URGENT NEED FOR MORE FEDERAL STIMULUS TO HELP STATES AND LOCAL GOVERNMENTS REPLENISH PUBLIC SECTOR JOB LOSSES

Summary: Additional information has become available since our blog entry on 6/28/2012 on the importance of further stimulus to the Public sector economy of the United States .  A recent report from the Economic Policy Institute concludes that the lack of continued stimulus to the Public Sector is the single biggest factor responsible for inadequate country-wide job growth over the past 3 years.1 IPPA contends that this is a serious ethical as well as an economic concern. IPPA feels that this failure for Congress to provide further stimulus as a result of Republican unwavering resistance is not only immoral but unpatriotic.

The 2009 stimulus and the auto industry rescue, supported by President Obama and Congressional democrats, cushioned the serious effects of the recession Obama inherited. The mainstay of these initial stimulus efforts was Federal aid to States. The subsequent Republican opposition to providing a second federal stimulus in 2010 and ultimately also blocking President Obama’s $450 billion jobs bill in late 2011 has resulted in a catastrophic negative effect on State budgets and secondarily on public sector jobs.2

A recent report from the Economic Policy Institute states that the loss of 627,000 public sector jobs since 2009, largely due to State budget cuts, has been the major negative effect on job growth in the last three years. This, as severe and disruptive as it is, understates the severity of the problem. Judging by population growth in those years the Public Sector should have added nearly 500,000 jobs simply to restore the level of local government services to the norm of the last 20 years. This widespread shortage of public sector jobs includes teachers, social workers, public health officials, and other professionals, along with police and firefighters–jobs that might have been available for the many currently unemployed recent college graduates.

An additional disaster is that this 1.1 million deficiency in public sector jobs translates into some 750,000 lost jobs in the private sector. This is a result of less spending by laid-off state and local government as well as private contractors losing out on government projects. Another 400,000 jobs may have been lost because of reduced consumer spending because states have made cuts in aid to the poor and unemployed. These compounded effects quickly spread and the nationwide economy suffers.

The Economic policy Institute concludes that if it were not for this widespread forced State and local government austerity [which the IMF has recently cautioned against and the European Union has finally realized that stimulus is needed to produced growth3] there would have been as many as 2.3 million jobs nationally and the unemployment rate would be more like 7% instead of the current 8.2%.

It doesn’t take a rocket scientist or a Nobel Prize winner to conclude that this country needs immediate Federal stimulus to the Public Sector to help alleviate the widespread suffering this lack of job availability is causing nationwide. IPPA stands on the principle that this existing lack of Congressional response is a moral issue as well as an economic one. IPPA states that for the Republicans in Congress to continue to thwart and threaten to filibuster President Obama’s attempts to alleviate these dire and unnecessary circumstances is both immoral and unpatriotic.

1. Blevins, Josh and Shierholz, Three years into recovery, just how much has state and local austerity hurt job growth? 6/6/12 The Economc Policy Institute Blog http://www.epi.org/blog/years-recovery-state-local-austerity-hurt/

2. http://www.nytimes.com/2012/07/12/opinion/the-road-to-more-jobs.html

3. http://www.nytimes.com/2012/07/17/business/economy/imf-clips-global-growth-forecast-for-2013-to-3-9.html

One Response to “URGENT NEED FOR MORE FEDERAL STIMULUS TO HELP STATES AND LOCAL GOVERNMENTS REPLENISH PUBLIC SECTOR JOB LOSSES”

  1. Jim Says:

    We have known since the work of Keynes what needs to be done. Krugman and others said at the time that the stimulus was too small. Laying off public employees in the middle of a depression is madness, a triumph of ideology over sound economic science.

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