The Edmond Sun

March 15, 2013

BY THE NUMBERS: The strange allure of austerity

Mickey Hepner
Special to The Sun

EDMOND — Quiz: Under which president did government employment fall?

a. President Richard M. Nixon

b. President Ronald W. Reagan

c. President George W. Bush

d. President Barack Obama

Judging from the tenor of the public debate, at least here in Oklahoma, I’m guessing few people would select “b” but “d” is the correct answer.

According to the latest data from the U.S. Bureau of Labor Statistics, government employment (at the federal, state and local levels combined) has been steadily increased since 1947. During the Eisenhower administration, 1.7 million government workers were added to the payrolls. Another 3.5 million government jobs were added during the Kennedy/Johnson administrations, and 2.8 million government jobs were created during the Nixon/Ford administrations. The government job growth continued with the Carter (1.3 million), Reagan (1.4 million), Bush (1.1 million), Clinton (2.0 million) and Bush (1.7 million) administrations, too.

But during the Obama administration this growth in government employment not only slowed but reversed course. So far during the Obama administration government employment has actually fallen by 730,000 jobs. In short, President Obama — the oft-labeled champion of big government — has presided over the largest decline in government employment since the immediate post-World War II era.

Granted, this is not likely something that the president views as a success from his administration. In fact, with a number of proposals, including most recently with the American Jobs Act, President Obama has sought to increase the number of teachers, firefighters, police officers, and government construction workers. However, recalcitrant Republicans in Congress have thwarted those attempts.

The real question though is “why”? Standard economic theory predicts that in times of high unemployment that government spending can stimulate the economy. In short, spending money on government jobs can help create private-sector jobs too. We even saw this happen with the 2009 stimulus bill, which the Congressional Budget Office estimates created up to 5 million jobs (in the public and private sectors combined) at its peak. Since that time though, government employment has declined significantly and as a result more people are unemployed today. Yes, the economy has grown and jobs are being created. But because government employment is falling the economy isn’t growing as fast as it otherwise would. It is interesting to note that if government employment had grown at the same pace during these first three years of the Obama-recovery as it did during the first three years of the Reagan-recovery, an additional 1.4 million Americans would be employed today.

Congressional Republicans have wanted to shrink the size of government and as a result more people are unemployed today.

The bad news is that Congressional leaders aren’t willing to soften their stance anytime soon. By eschewing any compromise with the White House, Congress has forced an $85 billion cut in federal government spending (which will grow to $109 billion in cuts next fiscal year) putting less money in workers’ pockets.

This decline in spending likely won’t be enough to tip the economy back into another recession, but it will grow more slowly than it otherwise would. Much like we’ve seen over these past three years where congressional contractionary policy has slowed growth, but not erased it, the sequester’s spending cuts will result in slower job growth than we otherwise would have. Unfortunately, this means more people will remain unemployed longer, and more families will suffer more.

As an economist it’s strange to see this fascination with austerity — this desire from so many on the right to shrink the size of government so much that they will sacrifice jobs and prosperity for millions of families. Sadly, this allure of austerity that has seemingly gripped Congress, will continue to lead us down the wrong economic path.

MICKEY HEPNER is the dean of the College of Business Administration at the University of Central Oklahoma. Hepner serves on the Executive Committee of the Board of Directors for The Oklahoma Academy.