Government Jobs Won’t Pay the Bills

January 2nd, 2012 at 4:54 pm David Frum | 36 Comments |

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What is wrong (and right) with Joe Stiglitz’s analysis of the Great Depression? Click here for Part 1. Click here for Part 2. Click here for Part 3.

Back in the 1960s, Daniel Patrick Moynihan once offered this solution to the economic problems of black America: restore Sunday mail delivery.

The line was sort of a joke, but sort of not. The Post Office of those days really did provide secure employment to large numbers of black Americans, and a seventh delivery day would require the employment of still more.

Government can always create direct employment. It’s often said that the three biggest employers on earth are the Chinese Red Army, the Indian state railways, and the UK’s National Health System, government enterprises all. When I was in the UK last month, I took part in the BBC’s Question Time program. During a discussion of youth unemployment, a member of the audience raised her hand to argue that it was very, very important that the British government hire counselors to help young people find jobs. There’s not a lot of reason to think that such counselors actually enhance youth job prospects. The eager way in which the woman phrased the question did however strongly indicate that she regarded the creation of more such positions as a great boost to her own job prospects.

Yet when Joe Stiglitz–or for that matter, President Obama–talks about government investment as a way to rescue the American middle class, they are contemplating something more interesting than merely expanding the government payroll. They are suggesting that government action can generate productivity improvements that will translate into rising wages in new economic sectors.

The analogy most often heard is the Internet. Government helped create its infrastructure, which in turn spurred all kinds of wealth-creating innovations.

Yet it’s precisely since the advent of the Internet that the gap between rich and poor has widened most spectacularly and that the wages of the middle have stagnated. I’m not claiming that the Internet drove those trends, but pretty evidently it did not prevent them.

If anything innovation seems to be accelerating the trends toward rising wages for high-skilled workers in China and India and declining wages for low-skilled workers in America. It’s hard to see why, say, cost-effective solar panels would be any different. And yet on that hope, so many are building an argument for a more intrusive and interventionist government. Unfortunately the downsides associated with intrusive and interventionist government cannot so easily be wished away.

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36 Comments so far ↓

  • rbottoms

    What planet are you people from?

    Obviously on your planet a paycheck from a job with the government doesn’t turn into cash money with which you can eat, pay rent, and live on.

    On the planet I’m from thousands of people repairing or building bridges, fixing schools, laying fiber optic lines, paving roads, and rehabilitating decaying infrastructure pays lots of frigging bills.

    What kind of elitist jerk is unable to see that?

    Sorry, that was stupid question, the answer of course is a Republican Conservative elitist jerk.

    • Houndentenor

      I’m surrounded by people who listen to Glen Beck, think Obama is a secret Muslim and want massive spending cuts. Just about every one of them works for the government (state, local or federal) or a contractor completely dependent on government funding (mostly NASA).

      Hearing people who feed at the government trough complain about big government spending is almost enough to make me vote for Ron Paul just out of spite. I’m not going to, but it would serve these Republicans to get what they think other people deserve. They would never find a private sector job paying even a fraction of what they are making now. Maybe then I wouldn’t have to hear “there are jobs out there, but people just aren’t willing to do them” and other assorted stupidity.

    • rbottoms

      They’ll be happy when all those N-e-g-r-o-e-s lounging over at the Postal Service have to get real jobs.

    • NRA Liberal

      Read between the lines. A “government worker” is a middle aged black woman working at the post office or the Department of Education, not a NASA engineer.

  • overshoot

    Government Jobs Won’t Pay the Bills

    Bridges, waer systems, highways, etc. may not increase the incomes of working Americans, but they will pay for themselves if only in reduced costs. And unlike a lot of proposed jobs, they will put unemployed Americans back to work in the meantime — without sending a large portion of the money spent out of the country.

    As for solar panels, batteries, windmills, etc. the rationale is similar: we’re going to be installing them regardless. Maybe soon, reducing the damage to the USA when the price of oil goes through the roof and reducing the American lives lost every year to pollution. Maybe later, when we have to pay for importing them from some other country which will be in a position to extract penalty rates from us once we’ve already suffered from massive damage to our economy.

    All in all, I’d rather see them made here employing Americans and avoiding the long-term costs of burying our heads in the sand.

  • balconesfault

    Yet it’s precisely since the advent of the Internet that the gap between rich and poor has widened most spectacularly and that the wages of the middle have stagnated. I’m not claiming that the Internet drove those trends, but pretty evidently did not prevent them.

