Ezra Klein posts a graph of modestly declining public sector employment that “says it all,” according to some. Maybe not! 1) First, as Keith Hennessey points out, while the graph shows a decline in public sector employment, at the federal level (outside the Post Office) public sector jobs have grown since Obama took office. The loss has been in state and local governments, whose workforces have been steadily bloating since around 1980. 2) And even that loss of public jobs pales besides the loss of private jobs (by a ratio of 11 to 1). 3) More important, there’s the issue of causality: the chart seems to show public jobs declining, unlike in other recessions. But is that because this recession has been more stubborn and persistent than previous recessions (as Paul Krugman, in other contexts, insists that he predicted)? In those prior recessions, when growth rapidly recovered, so did tax revenues–and the ability to employ government workers! (Here’s a graph showing that the recovery in output from the two prior recessions was faster than recovery from the current recession–while the recovery from basically all recessions before the last three was much faster.) In this recession, Democrats voted a temporary subsidy for state and local governments to keep up their hiring–and when it expired, those governments found they couldn’t afford to keep on as many employees–especially given the unsustainable pensions and benefits Democrats and others had granted oft-unionized public workers in good times (and that the Dem stimulus subsidized).
Again, none of this means government jobs might not be a useful stimulus mechanism–though I wish just once they’d decide that freelance bloggers and not well-paid, tenured state bureaucrats were the lucky Keynesian demand-conduits. But it doesn’t mean the recent mild decline in public employment makes all those Republicans whose presidents presided over previous recessions hypocrites (Klein’s conclusion). It might mean this recession is different from previous recessions, or that the policy response of this White House was peculiarly ineffective, or that one party’s** spending chickens had finally come home to roost. …
**–Governors and mayors of both parties’ enabled the runups in pensions and benefits, of course. But mainly Democrats. And the Tea Party revolt may have now changed the Republicans’ attitude.