Tag: jobs

Obama vs. Romney on Public School Jobs

In a high-profile presser on the economy last Friday, President Obama’s central proposal was to hire more public employees. Then, in his weekly address, he argued that hiring more public school teachers would allow the U.S. to educate its way to prosperity. His Republican presidential rival, Governor Romney, has recommended precisely the opposite: reducing the size of government to boost private sector job growth–and he, too, mentions public school teachers. So… who’s right?

First, let’s look at public school employment and student enrollment over time.

As the chart makes clear, enrollment is only up 8.5% since 1970, whereas employment is up 96.2%. In other words, the public school workforce has grown 11 times faster than enrollment over the past 40 years. What difference does that make in economic terms? If we went back to the staff-to-student ratio we had in 1970, we’d be saving… $210 billion… annually.

Wait a minute, though! Research by economist Rick Hanushek and others has found that improved student achievement boosts economic growth. So if the 2.9 million extra public school employees we’ve hired since 1970 have improved achievement substantially, we might well be coming out ahead economically. So let’s look at those numbers…

Uh oh. Despite hiring nearly 3 million more people and spending a resulting $210 billion more every year, achievement near the end of high school has stagnated in math and reading and actually declined slightly in science since 1970. This chart also shows the cost of sending a student all the way through the K-12 system–the total cost per pupil of each graduating class from 1970 to the present. As you can see, on a per pupil basis, a K-12 education has gone from about $55,000 to about $150,000 in real, inflation-adjusted terms.

The implications of these charts are tragic: the public school monopoly is warehousing 3 million people in jobs that appear to have done nothing to improve student learning. Our K-12 government school system simply does not know how to harness the skills of our education workforce, and so is preventing these people from contributing to our economy while consuming massive quantities of tax dollars. So what would hiring even more people into that system do for our economy…

More Sub-Par Employment Numbers

The Labor Department just released its monthly employment report and the White House is probably not happy.

There are several key bits of data in the report, such as the unemployment rate, net job creation, and employment-population ratio.

At best, the results are mediocre. The unemployment rate generally gets the most attention, and that was bad news since the joblessness rate jumped to 8.2 percent.

What makes that number particularly painful is that the Obama Administration claimed that the unemployment rate today would be less than 6 percent if the so-called stimulus was adopted. But as you can see from the chart, squandering $800 billion on a Keynesian package hasn’t worked.

While that chart is probably embarrassing to the White House, I think the most revealing numbers come from the Minneapolis Federal Reserve Bank’s interactive website, which allows users to compare employment data and GDP data for different business cycles.

I looked at those numbers a couple of months ago, so I could compare Reaganomics and Obamanomics, and the difference is startling. The Reagan policies of lower tax rates, spending restraint, deregulation, and tight money generated much better results than the statist policies of Obama.

The most recent numbers, shown below, aren’t any better for the Obama Administration.

But I suppose the good news is that the United States is not Europe. Government is even bigger on the other side of the Atlantic and many of those nations are in the middle of a fiscal crisis and the unemployment rate averages 11 percent.

Sort of makes you wonder whether there’s a lesson to be learned. Maybe, just maybe, bigger government means weaker economic performance.

One Year Later, Another Look at Obamanomics vs. Reaganomics

On this day last year, I posted two charts that I developed using the Minneapolis Federal Reserve Bank’s interactive website.

Those two charts showed that the current recovery was very weak compared to the boom of the early 1980s.

But perhaps that was an unfair comparison. Maybe the Reagan recovery started strong and then hit a wall. Or maybe the Obama recovery was the economic equivalent of a late bloomer.

So let’s look at the same charts, but add an extra year of data. Does it make a difference?

Meh… not so much.

Let’s start with the GDP data. The comparison is striking. Under Reagan’s policies, the economy skyrocketed.  Heck, the chart prepared by the Minneapolis Fed doesn’t even go high enough to show how well the economy performed during the 1980s.

Under Obama’s policies, by contrast, we’ve just barely gotten back to where we were when the recession began. Unlike past recessions, we haven’t enjoyed a strong bounce. And this means we haven’t recovered the output that was lost during the downturn.

This is a damning indictment of Obamanomics

Indeed, I made this point several months ago when analyzing some work by Nobel laureate Robert Lucas. And it’s been highlighted more recently by James Pethokoukis of the American Enterprise Institute and the news pages of the Wall Street Journal.

Unfortunately, the jobs chart is probably even more discouraging. As you can see, employment is still far below where it started.

This is in stark contrast to the jobs boom during the Reagan years.

So what does this mean? How do we measure the human cost of the foregone growth and jobs that haven’t been created?

Writing in today’s Wall Street Journal, former Senator Phil Gramm and budgetary expert Mike Solon compare the current recovery to the post-war average as well as to what happened under Reagan.

If in this “recovery” our economy had grown and generated jobs at the average rate achieved following the 10 previous postwar recessions, GDP per person would be $4,528 higher and 13.7 million more Americans would be working today. …President Ronald Reagan’s policies ignited a recovery so powerful that if it were being repeated today, real per capita GDP would be $5,694 higher than it is now—an extra $22,776 for a family of four. Some 16.9 million more Americans would have jobs.

