I know I’ve mentioned it before, but if we saw the same public sector growth over the last few years that is customary during economic downturns, or just growth consistent with population growth, [the unemployment rate] would be at least a full point lower. In fact, higher unemployment is a consequence of austerity, particularly at the state and local level. The economy has been given a shot of stimulus from a variety of sources, but much of that has been counteracted by this austerity. Paul Krugman explains today.
In fact, if it weren’t for this destructive fiscal austerity, our unemployment rate would almost certainly be lower now than it was at a comparable stage of the “Morning in America” recovery during the Reagan era.
Notice that I said “government in America,” not “the federal government.” The federal government has been pursuing what amount to contractionary policies as the last vestiges of the Obama stimulus fade out, but the big cuts have come at the state and local level. These state and local cuts have led to a sharp fall in both government employment and government spending on goods and services, exerting a powerful drag on the economy as a whole.
One way to dramatize just how severe our de facto austerity has been is to compare government employment and spending during the Obama-era economic expansion, which began in June 2009, with their tracks during the Reagan-era expansion, which began in November 1982.
Start with government employment (which is mainly at the state and local level, with about half the jobs in education). By this stage in the Reagan recovery, government employment had risen by 3.1 percent; this time around, it’s down by 2.7 percent.
Next, look at government purchases of goods and services (as distinct from transfers to individuals, like unemployment benefits). Adjusted for inflation, by this stage of the Reagan recovery, such purchases had risen by 11.6 percent; this time, they’re down by 2.6 percent.
I’m glad Krugman put the links to his blog posts in the online edition of the op-ed. You can pretty well figure out what Krugman will write about on Mondays and Fridays by reading his blog throughout the week. And the data tells the story in this case. Government employment and government purchases are way down, when in other recoveries they were way up. You’re talking about 1.3 million more Americans employed if we used the same strategies from the Reagan recovery.
That’s why we’re bound to the recovery we have. Probably the best thing we could have done for the economy over the past several years would have been to expand state fiscal transfers. Sure, they would have been called bailouts, but there was a compelling story to tell about saving the jobs of teachers and cops and firefighters, a case that the White House and Democrats in Congress never fully made. We got an edu-jobs bill in mid-2010, but the size was not nearly enough to stop the job losses. And as Krugman writes, when you scale back public education and investment, the practical effect of those job losses, that has far-reaching effects into the future.
Obviously the Congressional makeups have been different since 2011. And I really don’t want to re-litigate what could have been done during the 60-vote Senate interregnum, pre-Scott Brown, in 2009-2010 (though it should be mentioned that the Local Jobs for America Act, a direct boost to state and local spending, was sloshing around Congress at that time). But the road to a full recovery always drove right through state capitols and local government. Keeping them flush would have us in a far better position today.




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What do you mean, “slow growth economy”, David?
Highly Unequal Income Gains During the Recovery
11.6% sounds like a pretty robust growth rate to me.
Eh? Giving teachers, fire fighters, police, social workers & other assorted lazy slacker govt union workers the pink slip is the DREAM GOAL so lovingly & forcibly *achieved* by the 1%.
Remember that the Dow heads ever upwards, along with the cost of a tank of gas.
Where’s the beef? This is what the 1% want. Mission Accomplished!
Britain is undergoing an austerity ‘pogrom’ and I think approximately 270,000 public sector workers have so far been given pink slips. This has served to drag their economy even further into depression:
http://www.ekklesia.co.uk/node/16365
I guess Americans intend to head in the same direction.
Right. Taking more money from productive citizens to spend on paper pushers is the road to success? No.
New jobs requires new economic wealth be produced. Govt doesn’t produce anything anyone wants to buy. Witness the Volt’s demise.
The really sad part about all this is the refusal of Krugmanites to recognize that this isn’t a demand recession, it’s a debt recession. There are only two ways out of a debt recession, forgive the debt, or pay the debt off. Adding to the debt just makes things worse.
I can understand the allure of free money. But we’ve thrown trillions at the economy to no avail. All of it printed or borrowed. Mostly printed.
Krugman is like the grocer to whom a customer complained, “the diet ice cream I bought isn’t taking off any weight”! To which Krugman replies, you’re not eating enough, have some more.
You’ve got a choice, some austerity now, or catastrophic austerity later.
Take your pick.
The USA- of the jackasses, by the jackasses, for the jackasses.
Clockwork orange is the reward these creeps will inherit. Their $ ciphers on a computer screen will not save them when their deserved day comes.
And I really don’t want to re-litigate what could have been done during the 60-vote Senate interregnum.
No, please do. Because “re-litigate” is exactly what Larry Summers and Tim Geithner did to water down Obama’s economic program.
No, the French had other options BUDDY .
Well, yes. But also look at unemployment benefits. 26 weeks vs. 99 weeks, money that could have been used to pay teachers, fire fighters and police.
Consider: “The drawback to generous unemployment benefits is that it reduces a worker’s incentive to quickly find a new job.”
