The debate about the nation’s declining economy took an interesting turn this past week as liberals have begun arguing that cuts in public sector jobs are sinking any hopes of a recovery. That was the conceit of yesterday’s front-page story in the New York Times that claimed public worker layoffs are hurting the economy. This is an assertion that seems to contradict the focus of most public policy discussions in the past two years — especially during the debt ceiling crisis in 2011 — when most Democrats and Republicans agreed that government expenditures had to be cut and only differed over how much the size of the public payroll needed to be reduced. But with the Republican presidential candidate getting some traction by speaking out on the need to continue cutting back on the size of government, some liberals are pushing back and speaking not only about the cost to the public of cuts in services but also about the role of public sector jobs in inflating the country’s economic balloon.
In a limited sense, they are right, as the wages of government employees are part of the economy and when they disappear, it creates some unemployment as well as a decline in economic activity, not to mention pain for the families involved. But laments about these job cuts should not confuse us about the role the public sector plays in expanding the economy. Genuine growth, the sort of wealth creation that makes all the boats rise, comes from the private sector jobs, not government sinecures. Moreover, if the public schools and other government services are now to be merely seen as jobs programs, then the problems of our education system go a lot deeper than budget shortfalls.
The argument about how much role government spending plays in keeping the economy afloat dates back to the Depression and the heyday of Keynesianism. However, the idea that the creation of such public sector jobs creates permanent or sustainable growth is the sort of belief system that sustains bankrupt banana republics, not the United States.
We can reasonably debate just how big government needs to be, and there are cogent arguments to be made that assert the necessity of public services and the problems created when they are axed. But to speak of the schools or other departments as entitlements or as places to shift the unemployed is to take us down a road in which the government is assuming an outsized role in both our lives and the economy and where the private sector is bound to be negatively affected. A society that depends on the government not to just provide for vital services but for employing an increasingly large percentage of adults is one unlikely to be capable of ever digging itself out of an economic hole.
Just as important, dependence on government employment growth means an ever expanding budget deficit that sinks the nation in debt and makes the investment and savings that generate private sector growth and wealth creation less likely. That statist pattern is what we expect to see in Third World countries, where corrupt elites keep unemployment artificially low with vast government jobs programs that are a dual purpose form of stimulus/corruption. Such thinking is not only bad economics it degrades the entire idea of government and ensures that public services will be badly implemented. We are currently a long way from that, but the day our leaders start looking to public sector jobs as a way of solving our unemployment problems, we will have taken the first step toward an addiction to a form of spending that is difficult to break.