Can the U.S. Government Create Jobs?

More

"Now, government can't create jobs, but it can help create the conditions for small businesses to grow and thrive and hire more workers," President Barack Obama said in a speech last month. A dash of refreshing honesty?

Or a whole lotta hooey, argued Tim Fernholz at The American Prospect. It's easy for government to create jobs. What are firefighters, police officers, DMV workers, teachers and other public sector position if not "jobs" "created" by "government"?

Actually, there's room for both Tim and Obama to be right. Government can't literally create private sector jobs any more than a dog can give birth to a kitten, although it can create and subsidize infrastructure projects, dangle tax incentives for employers, and try to juice aggregate demand -- but this is indirect. On the other hand, the federal government can explicitly create a public sector job as easily as it can speak the words "you're hired" -- provided Congress allocates the money.

This is the central parardox of job creation. The easiest jobs to save or create are public sector positions, but we judge the recovery by the velocity of private sector job growth. You can spot this in the crestfallen reaction to April's jobs report, in which short-term Census job growth outpaced the private sector by 10-to-1. The federal government makes up only 25% of GDP, but you can't have a nationwide recovery without the private sector grabbing the baton.

Politicians can cheer "jobs bills" like the American Jobs and Closing Tax Loopholes Act* but they're ability to directly impact the private sector is limited. Indeed, the last jobs bill merely offered targeted payroll tax cuts for new hires. The best we can expect now is to prevent state government layoffs either with direct lifelines to endangered sectors like education or by shouldering the Medicaid burden in the hope that states will move that money over to payrolls.

If these are useful weapons against unemployment, then they're also doubled-edged swords. Bailing out states that overpay their employees (or overpromise pensions) does nothing to encourage efficient government. Throwing a $23 billion life raft to public schools for the purpose of job preservation undercuts the administration's efforts to use financial incentives to galvanize education reform.

And yet... Unemployment is kissing 10 percent and the economy is still leaning on the largess of Uncle Sam. If we remove the stimulus crutch, make no mistake: hundreds of thousands of jobs could be lost across the states, and that will have its own ripple effect on demand, profits and private sector employment. State relief is an ugly and messy measure to elevate employment. But the unemployment beast is still kicking, and this is the sharpest weapon we've got.

____________
*Honestly, that name. If you're going to be boring, at least be boring within the rules of parallelism.

Jump to comments
Presented by

Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

Get Today's Top Stories in Your Inbox (preview)

A Fascinating Short Film About the Multiverse

If life is a series of infinite possibilities, what does it mean to be alive?


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

The Death of Film

You'll never hear the whirring sound of a projector again.

Video

How to Hunt With Poison Darts

A Borneo hunter explains one of his tribe's oldest customs: the art of the blowpipe

Video

A Delightful, Pixar-Inspired Cartoon

An action figure and his reluctant sidekick trek across a kitchen in search of treasure.

Video

I Am an Undocumented Immigrant

"I look like a typical young American."

Video

Why Did I Study Physics?

Using hand-drawn cartoons to explain an academic passion

Writers

Up
Down

More in Business

Just In