Yves guest post http://www.nakedcapitalism.com/2012/03/chris-cook-the-ghost-of-enron-past-explains-oil-market-manipulation.html
describes in great detail how Enron style oil markets manipulations have skinned consumers. certainly austerity focused on local government down size as well as federal so the 1% are in tall cotton.
The pantload of socio/religoius bullshit by the MSM is a major distraction as is saber rattling. The big con is on.
Devil is in the details, huh, allan?
Thanks for that. I knew MY situation wasn’t getting any better. OTOH, my wealthy 1% boss just came back from a S. Pacific cruise. NOT on Costa.
genuinely a remarkable presumptuous habit how the puppet masters can
flatten Social Security with their folly and blame it also.
And they blame everyone in sight around the world. After all, there
are cronies there too.
Except, in their efforts to suspend all manner of economics (calling you
not capitalist in perfect hypocritical form,) law (who needs usual and
ordinary proof of title?) and immigration (in practice his ideas are
plausible, but got Schumer? (VISA’s galore if you by-pass our screwed
middle class and pay up for TBTF banks’ over-valued assets,) they’re not
just making a mockery of the ideals they smugly claim you don’t measure
up to (while they sociopathically try limiting you,) but they actually
chase investment away with their -0- interest rates.
They can’t shaft China and their thus-aided yuan, because their cronyism
requires the input indefinitely.
The truth is economically, mathematically
–
—I happen to be someone who’s said the historians call it: “periodization,”
the economists: “tails,” wherein morality, math and history can become
one—
_____________________________
this will not work without our freeing ourselves from the fraud and arrogance.
Actually, Stiglitz (I never won a Nobel, but he did) has said as much:
http://www.businessinsider.com/nobel-economist-says-we-have-to-prosecute-fraud-or-else-the-economy-wont-recover-2010-11
http://www.businessinsider.com/stiglitz-fed-creating-chaos-2010-10#ixzz11W1eoMXZ
I’m not traditionally curious in morality, but labor on the other side
of the world wouldn’t be a problem on this side but for those other cronies.
So, this is really a practiced strategy for slavery, an arrogant entitlement to it, an economy and civil system that can’t survive absent
seeing past division.
This in part defines a lot of hypocrisy, identifying the finger pointers as the real bad guys and thus affording that curiosity, and my own super-narrow freakasauris thought is this could be coalescing because it’s conveyed.
–
Well then, I can’t end this on “freakasauris.”
So, google Reich, Chinn austerity.
and make the TBTF bankers pay up one way or the other, and tell
the corps about this:
http://robertreich.org/post/16123475847
and tell the billionaires they too often pay no taxes and you don’t like it.
Not even hiring in China right now. Go quickly find that new job. Lazy people work for someone else. Start your own business and become a millionaire. We can get robots to do the unpleasant work and the surplus population can just starve to death. I got mine without anyone’s help. All on my own. No need for parents, teacher, doctors, lawyers, servants, truckers, laborers, etc, etc,
. The bullshit meme that you can pull yourself up by your own bootstraps is a total myth. Defy anyone to show me anyone who became rich on their own effort. Never has happened in the history of mankind. We are dependent on all humans past and present .
Too bad, Costa giving some good prices now.
Then why aren’t you a millionaire too?
Easy peasy, right? Somebody else did all the work?
Heh.
Paul Krugman’s not going to like to hear that.
Page 210 of Macroeconomics, Paul R. Krugman
Side Effects of Public Policy
“The really sad part about all this is the refusal of Krugmanites to recognize that this isn’t a demand recession, it’s a debt recession. There are only two ways out of a debt recession, forgive the debt, or pay the debt off. Adding to the debt just makes things worse.” You have ZERO proof of that. All the proof lies on the other side. We have a classic demand depression here going on. The lack of demand is above 20% across the board and almost every business person sees it. The ONLY ones able to raise prices endlessly are those folks in monopoly or tbtf situations ( the banks)or Ins. non-market situations / medical Ins. All of those situations are POLITICAL. If Drug companies for instance had to face Medicare negotiators on par with the guys at the VA for instance drug prices would plummet overnight and it goes on and on like that. BIG Gov’t is indeed in the way, but its because of corruption / payoffs to pols that shield many of these companies from real competition. As for the debt being the problem, then why wasn’t it an issue when BV$H 2 was in office? We all know why! Because when Retardicans run up debts that doesn’t count! They just put it all on the Nat’l Defense tab no matter what it is and its magically no longer debt. The only debts you guys see are ones that actually HELP average people and aren’t buying guns, planes, and corrupt foreign pols et al. If Romney gets in the debt will magically take a back seat again as far as you guys are concerned. Economics has absolutely NOTHING to do with it.
