Public worker layoffs, public works obstacles both hurt U.S. recovery

Bill Knight column for Mon., Tues., or Wed., June 18, 19 or 20


Trimming government jobs isn’t part of the solution; it’s part of the problem.
There can be adverse consequences to cutting costs, especially when those costs are actually human beings who buy products, pay taxes, help support the economy, and provide work society needs – and wants.

Federal aid to cities and states to retain police, teachers and other public employees, and to rebuild deteriorating roads, bridges and other infrastructure, have been blocked by Republicans, as President Obama reminded Americans in his press conference on June 8, when he said that layoffs of employees at state and local government is hampering the economic recovery, along with Europe’s financial crisis and a do-nothing Congress.

“Given the signs of weakness in the world economy, it’s critical that we take actions we can to strengthen the American economy right now,” said Obama, who called on Congress to reconsider the American Jobs Act Democrats proposed last fall. “If Congress decides not to do anything about all this because it’s an election year, they should explain to the American people why.”

While the U.S. economy continues to gain private-sector jobs monthly, the nation has lost more than half a million government jobs during the recovery, says Josh Bivens of the Economic Policy Institute (EPI), which called such downsizing an “unprecedented drag.”

If the U.S. government had drawn on successful strategies used in the past to recover from downturns, more than 1 million public-sector jobs would have been added. That would have added buying power as well as another 500,000 jobs in the private sector, Bivens says.

Instead, using a divide-and-conquer strategy, the GOP has scapegoated public employees to benefit Republicans’ wealthy patrons, according to economist Dean Baker of the Center for Economic and Policy Research.

“Politicians across the country are using heaping doses of the politics of envy to try to arouse the anger of workers,” Baker writes. “However, their targets are not the corporate CEOs pulling down tens of millions of dollars a year in pay and bonuses. Nor is it the Wall Street crew that got incredibly rich inflating the housing bubble and then took government handouts to stay alive through the bust. The targets of these politicians' wrath are school teachers, firefighters and other public sector workers.”

Elsewhere, Milwaukee writer Roger Bybee uncovered a Republican document laying out how the strategy could depress wages across the country across the board.

“In a paper called ‘Spend Less, Owe Less, Grow the Economy,’ Republican members of the Joint Economic Committee hailed the benefits of ‘decreasing the number and compensation of government workers,’ saying, ‘The effects of this will ripple into the private sector in the form of lower wages: A smaller government workforce increases the available supply of educated, skilled workers for private firms, thus lowering labor costs’,” Bybee shows.

During previous economic need, governments often used investments in infrastructure to stimulate the economy, and the 2008-2009 recession in the United States was no exception, according to a new paper from the Federal Reserve Bank of San Francisco for the National Bureau of Economic Research: “Roads to Prosperity or Bridges to Nowhere? Theory and Evidence on the Impact of Public Infrastructure Investment.”
But the infusion may not have been big enough or long enough to have the desired effect.

The Fed report shows that the $840 billion stimulus package enacted by Congress containing $105 billion for infrastructure -- including work on highways, bridges and railroads, plus wireless networks, power transmission lines and water projects – worked, as far as it went.

Past investment in infrastructure projects had positive effects on local Gross Domestic Product both immediately and after six to eight years, the Fed reports. Local economies immediately benefited at three times the amount of the funding (known as the multiplier effect) as the money spent moved through communities. Also, while initial GDP boosts occurred only for spending during recessions (not when the economy is expanding), long-term effects happened after spending during both recessions and expansions.

Finally, while the effect was positive, it wasn’t permanent: 10 years after such initial investments, local economies tended to return to their level of activity prior to the economic downturn.

Despite such evidence, Republicans continue to say defeating President Obama is their top goal, so they resort to blaming public employees and criticize investment in public works as unnecessary “pork” ripe for budget-cutting.

The economic crisis was not caused by nurses, firefighters, city or county employees, or medical workers. The public needs the work they do. And the results of eliminating such jobs can be as catastrophic as not repairing bridges.