By the way, the Gramm-Solon column also addresses the argument that this recovery is anemic because the downturn was caused by a financial crisis. That’s certainly a reasonable argument, but they point out that Reagan had to deal with the damage caused by high inflation, which certainly wreaked havoc with parts of the financial system. They also compare today’s weak recovery to the boom that followed the financial crisis of 1907.

But I want to make a different point. As I’ve written before, Obama is not responsible for the current downturn. Yes, he was a Senator and he was part of the bipartisan consensus for easy money, Fannie/Freddie subsidies, bailout-fueled moral hazard, and a playing field tilted in favor of debt, but his share of the blame wouldn’t even merit an asterisk.

My problem with Obama is that he hasn’t fixed any of the problems. Instead, he has kept in place all of the bad policies - and in some cases made them worse. Indeed, I challenge anyone to identify a meaningful difference between the economic policy of Obama and the economic policy of Bush.

  • Bush increased government spending. Obama has been increasing government spending.
  • Bush adopted Keynesian “stimulus” policies. Obama adopted Keynesian “stimulus” policies.
  • Bush bailed out politically connected companies. Obama has been bailing out politically connected companies.
  • Bush supported the Fed’s easy-money policy. Obama has been supporting the Fed’s easy-money policy.
  • Bush created a new health care entitlement. Obama created a new health care entitlement.
  • Bush imposed costly new regulations on the financial sector. Obama imposed costly new regulations on the financial sector.

I could continue, but you probably get the  point. On economic issues, the only real difference is that Bush cut taxes and Obama is in favor of higher taxes. Though even that difference is somewhat overblown since Obama’s tax policies - up to this point - haven’t had a big impact on the overall tax burden (though that could change if his plans for higher tax rates ever go into effect).

This is why I always tell people not to pay attention to party labels. Bigger government doesn’t work, regardless of whether a politician is a Republican or Democrat. The problem isn’t Obamanomics, it’s Bushobamanomics. But since that’s a bit awkward, let’s just call it statism.

Debate on Government Stimulus

I am debating the need for more government spending to goose the economy and create jobs over at PolicyMic.com. I argue that we’ve had enough government “stimulation” (see here). My opponent argues that the federal government hasn’t spent enough money (see here). Readers will decide the “winner” and can add their own two cents.

The Pentagon and Jobs

Desperate to fend off cuts in military spending, the defenders of the status quo are claiming that potential reductions included in the debt ceiling deal’s sequestration provision would result in huge job losses. In September, Leon Panetta suggested that cuts of up to $1 trillion would increase the nation’s unemployment rate by a full percentage point, and put up to 1.5 million people out of work.

Early last week, the Aerospace Industry of America (AIA) jumped in claiming that “more than one million American jobs could be lost as a result of defense budget cuts if the deficit reduction select committee fails to reach agreement on alternative balanced budget solutions….”

The media picked up on the AIA’s press release, but their documentation was flimsy, at best: AIA offered up a five-page summary of the research conducted by George Mason University professor Stephen S. Fuller, and a video of the press conference in which Fuller, AIA CEO Marion Blakey, and Tom Buffenbarger, president of the International Association of Machinists and Aerospace Workers, railed against the “devastating impact” (Blakey) of military spending cuts and the “economic turmoil” (Buffenbarger) that would result.

Yesterday, nearly seven weeks after the secretary issued his dire warning, Panetta’s office released the findings of a report from Interindustry Forecasting at the University of Maryland (INFORUM) to buttress their claims.

By then, the counteroffensive was already in full swing. Bill Hartung has one of the better assessments that I’ve seen because it includes Bill’s insight into the inner workings of the military-industrial complex, blended with his characteristic wit. The bottom line, he explains, is that the contractors are doing just fine, and they will be in the future. The claims of massive job losses are just the latest in a string of scaremongering tactics aimed at allowing them to hold onto their loot.

Other opinion writers and columnists have fixed on aspects of the jobs argument that suit their broader purpose. Paul Krugman pushed a predictably Keynesian line (all government spending is good, but non-military spending is better). Others pointed to the hypocrisy of the situational Keynesians, people who generally oppose government spending when it buys road and bridges, but who embrace military spending for its supposedly magical stimulative effects. These are the “believers in the military spending fairy,” explains Dean Baker at the Center for Economic Policy Research.

None of this debate is new. In the late 1940s, Keynesians assailed Harry Truman for questioning whether excessive military spending might drag down the economy. Nonsense, they said. We can afford much more spending, and it will have wonderful stimulative effects, to boot. Many of these same Keynesians claimed that Dwight Eisenhower’s fiscal restraint was forcing the country to fight the Soviets with one arm tied behind its back. (Truman eventually relented, which has earned him the undying respect and admiration of liberal and conservative hawks alike; Ike’s fiscal conservatism, by contrast, has generated only scorn from the same group).