When six apply for one available job what is your advice to the other five. Move to…
There is only one way to create jobs, and that is to bring back manufacturing. No matter how much money is going to be poured into government created job, it will be of no use. It is like having a leaky tank into which you keep pouring water but it is just leaking out. I know politicians would like us to believe that these jobs can never come back, and they are not as long as we long as the corporations keep paying off to keep these jobs overseas and have low duties on imported products. But this is the only place where the jobs are. So until we fix our political system, it is not possible to fix the economic system. We may have to wait a few decades for the current economic cycle to run its course, until the time when manufacturing is going to be more cost effective here than, say in Africa, which could be the next place where the search for cheaper labor will take us after China. Trust me, China will never allow importation of cheaper products into China. That would be political suicide. I believe their recent revolution is still keeping the fear of God in their elites, and they know that empty stomachs can be very explosive.
I tried to get them on Costa. I said, “What are the odds they (Costa) would have another mishap?”
Not my advice.
Krugman is wise and should be revered like his quotes for today’s article, or not?
So no solution offered, no problem solving attempted, just fallacious argument from the peanut gallery as usual.
Recent college grads are entering a job market that is worst in history for them. Many are working at unpaid internships. The billionaires and their minions have not created enough jobs and real wages are lower for the average worker than they were in 1978. Wealth (rightly or wrongly) is consolidating into a smaller and smaller number of people. We are still the richest country in the world but have a distribution problem not a resource problem. How do you propose to sovle these macro economic issues. Your comments don’t add to our fund of knowledge and are really uninformed. Cutting and pasting doesn’t make you intelligent. I ask again what is your solution to the real problems our country faces?
The problem is that if something goes wrong on a Costa cruise, you have to file suit in the District Court of San Marino. And try your case in person. Without a lawyer. And your maximum recovery is 1,000 Italian lire.
I think the bigger problem is you might still be in the ship when it is underwater.:)
Bad enough to be underwater in your home, but being underwater in a Costa ship is much worse.
Keynes is not mocked. As Davie Cameron’s finding out in the UK.
who do you define as a productive citizen since you seem to be saying teachers and firefighters are not? Krugman is stating a hallmark of the Reagan recovery was the growth of government employment and spending not the reverse of what is going on right now. What are you talking about?
See my comment #22 applies to this troll as well.
No you borrow money at historic low rates.
Pay it to productive citizens for building infastucture.
This supplies demand which will increase production.
This supplies demand which will increase production.
This supplies demand which will increase production.
Once you have this nice little feedback loop going,
you siphon off your initial investment and pay it back.
As if anything I could add would change your mind.
How about if I team up with #29. Let’s build infrastructure, like a pipeline, we don’t even need to borrow money, someone’s willing to pay for it.
NOOO!
Well then, better to take a relief check.
A pipeline across the U.S. to ship oil to China that creats at most 111 jobs is not infrastructure but for once I agree with you; you could not add anything to change my mind. A superficial knowledge of the problem and a counterattack response to my challenge with another meme from the Koch Bros.
That would be lovely in a demand recession, but we’re not in a demand recession. We’re in a debt recession. Demand is always present, but paying the bills leaves little or no discretionary income.
And no, the money spent now, will never be paid back. That’s the fundamental Keynesian flaw. Debt is rolled over and over and over, waiting for the day when inflated dollars make the debt look manageable.
“I believe their recent revolution is still keeping the fear of God in their elites, and they know that empty stomachs can be very explosive.” I think your right. Our elites though believe the opposite and will eventually pay a heavy price for this belief. The Occupy thing was just a minor tremblor compared to what is in the pipeline if things continue on in this manner.
Things are continuing in this manner
Evidence please. And if you look, you won’t find much. This idea that ui significantly affects unemployment durations is an urban myth. You can look it up.
Appears there is a new economic theory that I was not aware of – debt recession theory.
Could you please explain how taking on debt, either at the Federal government level or some other level, causes a nations recession? In your answer please take into account that nations do not have budget limits as such since they can, if they have their own currency, debased the currency as much as needed, no matter what the debt level.
Longer period of potential unemployment insurance “reduces a worker’s incentive to quickly find a new job” is shown by historical studies to be not a true statement.
However Fox folks do claim it is true.
As for the simplistic – set up to confuse students by unnecessary information – but “fair and balanced” Page 210 of Macroeconomics, Paul R. Krugman – Side Effects of Public Policy
Most economically advanced countries provide benefits to laid-off workers as a way to tide them over until they find a new job. In the United States, these benefits typically replace only a small fraction of a worker’s income and expire after 26 weeks. In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that afflicts a number of European economies.
But then the above says “widely believed” – and Peterson/Koch money can get things widely believed.
Not national debt, consumer debt. People aren’t going to borrow and spend when they are underwater with their home or insecure about their employment.
Unlike the US, regular people have to repay what they borrow.
I did look it up.
Page 210 of Macroeconomics, Paul R. Krugman
Side Effects of Public Policy
Enitre quote at #16.
Widely believed refers to Europe.
Mr. Krugman, who’s opinion forms the basis for this article asserts, “The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job.”
He’s good enough to quote today, but we can’t believe what he wrote yesterday? I guess it depends on whatever fits your preconceived worldview.