Though it feels like it was about a thousand years ago, it was only a couple of weeks back that President Barack Obama announced that the private sector was "doing fine" and that it was the public sector that really needed a helping hand getting through this furshlugginer economy. Former Massachusetts Gov. Mitt Romney bravely critiqued his presidential sparring partner by averring:
"[Obama] says we need more firemen, more policemen, more teachers….It's time for us to cut back on government and help the American people."
In the very best political tradition, each candidate immediately walked back his original statement through heavy—and half-hearted—qualification. Obama corrected himself by saying, "It is absolutely clear that the economy is not doing fine" and Romney said that it's "completely absurd" to say he'd pink-slip cops, firemen, and teachers because they are mostly hired at the state and local level (forget for a moment that a ton of federal dough is spent on hiring state-and-local cops, firemen, and teachers).
Whatever. A real question remains, and it's one that affects the objectively dreary state of public-sector America, which is flat-out broke at every level of government. Do we in fact have our staffing levels for teachers, cops, and firemen right? Could we get by with fewer of these sorts of employees or do we need yet more, to make up for the supposedly draconian cuts that have descended upon schoolhouses, police departments, and firehouses like Herod's minions murdering innocents?
A lot of Obama's stimulus was spent on keeping public-sector payrolls going full-tilt and now that the stimulus has dried up (and clearly failed to "prime the pump" of general economic activity in any serious way), some of those folks are being let go. At least at the state and local level. As Keith Hennessey notes, outside of the Postal Service (which has long been shrinking), Obama has added 1420,000 workers to the federal payroll.
Before we look at teachers, cops, and firemen in turn, consider the overall plight of working America. Here's a chart of private- and public-sector job losses since January 2009. Public-sector employment is indeed down from where it was back then and private-sector jobs are back to about where they were when Obama took office (though still lower than they were in pre-recession times; about 4 million jobs total have vanished since the start of the Great Recession in 2007, and 80 percent of those losses were in the private sector).
Despite recent cuts to the public-sector workforce, fears of teacher-less classrooms, cop-free streets, and empty firehouses are misplaced.
When it comes to teachers, in 2008 (the last year for which the federal government lists actual data), there were 15.3 pupils per teacher in public K-12 schools. That's the lowest recorded number. In 1998, the number was 16.4 and in 1978, it was 19.3. Over this same time period, the amount of money per student has increased tremendously and scores on the National Assessment of Educational Progress (NAEP) have stayed flat at best. Since 1970, the number of public-school students has increased by about 9 percent while the number of public-school employees (teachers plus everyone else) has increased by 96 percent. Something ain't right there. It seems quite plausible that states and local school districts can lose a good chunk of teachers without significantly impairing the quality (that may not be the right word) of K-12 public education.
What about cops? According to Bureau of Justice Statistics, in 1992 there were 332 "full-tme state and local law enforcement employees per 100,000 residents." By 2008, that number had jumped to 373 full-timers. To be fair, crime has been declining over that time frame, so maybe the extra cops have really made a difference. Yet most experts point to factors other than the sheer number of law enforcement employees to explain the decline. The population is aging, which correlates with less crime; the sorts of gadgets and gizmos that get ripped off are more affordable for everyone, leading to less crime; surveillance cameras (both private and public) seem to have chilled thefts and assaults; and more. So there's every reason to believe that we can scrimp on high-cost uniformed cops and not be met with a crime wave that will turn even Smallville, USA into Gotham City any time soon.
Then there's firefighters. Data from the National Fire Protection Association (NFPA) tracks the number of firefighters between 1986 and 2010. In 1986, there was a total of 4.35 volunteer and career firefighters per 1,000 Americans. That number dropped to 3.57 firefighters per 1,000 people in 2010. The number of career firefighters—these are the ones who are compensated by taxpayers—has remained relatively stable though, going from 1.73 per 1,000 people to 1.53 per 1,000 people. That's not much of a drop and it's worth pointing out that firefighting, unlike teaching or police work, doesn't scale the same way relative to population. Having more (or fewer people) doesn't clearly mean more (or fewer) fires. In any case, NFPA data show a decrease in "incidents attended by public fire departments." In 2003 (the oldest year I could find data for), for instance, public fire departments covered 1.6 million fires. In 2010, the numbers was 1.33 million. More people, fewer firemen, and fewer fires. That's great news.
So it seems that the American public can get by with fewer public-sector employees without spiraling down into chaos. Unless you believe that the primary function of the public sector is to be a jobs program, there is no reason to sweat recent cuts to public-sector jobs, whose numbers, as Mickey Kaus has pointed out, have "been bloating since around 1980." Obesity isn't just about food, it turns out.
As it happens, Nobel-winning economist and New York Times columnist Paul Krugman and many others (let's call them stimulatarians), seem to believe that a key function of government is precisely to employ lots of people who otherwise would look for work elsewhere. He argues that growth in public-sector employment is all that stands between recession and recovery:
Conservatives would have you believe that our disappointing economic performance has somehow been caused by excessive government spending, which crowds out private job creation. But the reality is that private-sector job growth has more or less matched the recoveries from the last two recessions; the big difference this time is an unprecedented fall in public employment, which is now about 1.4 million jobs less than it would be if it had grown as fast as it did under President George W. Bush.