Ronald Reagan was no Keynesian, but he seemed to agree with them when it came to military spending. “Defense is not a budget issue,” he said, “You spend what you need.” And yet, not even the Gipper spent as much as we do today on our military. We are spending more, in inflation-adjusted terms, than at any time since World War II. More than during Korea, more than during Vietnam, and more, even, than in the early 1980s. It is likely that total military spending will be lower in 2012 than 2011, but most of these savings will come from the troop reductions in Iraq and Afghanistan. The Pentagon’s base budget may yet emerge unscathed.

Military spending advocates routinely skirt around such inconvenient facts. Looking at absolute spending, even if adjusted for inflation, they say, obscures the reality that spending as a share of GDP is relatively modest, in historical terms. But the hawks can’t have it both ways: they can’t claim on the one hand that military spending constitutes a very small share of the total economy (and therefore we can spend as much, or more, with ease), and at the same time wail about the massive job losses that would result from cuts in military spending.

In the end, it all comes back to opportunity costs. Unless one believes that every dollar saved from the Pentagon’s budget will be thrown into a huge government money hole in the New Mexico desert, the reality is that at least some–and likely most–of the taxpayers’ dollars that are currently dedicated to the military could be better employed elsewhere. My preference would be for each of us to keep a bit more of the money that we earn, money that we will then choose to spend as we see fit. This new private spending would more than offset the cuts in government spending, given the government’s inherent inefficiencies, dead-weight losses, etc. Yes, some workers might lose jobs in the near term, but, as Gordon Adams notes, the economy has recovered from a number of previous military build downs, which were deeper and faster than those envisioned today.

Finally, we should embrace the discipline that even modest fiscal constraints can have on our grand strategy. The most “draconian” cuts envisioned under sequestration would take the military’s budget back to 2007 levels–hardly a “lean” year for the defense industry–but policymakers are likely to pay more attention to how they allocate resources if they perceive that they have less of them.

During his last few months as the Chairman of the Joint Chiefs of Staff, Adm. Mike Mullen explained that the Pentagon had forgotten how to prioritize during more than a decade of ever-rising budgets. The White House and others in the national security community have as well. I’m confident that shrinking budgets will infuse a measure of prudence and restraint that is long overdue.

Cross-posted from the Skeptics at the National Interest.

Yes, ObamaCare Will Eliminate Some 800,000 Jobs

From my article “ObamaCare–The Way of the Dodo” in Virtual Mentor, a journal of the American Medical Association:

The CBO projects the law will eliminate an estimated 800,000 jobs. The fashionable retort is to note that this effect “primarily comes from workers who choose not to work because they no longer have to work at jobs just for the health insurance.” That defense fails for two reasons. First, a “job” is when Smith and Jones exchange labor for money. It doesn’t matter whether Jones withdraws the money or Smith withdraws the labor. Either act eliminates a job. Second, it’s an odd defense of a law to say it encourages people to consume without producing.

Emphasis added; citations embedded as hyperlinks.

Put differently: why should we care only about someone not getting a paycheck and not at all about a job left undone?

Update: When he’s talking about something other than ObamaCare, President Obama himself acknowledges that suppressing the labor supply is as harmful as suppressing demand. Obama laments how government policies “cost[] us hundreds of billions of dollars in wages that will not be earned, jobs that will not be done, and purchases that will not be made.”

Obama-Reid ‘Jobs’ Bill Soaked in Greece

A stated aim of the Obama-Reid jobs bill is to preserve the “competitive edge” that our “world-class” education system purportedly gives us. In an attempt to do that it would throw tens of billions of extra taxpayer dollars at public school employees.

A few problems with that: we’re not educationally world-class; we don’t have a competitive edge in k-12 education; and this bill would actually push the U.S. economy closer to a Greek-style economic disaster.

First, the belief that increasing public school employment helps students learn is demonstrably false. Over the past forty years, public school employment has grown 10 times faster than enrollment. If more teachers union jobs were going to boost student achievement, we’d have seen it by now. We haven’t. Achievement at the end of high school has been flat in reading and math and has declined in science over this period. I documented these facts the last time Democrats decided to stimulate their teachers union base, just one year and $10 billion ago.

So what has our public school hiring binge done for us? Since 1980, it has raised the cost of sending a child from Kindergarten through the 12th grade by $75,000 – doubling it to around $150,000, in 2009 dollars.

And what would going back to the staff-to-student ratio of 1980 do? It would save taxpayers over $140 billion annually.

But don’t those school employees need jobs? Of course they do. But we can’t afford to keep paying for millions of phony-baloney state jobs that have no impact on student learning. We need these men and women working in the productive sector of the economy – the free enterprise sector – so that they contribute to economic growth instead of being a fiscal anchor that drags us ever closer to the bottom of the Aegean. Freeing up the $140 billion currently squandered by the state schools would provide the resources to create those productive private sector jobs.

Continuing to tax the American people to sustain or even expand the current bloat, as Obama and Reid want to do, cripples our economic growth prospects by warehousing millions of potentially productive workers in unproductive jobs. The longer we do that, the slimmer our chances of economic recovery become. This Obama-Reid bill is such an incredibly bad idea, so obviously bad, that it is hard to imagine any remotely well-informed policymaker supporting it… unless, of course, they think the short term good will of public school employee unions is more important than the long-term prosperity of the American people.