    The internet without question drove the creation of a huge boom in jobs in the US in the 1990′s, in concert with the PC boom. And there are many many examples of middle class entrepreneurs who have created successful business niches via the internet that would have been impossible due to prohibitive advertising and marketing costs in the past.

    The problem is that we squandered this middle class boom – free trade agreements, giving China permanent most favored nation trade status, tax policies which heavily favored the wealthy, and the combination of tax policies and poor regulation supporting the creation of an economic bubble which made huge profits for the wealthiest at its peak, then rained feces down upon the middle class as it collapsed.

    I really don’t see any compelling argument here from Frum for not regarding the Government. or even government jobs, as a key anchor for preserving a strong middle class. There needs to be more than idle rumination to challenge what seems to be pretty strong evidence that paying teachers, firemen, police, administrators, etc good but not superstar salaries provides a strong stable foundation for a middle class in America.

  • austineisle

    Mr. Frum,

    You seem to imply a very different narrative for the rise of inequality, or perhaps on the stagnation of wages, than pres. Obama. What exactly is your view on this, and since it’s seems you don’t think an interventionist government is the solution, what would be yours?

  • Graychin

    Are workers who build roads, bridges and schools with government funding working at “government jobs”?

    Observe the development along the route of a suburban expressway, then tell me that roads don’t contribute to economic growth.

    The nation has many infrastructure needs which have been neglected for decades. The nation can borrow money right now at record-low interest rates – a low-cost investment in our future. But we shouldn’t do that, because it might create a “government job”?

    This is weak stuff, Mr. Frum. Very, very weak.

  • rbottoms

    I keep forgetting that these guys always revert to type.

    Somewhere along the way I got the impression the DF understood that spending money right now on projects that we need anyway at record low prices for labor and materials is a good idea regardless of what work needs to be done to create long term jobs.

    A man who is one step away from having all his possessions on the front lawn doesn’t give a crap about long term monetary policy, internet jobs, or some mythical retraining for the “next wave.”

    He wants a job, right frigging now and doesn’t much care if it’s laying bricks or pipe. It’s work and it feeds his kids and keeps a roof over their heads.

    You macro-brain think tank MF’s caused this mess, how about handing out some paychecks while you scratch your heads and think up the next disaster.

    • balconesfault

      You macro-brain think tank MF’s caused this mess, how about handing out some paychecks while you scratch your heads and think up the next disaster.

      lol – harsh, but I like it.

    • magatha

      +1

  • Holmes

    David, this post of yours is just a brain fart.

    “Yet it’s precisely since the advent of the Internet that the gap between rich and poor has widened most spectacularly and that the wages of the middle have stagnated. I’m not claiming that the Internet drove those trends, but pretty evidently it did not prevent them.”

    So it didn’t help, it didn’t hurt, and, hence, was not a factor. Can the same be said of airports, bridges, roads, ports, and utilities (e.g., electric, water, sewer) that rely on taxpayer support? Imagine our society without functioning sewer systems — you would be first in line writing about the need for interventionist government. BTW, even workers with stagnant wages find value in – and benefit from – the Internet.

  • sweatyb

    Wow, Frum, never use that Internet line again. It’s sheer nonsense.

    I haven’t heard anyone arguing that a more intrusive and interventionist government will give us more jobs. I’m pretty sure Stiglitz didn’t say anything like that so maybe you are arguing with the voices in your head again?

    Actually, print out this post and burn it. It’s terrible.

  • Reflection Ephemeral

    “They are suggesting that government action can generate productivity improvements that will translate into rising wages in new economic sectors.”

    I’m not as familiar with Stiglitz, but that’s not the argument I’ve seen from folks like Paul Krugman. His argument is that, in this context, with a low cost of gov’t borrowing, households saving instead of spending, and financial institutions reluctant to lend, a temporary increase in government spending can bridge the gap.

  • armstp

    The analogy most often heard is the Internet. Government helped create its infrastructure, which in turn spurred all kinds of wealth-creating innovations.

    Yet it’s precisely since the advent of the Internet that the gap between rich and poor has widened most spectacularly and that the wages of the middle have stagnated. I’m not claiming that the Internet drove those trends, but pretty evidently it did not prevent them.

    What a complete strawman argument.

    I think a better comparison is how say the creation of the Interstate highway system in the U.S. or a U.S. education system or the national railway in Canada created an economic backbone for the country.

    I would say the Internet has been one of the few areas that has driven the economy in the U.S. in the last 20 years. Imagine if the Europeans had invented the Internet and created all those countries.

