INCREASING LOSS OF JOBS IN THE PUBLIC SECTOR IS DRAGGING DOWN THE U.S.ECONOMY

Summary: The continuing and accelerating loss of jobs in the public sector is a major factor in retarding our country’s economic recovery. President Obama has promoted a rational plan for new stimulus to stem the job losses at the State and local level intended to bring relief to the middle class —and alleviate the misery and hardship of these laid off workers and their families. The Republican members of congress have put up continual roadblocks to prevent implementation of such a plan. IPPA calls for a populist outcry of support for this very necessary stimulus—and direct communications with our representatives demanding passage of enabling legislation.

Private companies have been adding workers for more than two years, but in the public sector work force pink slips are still going out1. Since reaching employment peaks in August of 2008–largely due to the often maligned federal stimulus program–local governments have lost 496,000 jobs and state governments 159,000, through December 2011. 50% of the state losses and 30% of the local one occurred during 2011, indicating that the problem is accelerating2.

With the overall economy slowly expanding, state tax revenues have started to increase and are expected to reach pre-recession levels next year3. Even so governors and legislators are keeping a tight rein on spending, whether to rebuild the state “rainy-day funds” or because of political ideology. The effect of continued layoffs includes a siphoning off of $1.5 billion in spending power. The ill effects of this policy are not just economic. They also affect public service: they decrease local firefighter response; they reduce public safety with police layoffs. Businesses are hindered by losing middle class customers. Construction projects are delayed due to reduction of city inspectors.Mike Whited, president of the firefighters union in Muncie, Indiana, chafed at portrayals of public workers as overpaid or greedy, saying his union has made concessions on health insurance and raises. “I think a lot of people don’t understand what we do” he said. ”They’re looking for somebody to blame and I think they’re being led the wrong way”4. This sentiment was echoed by Bob Plain, a journalist who runs the website RIFuture.org. He said “the meme in Rhode Island is that if there is a problem, you can trace it back to the public employees”5.

Jobs in education have accounted for more than half of all the losses in local governments. Teachers and school employees are continuing to receive layoff notices in California, Colorado, Nevada and Ohio6. This seems tragically ironic as there is so much talk about a country-wide need to improve the secondary public school experience.

Some of the political ideology previously referred to was clearly apparent in Rhode Island, as reported on 6-19-12 in the NY Times by Joe Nocera. Instead of approving a supplemental property tax for the town of Woonsocket, RI to help overcome a $10 million debt, the State Representatives from that area refused to approve the tax increase thus pushing the town closer to receivership. That could result in someone, not beholden to the town voters, having the power to abrogate union contracts, including pensions. A receiver has the unrestricted power to force cuts that reduce programs that many citizens depend on. One of these legislators is on the National Board of the American Legislative Exchange Council, a political organization otherwise known as ALEC. ALEC has a very clear agenda to support shrinking State budgets. So this strategy of forcing receivership is a direct affront to democracy by taking the power away from citizens and giving the power to an unelected official to make draconian cuts7.

So what are the political implications of all this? The choice seems to be relatively clear. President Obama has been proposing more stimulus to State and local governments to hire more “firemen, policemen and teachers” to stop the public employment freefall that is seriously endangering our economic recovery. Candidate Romney, on the other hand, derides that idea and has recently stated “It’s time to cut back on Government and help the American people”. It’s IPPA’s opinion, and evident in the examples cited above, that this accelerating rash of State and local layoffs is doing anything but helping the American people8, especially those in the middle class. According to Paul Krugman, this unprecedented fall in public employment has probably resulted in about 1.4 million jobs less than would have been if job growth had been as strong as previously seen after an economic slowdown in the administration of George W. Bush. That level of job growth would have lowered the unemployment rate to 7.3% instead of the current rate of 8.2%. It seems pretty obvious that cutting government when the economy is severely depressed is very bad for the middle class9.

The real irony in all this is that it would be relative easy to reverse this trend in the United States in contrast to the European Union. Because of the Federal Reserve, it is possible for the federal government to borrow at current historically low interest rates and thus provide the obviously necessary financial stimulus to State and local governments and enable hiring back the hundreds of thousands of laid off workers10. The resulting debt could be paid off with revenue increases which would result from the improving economy, brought about by increased payroll taxes paid by rehired workers. This is exactly the plan the President has been promoting for months and that the Republicans have blocked in the House and filibustered in the Senate.

IPPA believes that it is not only irrational but also clearly not in the national interest to persist in a policy of national austerity at the State and local levels that continues to hobble our economic recovery. The resulting loss of so many workers providing essential services throughout the country as well as the associated hardships suffered by these workers and their families is not only unnecessary but a national disgrace.

1. Dewan, Shaila and Rich, Motoko, Public Workers Face New Rash of Layoffs, Hurting Recovery. NYTimes June 20, 2102
2. Bureau of Labor Statistics, Monthly Labor Review, March 2012
3. Dewan and Rich.
4. Dewan and Rich.
5. Nocera, Joe, When ALEC Takes over your Town. OpEd NYTimes, June 19, 2012
6. Dewan and Rich.
7. Nocera.
8. Krugman, Paul, We Don’t Need No Education. OpEd NYTimes, June 15, 2012
9. Krugman.
10. Krugman.

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