We're living in an age of unprecedented austerity.
Now, that sounds impossible to conservatives who know, just know, that government has exploded under Obama's socialist watch. And that we have trillion dollar deficits—dun, dun, dun—as far as the eye can see. But I have some good news for them (though not the economy). They're wrong. Government employment has actually fallen under Obama, and the deficit is falling fast too.
As Ben Bernanke put it, "people don't appreciate how tight fiscal policy has been." And how much that's knee-capped the economy. Take jobs. Bernanke points out that total public sector employment—local, state, and federal—has fallen by over 600,000 during the recovery alone. As point of comparison, it rose by 400,000 during the previous one.
But even this million person job swing doesn't tell us how historic austerity has been this time. You have to look at the chart below to see that. It shows government job growth during every recovery on record, going back to 1945. This is the least there's ever been.
How is it possible that government added more jobs after World War II demobilization than now? Or after the 1980 recession, which was followed by another recession a year later? Well, it's what Paul Krugman calls the 50 Herbert Hoovers effect. See, state governments are required to (mostly) run balanced budgets, even during a recession. That's usually not too much of a problem as long as the slump is quick or shallow.
But the Great Recession was neither. The crisis hit and tax revenue disappeared—and didn't come back. Now, the federal government did use the stimulus to fill some of these state budget holes, which is why public sector employment didn't fall much in the first year of the recovery. But then the stimulus money ran out—really, it did—and states were left on their own. Like Hoover in the 1930s, they tried to balance their books amidst a depressed economy. And like Hoover in the 1930s, it didn't work out too well. They went on a cops-and-teachers firing spree the likes of which we've never seen before. And one that was the difference between unemployment being 6 instead of 7 percent today.
The greatest trick austerians ever pulled was convincing people that it was stimulus that had failed.