I get it.  I understand.  You want a smaller public sector.  There’s no real logic to it, you just want it.  Like a child wants the latest toy or video game.  You can’t articulate the “why” other than some deep-seated desire that it’s what you want.  As the old saying goes, be careful what you wish for, you might just get it.

And you want to keep Governor Walker in office.  Sure, I understand.  But that pesky economy just won’t cooperate.  Things keep swirling down, down, down.  You can pretend “It’s Working,” but the truth is written in the Bureau of Labor Statistics data.

Wisconsin shed more state-level public sector workers than any other state in the US.

Wisconsin shed a larger share of state government jobs than any other U.S. state in the second quarter of last year, according to the most accurate and comprehensive data that exists, released Tuesday.

State government employment in Wisconsin declined 10.1% or 7,987 jobs from April through June compared with the same three months a year before.

That time frame marks the second quarter of the term of Republican Gov. Scott Walker, who vowed to cut the state’s deficits and spending.

This is one race Wisconsin does not want to win.

Although I’ve not seen an example for Wisconsin, Connecticut faced a similar sized loss through a possible layoff this past summer.  Connecticut officials attempted to estimate the impact to their state economy should such a layoff transpire.

It’s important to understand that one person loosing a job doesn’t just affect that person.  There is a knock-on effect throughout the economy, like ripples from a pebble dropped in a pond.   As money circulates through the economy, it is subject to a multiplier effect.  This means that each dollar spent potentially generates ($1 x multiplier) of economic activity.  So if the multiplier is 2, than each $1 spent will ultimately generate $2 in downstream economic activity.  Economists debate what the right multiplier should be for different economic circumstances, but there is a general consensus among mainstream economists that the multiplier effect is real.  So what happened in Connecticut?

The Connecticut Economic Resource Center said Friday that a multiplier of 1.39 would be applied to the pending state government job losses. This means that for every single job lost, another four-tenths of a job would be lost as well, said Alissa DeJonge, the center’s director of research.

That works out to an additional 3,000 or more job losses that could hit the private sector hard, she said.

The impact of this loss of public sector jobs in Wisconsin could be an additional 3,100 jobs (both public and private sector) through indirect, knock-on effects.  That’s staggering.

Yet despite this risk, I’ve seen numerous tweets like this one from J.R.

and I’m reasonably sure that these sentiments are shared across the Conservative echo-scape by a broad spectrum of people.  Cut, cut, cut!  The more we cut the more we’ll grow, seems to be the belief despite overwhelming evidence that proves the opposite.  Expansionary austerity is a myth.

Let’s consider what direct impacts this sharp decline in public sector employment meant for Wisconsin:

  • Thousands of new unemployment claims, a further drag on our limited resources
  • More strain on an already oversubscribed BadgerCare
  • Increasing utilization of emergency rooms for primary care
  • Increased childhood poverty
  • More foreclosures driving down neighborhood property values
  • Reduced demand for goods & services
  • Increased homelessness
  • Reduced services for the elderly, disabled, mentally ill, and other vulnerable citizens
  • “Brain drain” as unemployed workers leave Wisconsin for greener pastures
  • Reduced tax revenues (income, consumption & property)

Honestly, it’s not surprising that most conservatives are blind to this cause & effect relationship, so blinded by their desire to drown the public sector in a bathtub.  Accustomed to dismissing complex systems like the economy or the global climate as somehow unknowable, they seem to have a blind spot for these problems.  Complex systems are not reducable to a simple “common sense” filter.  But the world is a complex and dynamic system that requires patience, attention and thoughtful study to understand.  Conservatives seem unsuited to that task.

The irony?  The more they push public workers out, the more they cut, cut, cut, the more inflexible they are on new revenue, the worse the economy will get, propelling the recall effort against Governor Walker forward.

Here’s a simple calculation for my Republican readers (and you know who you are, dahlings!) to consider:

You can have fewer public workers or you can have a chance to keep Governor Walker.

Which will it be?

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3 Responses to Public Sector Job Loss and Why it Should Matter to Republicans

  1. Well said. There also seems to be this conservative idea that the economy is the economy, and the government is the government, and never the twain shall meet. It’s like the tax dollars that fund the public sector disappear into a black hole, never to emerge again in to the real economy. So if we just plug the black hole, somehow that will leave us with MORE dollars overall in the economy and everything will be sugar and rainbows.

