Arnold Kling  

A Fact for Tyler Cowen

Rethinking Macroeconomics, Con... Cash for Clunky Ideas...

The New York Times reports,

While the private sector has shed 6.9 million jobs since the beginning of the recession, state and local governments have expanded their payrolls and added 110,000 jobs

For some reason, Tyler buys into the Paul Krugman "Fifty little Hoovers" propaganda that a big threat to the economy is state and local cutbacks. I confess that ten years ago I thought that a great thing to do in a recession was stimulate state and local spending, but that was back when I saw macro in hydraulic terms and not in Recalculation terms. From a Recalculation perspective, trying to expand the state and local sector is not such a fine idea.

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CATEGORIES: Macroeconomics

COMMENTS (7 to date)
Boonton writes:

Arnold would do well to pay closer attention to the numbers:

The report, based on an analysis of federal jobs data, found that state and local governments steadily added jobs for eight months after the recession began in December 2007, with their employment peaking last August. State and local governments have since lost 55,000 jobs, but from the beginning of the recession through last month they gained a net of 110,000 jobs, the report found, in part because of the federal stimulus program.

From Dec 2007 to Aug 2008 state and local gov't has been gaining jobs. Note that while the recession began in Dec 2007 it really was driven home until Sep/Oct 2008 when the markets collapsed.

From Aug 2008 through today they have lost 55,000

so during the worse of the recession the states have been cutting jobs (and that's not counting the unpaid 'forced holidays' many states are doing). Krugman's '50 little Hoovers' concept appears quite valid. The states are cutting back in a pro rather than anticyclical manner. Now you can argue that whether or not this is a good thing or not but just citing the 110,000 gain figure is misleading. It implies that the despite all the news stories about state budget crises and shutdowns the states haven't really been cutting back.

Massimo writes:

I wish I could understand this post... Hydraulic terms? Recalculation perspective? I am lost

Troy Camplin writes:

Actually, the government job losses are negligible compared to the monthly losses during the same period.

Nevertheless, the government jobs are a net loss for society. To pay them, you have to tax the private sector. Even if you argue that the public sector does create some wealth (and I'm being generous here, as I am pretty certain it does not, but is merely paid to redistribute wealth, which is further wealth-destroying), that will not be nearly what would have been created in the private sector. Thus, expansion of government jobs destroys rather than creates wealth, and will extend the depression even further. Make-work does not make wealth, and wealth is what we need to make in a depression.

Don the libertarian Democrat writes:

I think that you should call your plan "Constant Calculation". "Recalculation" makes your plan also sound hydraulic. We're going from A to B, where B is a steady state or something like that. Then you can say that anything that hinders this ability to constantly recalculate, at any point, is a problem. But maybe I'm misunderstanding your view.

Niccolo writes:

So, Boonton, a loss of 50,000 jobs changes the point? That's a very small amount of the labour force in the public sector alone.

Brandon Berg writes:

Isn't it a myth that Hoover cut spending? According to this publication from Cato, federal spending, in real per capita terms, nearly doubled under Hoover.

Boonton writes:

So, Boonton, a loss of 50,000 jobs changes the point?

Well if your point is that state and local gov't responded to the recession by increasing employment then yes it disproves that point. The losses would have been even greater without the state and local aid portions of the stimulus bill. And, as I pointed out, this does not include 'unpaid holidays' and other types of wage cuts that state and local gov'ts have resorted to in order to avoid layoffs.

That's a very small amount of the labour force in the public sector alone.

I agree there. If you read the report they have a chart on total employment in 2007. State was 4.307M and local was 12.146M for a total of 16.453. An expansion of 110k employees doesn't amount to even a single percentage point change.

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