is aimed at a political end. But in a period of stagnant job growth and high unemployment, it is fair to ask where the jobs might come from. I find it a bit disingenuous as well to claim that neither sector is geared to creating jobs. In the rubrics of the Bureau of Labor Statistics, all we have are the private sector and the government (non-profits are private as far as the BLS cares.) So, in terms of volume, who does better?
The private sector, obviously. In Buncombe County, 86% of the 109,832 jobs reported by the BLS in 2009 were private sector jobs. Federal, State, and Local Governments combined accounted for 15,917, with over half of those being Local government employees. Yet the public sector is growing. Federal employment grew by almost 14% between 2007 and 2009 while the number of state jobs grew by 2%. Who says the government can’t create jobs? And while local government employment fell by .2%, private sector employment has dropped a whopping 7% in the 2007-09 period. So through this recession, the public sector has done a better job at, um, creating jobs.
Except that it’s still only 14% of the total employment and we don’t really want everyone working for the government if for no other reason than that there would be nobody to pay for government. Ok, and we don’t want to live in a socialist country. Or not all of us. Anyway, the growth in government jobs is not meant to replace jobs lost in the private sector. The good Keynesians in the White House Budget Office hope that adding more jobs will stimulate growth in the private sector. And they are sort of right. The government intervention we have tried, which is less that most Keynesian economists hoped for, has stopped the economy from crumbling. And there was much rejoicing.
But it hasn’t gotten us going again, which is starting to be a problem. More government intervention will not fix the job growth problem, but it can produce demand which will stimulate the private sector to produce which will require the hiring of more labor which will mean more consumer demand for products which will, well, you get the point. So, let’s get some more stimulus up in here! Just as soon as we get it past Congress. Right. You get the point again. But there is more to the story.
Government can make expenditures of stimulus money by drawing on the deep well which is the American taxpayer. Corporations, however, are also sitting on wells of their own at this point. Or perhaps more like strategic oil reserves of their own. In fact, some companies probably call them reserves. There is a lot of cash sitting in corporate treasuries which could be invested in capital improvements which would create demand for products that would lead producers to hire workers who would then create demand for consumer goods which would, well, you get the point. So, let’s get us some capital investment up in here! As soon as these companies trust one another and the government, we’ll be all set.
And in the meantime, who will bake the bread for us? See, government and the private sector are not so much the brick and the stapler which Tom Sullivan calls them in his Scrutiny Hooligans post, they are the dog and the cat in the Little Red Hen story. (Or government may be two cats fighting over a ball of string which the rest of us have ceased to give a damn about.) We need to eat and neither the dog or the cat is willing to do what it takes to make the bread. Enter the Federal Reserve with “Quantitative Easing” round 2. Did you know that our Little Red Hen cooked up $600 billion in new money last week? I’m not talking about replacing worn out bills with crisp new bills. I mean they said, “Hey, do we want $600 billion up in here now? Don’t mind if we do.” And poof, it was done. This is a bigger f’ing deal than anything Joe Biden ever saw, and it was necessitated by the inability of any other economic player to act.