  2. Jon says:

    You are misapplying the multiplier concept. State budgets have to be balanced. It’s not optional. We can’t print money like the Feds. We can issue bonds, but that simply lowers the real value of state funds since the money costs more. Taking money out of the public sector puts it back into the private sector. It that sense, it’s a wash, though when you consider that the private sector functions more efficiently because of the profit motive of the owners and employees, you’ll see that it is sound economic policy. You seem to want public sector jobs for the sake of having them, but the purpose of government is not to directly provide jobs to citizens. It befuddles me that the left doesn’t get that.

    • Phil Scarr says:

      Jon: Thanks for the thoughtful response. Let me reflect on a couple of things you talk about.

      First,

      You are misapplying the multiplier concept. State budgets have to be balanced.

      The issue isn’t fiscal (although I used a fiscal example), what economists in Connecticut did was apply the same principle of the multiplier to employment. As public employees are laid off, there is a commensurate knock-on effect through the economy which causes more people to lose their jobs due to lost demand for goods and services. I hadn’t seen the multiplier effect applied to employment / layoffs, but it makes economic sense.

      As for the question of a balanced state budget, currently bond costs are at an all time low, it’s precisely the wrong time to worry about balancing the budget, Federal or state.

      Second,

      Taking money out of the public sector puts it back into the private sector. It that sense, it’s a wash,

      That’s the old “take water from one side of the swimming pool and dumping it into the other side” argument that has been well and thoroughly debunked. That is a static model of demand that doesn’t resemble anything in the real world.

      Most recently, this concept was taken down by Jared Bernstein in a debate with Arthur Laffer (of Laffer Curve fame).

      Supply siders can’t understand why you’d need stimulus spending to offset a demand contraction because demand doesn’t contract in their model. Against my arguments that we needed and still need more stimulus, Art kept stressing that in a world where farmer A gives money to farmer B, there’s no more money/demand in the system. Others in this benighted camp argue similarly that stimulus just takes water from one end of the swimming pool and puts it in the other end.

      That’s clearly a world where demand doesn’t fluctuate, where there’s always enough jobs for all comers (unemployment is voluntary!…or induced by nasty ideas like unemployment benefits), where farmer A never sits on excess savings that could actually generate more aggregate output if she lent it to under-employed farmer B (i.e, the gov’t borrowed it from her and provided it to B—or better yet, ordered crops from B).

      So forgive me if I don’t agree that laying off public sector employees has no impact on the demand curve. It does.

      though when you consider that the private sector functions more efficiently because of the profit motive of the owners and employees, you’ll see that it is sound economic policy.

      The mistaken assumption that the private sector is more efficient than the public sector has been debunked widely. It is in some cases, but not in others. Most recently here.

      I’m working on an post on healthcare costs showing that competition for health insurance (insurance, not healthcare services provided by doctors and clinics) actually increases costs rather than lowering them. It should be up this weekend.

      You seem to want public sector jobs for the sake of having them, but the purpose of government is not to directly provide jobs to citizens. It befuddles me that the left doesn’t get that.

      Actually, I do get it. And I do support a jobs guarantee. I’m a recent convert to Modern Money Theory. From Wikipedia:

      MMT aims to describe and analyze modern economies in which the national currency is fiat money, established and created exclusively by the government. In MMT, money enters circulation through government spending; Taxation is employed to establish the fiat money as currency, giving it value by creating demand for it in the form of a private tax obligation that can only be met using the government’s currency. An ongoing tax obligation, in concert with private confidence and acceptance of the currency, maintains its value. Because the government can issue its own currency at will, MMT maintains that the level of taxation relative to government spending (the government’s deficit spending or budget surplus) is in reality a policy tool that regulates inflation and unemployment, and not a means of funding the government’s activities per se.

      I suggest you spend a little time reading up on it. MMT incorporates the concept of an “employer of last resort” (a jobs guarantee).

      The Economist (the most orthodox of publications) did a writeup of heterodox economic theories, MMT being one of them.

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