Job Squeeze

I keep hearing it said that "government jobs aren't real jobs," that in fact, some assert, government jobs squeeze out private sector employment and actually hurt the economy.

Really?

If people who live in Eastern North Carolina really believe that, they should petition their representatives and senators to close down the Marine Bases at Cherry Point and Camp Lejeune, the Seymour Johnson Air Force Base at Goldsboro, the Army Base at Fort Bragg, state funded institutions such as ECU, and on and on. In Raleigh, the legislature's new budget has cut the funding for the capitol police in half. Can't we do more?

One of the mysteries of political discourse is the ability of participants to hold conflicting views at the same time and actually act on them. This requires a skill at intellectual compartmentalization that I never acquired.

By the way, those who serve in our military actually hold government jobs. When they walk into Wal-Mart or Target, their money looks like anyone else's. Their checking and savings deposits have the same economic effect on their community as anyone else's. And if they lose their jobs through a reduction in force, it contracts the economy just as much as if they had been working for General Motors or Google.

We hear a lot about the GDP. What actually goes into the GDP? GDP equals private consumption and investment, plus net exports, plus gov’t spending. It's as simple as that. Reduce government spending without increasing private consumption and investment, and the economy will contract.

The reason private consumption isn't increasing is that people have no money. The reason companies aren't investing in increased production capacity is that they have ample excess capacity already and can't see a near term increase in customers.

This is elementary business plan stuff. Businessmen (unless they have grown soft in the head) make business decisions based on reality, not on whether the president or members of Congress have hurt their feelings.

Economist Jared Bernstein has a good question and answer posting on his blog today.

In today's circumstances, any reduction in federal spending can only contract the economy. To be sure, some reductions would be worse than others, but right now any reduction will be bad.

As we await news from Washington on increasing the debt limit, I have my fingers crossed that the outcome will be merely very bad (reducing spending when we really need a stimulus) rather than disastrous (going into default).