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Making Things Worse By Cutting Government Jobs

David Callahan

The Washington Post ran a remarkable article yesterday on how huge layoffs by state and local governments -- with over 600,000 jobs lost since 2009 -- have been a leading obstacle to economic recovery.

And it is still happening. Nearly every month, the jobs numbers are worse than they might otherwise be thanks to public sector layoffs, and the latest data released today are no exception. The private sector created 130,000 jobs -- but the public sector fired 15,000 workers, for a net of 115,000 new jobs. In other words, we got 12 percent less job growth last month because government is laying people off amid the worse unemployment crisis since the Great Depression.

This is crazy. While everyone is supposedly scratching their heads about how to spark job growth, we can't agree on the easiest possible solution to making things better -- not firing people.

And this is why the Post article is so interesting -- or, rather, so appalling. The article tallies the damage from government layoffs, quoting Mark Zandi, chief economist at Moody’s Analytics, as saying that “The job losses at state and local governments is the most serious weight on the job market."

Then it recounts the total obstructionism of Republican leaders (and some Democrats, too) whenever President Obama has wanted to do something about this problem. The Post quotes conservatives saying that this downsizing is a good thing, because state and local governments had gotten too big:

Andrew Biggs, a scholar at the conservative American Enterprise Institute, said that nobody wants people to lose their jobs unnecessarily but that it was right for the federal government not to do more to save these positions, because state and local governments had become bloated.

“It strikes an emotional chord with people if we have teacher layoffs, but we have hired a great many teachers in the past several decades,” Biggs said. He added that the layoffs “ultimately get you closer to where you should be in terms of the size of the public-sector workforce.”

Yes, Biggs really said all that -- and here's why he's wildly wrong. First and foremost, whatever one might think about the proper size of government, a recession is not the moment to be firing anyone. If government should be downsized, let's do it later when every pink slip doesn't serve to worsen a grinding recession. Among other things, as I have written here before, the fiscal benefits of firing public workers is nothing like it looks. Fired workers no longer pay taxes, which means lost revenue, and they start collecting unemployment and maybe food stamps and other benefits, too, which means increased outlays.

As for Biggs' larger claim, that government had gotten too big, where's the evidence of that? The size of the combined state and local government payroll grew by 19 percent between 1995 and 2008 -- but the U.S. population during this same period grew by 15 percent. 

Drilling down further, we find that the size of the school age population grew by about ten percent during this period. And, as it happens, the number of public workers in education (which make up about a quarter of all state and local government employees), grew at exactly the same rate -- ten percent.

In other words, since 1995, government expansion has tracked roughly with population growth and, in the education sector, almost precisely with growing number of school age kids. Why does any of this suggest that mass layoffs now make sense?

On the contrary, there is evidence that the U.S. needed more education workers, not less, before we started firing them in droves. Class size is a huge concern to parents, and there is much research to suggest that students learn better in smaller classes (although this issue is complex). Class size became a major focus on education improvement efforts during the Bush years, with many states passing laws governing class size.

One last point: The most notable growth in public payrolls came as states and localities hired more cops and prison guards amid a crackdown on crime and mass incarceration. The number of such workers grew by 25 percent between 1995 and 2008, more than twice the rate as the education sector.

It wasn't big government liberals leading the charge for this expansion. It was law-and-order conservatives.