    It’s hard to see why, say, cost-effective solar panels would be any different. And yet on that hope, so many are building an argument for a more intrusive and interventionist government. Unfortunately the downsides associated with intrusive and interventionist government cannot so easily be wished away.

    So Frum, how do expect the U.S. to compete in a world where China has backed $40 billion of loans to its solar companies or where Germany massively subsidizes its green industries? Should we just differ these massively growing industries to the rest of the world? Should we just let our education system or apprentice programs or bridges and highways or rail service or ports continue to deteriorate while other governments make the investments to stay ahead of the U.S.?

    This is a very amateurist post with not much substance. You live in a fantasy “conservative” world.

    • gmat

      All of our successful trading partners, including the 2 you mentioned, use public-private strategies, as well as policies which push the limits of free trade agreements on domestic value-added.

    • NRA Liberal

      By conservative logic, the Chinese and German backing of green industry constitute government meddling, winners-picking, “industrial policy” and thus are a priori doomed to fail.

  • wanputtlun

    Sorry David, but if tax cuts have a trickle down effect then surely the income of any individual is spent as part of GDP whether that derives from government work or from “wealth creation” through production.

    If bankers bonuses create wealth then so does the wage of a school teacher or postman.

  • gmat

    Money has to constantly get borrowed and then deployed in the American economy, in order for jobs to be created.

    The last few years, households and small businesses have mostly been deleveraging because their balance sheets got real ugly after the real estate crash. (Corporations have borrowed money like crazy, taking advantage of near zero interest, but that money is deployed in high growth countries).

    It is the perfect setup for the government to borrow that money that’s sitting in the banking system, and order stuff (roads, bridges, retrofits of buildings, fuel efficient vehicles, pencils, desks, whatever) from the private sector, but with very strong domestic content provisions.

    At the same time, cut federal taxes for corporations on money they make in America, employing Americans (states are already doing what they can to attract business).

  • Nanotek

    “Government Jobs Won’t Pay the Bills”

    that must be why all Republicans refuse the $150,000 + perks that go with being a government Congress person or Senator.

    this from the same mega-group that walked into the White House and GOP controlled Congress in 2001 to take control of a thriving economy with a surplus and left in 2008, handing Obama an economy that lost $13 trillion overnight, doubled the deficit, gave us two bogus unfunded wars, the Medicare Part D taxpayer scam for big pharma and super-clowns on the SCOTUS …. your economic visions are clouded, at best

  • jg bennet

    According to America’s Free Trade founding father (Woodrow Wilson) the ultimate goal of the Free Market is Government jobs/Socialism.

    A HISTORY LESSON

    Woodrow Wilson was the first American president to publicly proclaim himself in favor of a Socialist New World Order inside a Socialist One World Government. His remarkable acceptance of the New World Order is found in his book The New Freedom.

    The Fabian socialists http://centurean2.wordpress.com/2011/12/18/british-revisionism-and-the-fabian-society/ realized long ago that socialism and communism are completly impossible without some form of FREE TRADE capitalism getting there first.

    Wilson’s book was actually written by Socialist William B. Hayle. Wilson denounced capitalism. “It is contrary to the common man and it has brought stagnation to our economy,” Wilson wrote.

    The ultimate goal of communism and socialism was to control world trade.

    Wilson had spent almost a year tearing down the protective trade tariffs that had defended the American domestic markets from being overwhelmed by “Free Trade,” essentially the practice of allowing cheap British goods made with cheap labor in India to flood the American market.

    On October 12, 1913 http://en.wikipedia.org/wiki/Revenue_Act_of_1913 Wilson signed the bill that was the beginning of the end of the unique American middle class, long the target of the Fabian Socialists. The bill was described as a measure to “adjust tariffs,” but it would have been accurate to describe it as a bill to “destroy tariffs.”

    ****Progressives like Sen. LaFollette used free market liberal propaganda to support free trade to undermine the power base of Republicans –Woodrow Wilson would admit as much in a speech to Congress. A brief resurgence by Republicans in the 1920s was disastrous for them. Woodrow Wilson’s ideological understudy, Franklin Roosevelt, would essentially blame the Great Depression upon the protectionist policies exemplified by the previous Republican President, Herbert Hoover……….

    ARE YOU STILL FOR FREE TRADE?

