Friday, September 23, 2011

Jobs vs. Government

By Lewis Sage

Point one: Anyone who’s paying any attention at all recognizes that our budget battles stem in part from a real philosophical disagreement as to the proper size of government.  (See Framing the Budget Debate, 9/18/11.)  Some take the position that government is too big; others demur.  It seems out of fashion to speculate that the public sector might be too small for our own good.
Point two: Even the most cynical among us would agree that we all want employment to recover… sooner or later. And it’s absolutely clear to all that the private sector must grow dramatically to end the current malaise.  The trick – and what the fight might seem to be about – is how to ignite that growth.  Public employment is at the center, both because it measures the size of government and because it can either to spark or to squelch recovery.
So where have policy initiatives – or the lack of them – taken us recently?  What choices have we made, at least implicitly?  For evidence, let’s look at the past twelve months.  (Data are from
Between August 2010 and August 2011, seasonally adjusted employment in the US increased by a net 357,000.  Digging a bit deeper, we find that, in the private sector, changes in agriculture (+) and self-employment (-) washed each other out, while the rest of the private sector added about 560,000 jobs, an increase of a little more than 0.5%.  Not much, certainly not enough to drive down the rate of unemployment, but a move in the right direction.  Public sector employment, on the other hand, fell by 278,000 jobs in the same interval, cancelling roughly half the effect of private-sector growth as states scrambled to cut spending and balance their bleeding budgets without adequate federal support.
That’s no way to reduce unemployment and spur recovery.  It looks much more like a way to shrink government and delay economic growth.

Dr. Lewis C. Sage likes intersections. Since 1991, he has taught Law and Economics, Mathematical Economics, and the Economics of Healthcare. A former Fulbright Fellow (Bulgaria 1995-6), he teaches an interdisciplinary Honors seminar, Enduring Questions, and is studying strategy in the NFL draft with faculty and students in Sports Management and Psychology. E-mail:

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This blog lives under the auspices of the Department of Economics whose mission has been to hold high the lantern beaming an "economic way of thinking" onto the world. Selfishness, rationality and equilibrium have been central to the teaching of an economic way of thinking rooted in the Renaissance. And, in this regard, the department has faithfully stayed the course. The intent of this blog, thinking out loud..., however, is to entertain exchanges which may challenge the centrality of economics as we teach it.