I happen to think that the really big difference between this recession and the last two are the absolutely humongous interventions into the economy by the federal government via the stimulus, TARP, and ObamaCare (whose uncertain legal status and cost estimates can't in any way have helped businessess want to hire more people). I may be forgetting the great Pets.com bailout of 2001, but I don't think so. What's more, argues Krugman in a recent column, the lackluster experience of Ireland's "austerity" program, in which 28,000 public workers were canned over a few years, shows that reducing public payrolls is no way to win the future:
Recovery never came; Irish unemployment is more than 14 percent. Ireland's experience shows that austerity in the face of a depressed economy is a terrible mistake to be avoided if possible.
Let the record show that George W. Bush, as this site (and me personally) never tires of pointing out, was a big-government disaster, who broke the bank like an impulsive five-year-old smacking a piggy bank with a hammer. If Bush's free-spending ways were so stimulative, the question before us would be how can we restrain such fantastic economic growth and not how can we get anything going.
Like Obama, George Bush inherited a crap economy and a whopping 900,000 public-sector jobs were added in his first term, which was also known as a "jobless recovery." The feds went on a hiring and spending spree, of course, and so did state and local governments once the economy bounced back. Unlike Obama, Bush also inherited a surplus from which to at least pay for some of that spending. To insist that public-sector spending is the way to reduce unemployment really does mean forgetting that these jobs don't pay for themselves. The only way the government at any level makes payroll is by taxing now or borrowing now and taxing later to pay off debt.
A decade-plus after Bush first took office, debt at all levels has metastisized, which is another way of saying that the bill for runaway government spending—we're talking increases of 60 percent or more in inflation-adjusted dollars at the federal level and well over 50 percent at the state level between 2003 and 2007 alone—is coming due. So for Krugman and other stimulatarians to simply keep harping on public-sector employment levels really begs the questions of who's going to pay for those saved-or-created hires and what effect explicit or implicit tax increases have on the larger economy.
Which brings us to the related question of Irish austerity, which to Krugman's mind proves that firing public workers will hurt any economy. Contrary to Krugman, Irish public spending has been relatively flat in recent years, which is really nobody's idea of austerity, if by that term you mean taking a hatchet to a budget to reduce the debt to GDP or spending ratio. By the same token, Ireland has been happy to raise all sorts of taxes in recent years to attempt to close budget and debt gaps. As Reason columnist and Mercatus Center economist Veronique de Rugy has pointed out, an incomplete list of "austerity" tax increases in the Old Sod includes:
- Standard VAT rate increased by two percentage points to 23 percent. (It was cut in December 2009 down to 20 percent from 21.5 percent)
- €100 household charge introduced to fund vital local services.
- Carbon tax increased from €15 to €20 per tonne effective from midnight, Budget Night, on petrol and diesel, and from May 1, 2012, on other fossil fuels, excluding solid fuels. This change equates to 1½c increase in cost of a litre of petrol & diesel.
- Excise tax on cigarettes up by 25 cents.
- Motor-tax rates increased.
- Capital acquisition tax, capital-gains tax and D.I.R.T. raised to 30 percent.
- Property-relief surcharge of 5 percent to apply to large investors.
These levies, she notes, have been laid on top of a whole bunch more as well. Far from Krugman's suggestion that Irish austerity has taken the form of massive cuts in goverment spending and public-sector employment, most of it involves tax increases that are properly understood as "private-sector austerity." De Rugy has elsewhere pointed out that there are crystal-clear examples of how to shrink public-sector spending (and by extension, public-sector employment) which not only reduce debt-to-GDP ratios but correlate with economic growth. The key is to eschew "balanced approaches" that rely on some spending cuts and some tax hikes and to go whole hog on the spending cuts. Successful austerity plans—those that see debt-to-GDP decline by at least 4.5 percentage points after three or more years—contain an average of 80 percent of spending cuts and 20 percent tax increases. Rather than grapple with actual examples from the recent past, the stimulatarians either fudge weak arguments about how World War II ended the Depression ("the Great Depression ended largely thanks to a guy named Adolf Hitler") or how stimulative a Watchmen-style fake alien invasion would be.
And to answer Krugman's query about runaway spending causing rotten economic performance: Yes, there appears to be a pretty strong connection, especially when spending keeps the debt ratio from shrinking. According to Carmen Reinhart, Vincent Reinhart, and Ken Rogoff, "debt overhang"—defined as a country posting a debt-to-GDP ratio of 90 percent or more for five consecutive years—causes significant reductions in long-term economic growth. Economists such as University of California at San Diego's Valerie Ramey and Harvard's Robert Barro—not to mention former Obama adviser Christina Romer—have all made convincing empirical cases that fiscal stimulus doesn't work. Certainly we know this much: The Obama stimulus failed to deliver on its unemployment rate promises (and that would be true even if public-sector employment had not been cut).
The stimulatarians would keep increasing government expenditures and padding public payrolls as the one true route to prosperity. Tax increases are OK in this scenario (or at least not worthy of much serious discussion) because they might help to keep more folks on the public payroll which is, in Krugman's analysis, "the big difference this time."
But we plainly don't need more teachers, more cops, or more firemen to educate our kids, protect our streets, or put out our fires.
And hiring more public-sector employees is no way to reduce government spending, which is the best way to reduce the debt-to-GDP ratio.
Which is the best way right now to get the economy moving.
If only President Obama or Gov. Romney understood any part of that.
Nick Gillespie is the editor in chief of Reason.com and ReasonTV. He is co-author with Matt Welch of The Declaration of Independents: How Libertarian Politics Can Fix What's Wrong with America, out in paperback with a new introduction on June 26.