Much of the talk about today’s jobs report concerns the large number of government layoffs — especially local government layoffs — offsetting anemic private-sector job creation to give us a negative jobs report. Liberals are fuming. Ezra Klein’s reaction is typical:
The government is now impeding an economic recovery. But it’s not for the reasons you often hear. It’s not because of debt or because of taxes. Nor has it scared the private sector into timidity. It’s because, at the state and local level, it’s firing people. There are more than 14 million Americans looking for work right now — to say nothing of the 9.5 million who have been forced into part-time jobs when they want, and need, full-time work — and the government just added 159,000 more to the pool. Consider this: If we only counted private-sector jobs, we’d have had positive jobs reports for the last nine months. As it is, public-sector losses have wiped out private-sector gains for the past four months.
Ezra acknowledges that 77,000 of the 159,000 public-sector workers laid off were temporary census workers — I suppose we could demand a recount — but he is much more incensed about the 83,000 state and local government workers who joined the ranks of the unemployed last month. These governments cannot run deficits, but the federal government can, and liberals think it should borrow more and give more than it already has to state and local governments to prevent layoffs. Ezra is angry because “Senate Republicans, alongside some conservative Democrats, have decided to make the government pro-cyclical: Rather than fighting the downturn in the business cycle, the government is now accelerating it.”
The opposite of pro-cyclical is counter-cyclical, but making the government counter-cyclical, in practice, means making it counter-cyclical in only one direction: higher spending during downturns, but no cutbacks during upswings. The reason conservative governors such as Rick Perry have turned down federal aid during this cycle is that such aid forces state and local governments to commit to a higher baseline, which usually means higher taxes — I predict that nobody who is calling for the government to be counter-cyclical during this recession is going to suddenly start cheering for layoffs when the boom times return.
In fact, most state and local governments heedlessly overexpand when times are good and reserve little if any money for their rainy-day funds, thus setting the stage for the next round of federal bailouts when that rainy day arrives. That’s “counter-cyclical” state aid policy, in a nutshell, which is why Senate Republicans were right to put a cap on how much they were willing to spend. Since the summer of 2007, when the subprime-mortgage meltdown began, state and local governments have shed around 70,000 jobs, while the private sector has shed over 7,700,000. So let’s keep some perspective about the real source of our continuing unemployment woes and the government’s ability to solve them through borrowing and spending alone.