  • jg bennet

    There’s a nice academic paper by an MIT economist and his friends that gives some hard data to back up everyone’s suspicion that the U.S. is losing jobs to China.
    http://econ-www.mit.edu/files/6613

    One key discovery of this study is hard data to back up the idea that free trade is not a small-government policy. In reality, free trade tends to expand government, by increasing the demand for social services and transfer payments (unemployment, welfare etc.) needed to mitigate its social costs. As the authors put it:

    “Growing import exposure spurs a substantial increase in transfer payments to individuals and households in the form of unemployment insurance benefits, disability benefits, income support payments, and in-kind medical benefits.”

    FREE TRADE = SOCIALISM

    Man has the GOP been duped and Frum being an intellectual Republican supports the covert socialist agenda. What is up with that?

    FAIL :)

    • ottovbvs

      FREE TRADE = SOCIALISM

      Where do you get these bizarre oversimplifications from? Free trade after technological advance is probably the greatest engine of wealth creation in world history. The expansion of government generally arises from the increasing sophistication of society. Thus to the extent that free trade acts as a wealth creator and therefore a means of bringing into existence more sophisticated societies you could posit a connection with larger government but I’m not sure this means free trade equals socialism.

      • jg bennet

        Otto

        Perhaps you have bought into the greatest propaganda campaign in history if you believe free trade is about liberty and limited government..

        Look at the facts its not simplistic at all. Many people think Obama is a Fabian socialist and look at the free trade deal he signed and the GOP supported.

        The Free Trade deal with South Korea is a perfect example of how free trade promotes socialism by killing domestic jobs. Every free trade republican applauded the deals signing. Amazing!!.

        May 16, 2011
        Pending U.S. free-trade accords with South Korea, Colombia and Panama won’t be submitted to Congress until lawmakers ***agree to renew trade-adjustment assistance for workers,**** an Obama administration official said.

        Bills implementing the accords, reached under President George W. Bush, are being drafted and ***will be withheld unless Congress agrees to extend benefits for workers who lose their jobs to overseas competition.***

        Below is a perfect FABIAN/WILSONIAN SOCIALISM 101 quote and it is from the Republican Speaker of The House.

        October 13th 2011
        House Speaker John Boehner applauded the successful votes on the trade deals, thanking both President Obama and President Bush for working “in good faith to ensure they become law,” but he said their passage was long overdue.

        “With passage in the House and Senate today, a key component of the Republican jobs plan will be sent to the president for his signature,” Boehner said. “These significant trade pacts will provide new opportunities for American small businesses, farmers and manufacturers to expand and hire more workers. And frankly, it shouldn’t have taken this long for it to happen”.

        BOEHNER LEFT OUT THAT IT IS ACTUALLY THE GOVERNMENT PAYROLL THAT WILL ADD NEW “EMPLOYEES”

        • ottovbvs

          “Perhaps you have bought into the greatest propaganda campaign in history if you believe free trade is about liberty and limited government..”

          You also apparently have comprehension problems. Read what I said again. Absolutely nowhere did I mention liberty or limited govt. In fact I specifically posited a likely connection between free trade and the expansion of govt.

        • jg bennet

          oops sorry i’m commenting and working at the same time. perhaps i should be more careful or comment when i’m not at work. :)

          the free trade socialist connection has a point. if we destroy our job base through outsourcing our workers are either left to fend for themselves or have their hat out to the gov.

          by signing the korea trade deal both parties chose socialism disguised as free market capitalism.

          FREE TRADE SUCKS! be it socialist or capitalist either way it leads to unemployment insurance, welfare, medicaid etc.

          According to Forbes, the United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001.
          http://www.forbes.com/sites/beltway/2011/02/14/intelligence-community-fears-u-s-manufacturing-decline/

  • _will_

    i always enjoy Frum’s detailed, logically sound criticisms of the modern GOP and their insistence on a world separated from reality. then i’m left flummoxed by his adamant allegiance to the GOP and his cheer leading the same policies – at least in broad, content-free, platitudinous strokes (ltd gov!! free markets!! less regs!!). i often wonder when he’s going to make a specific, cogent arguments against the mainstream Democratic policies that he tacitly approves of in so many of his pieces… but when he does, it just ends up being something dopey like this and it becomes clear that he – like so many in the punditocracy – might just like to hear himself talk.

    let’s face it, Frum’s carved out a nice little niche calling out the GOP crazy, much to the glee of the liberals and the consternation of the Republican faithfuls who come to this website everyday. his brand of apostasy gets him good work on CNN and in New York Magazine. but i can’t really get a sense of what the guy actually stands for (except the for state of Israel in every instance, regardless of what they do or say).

    • Sinan

      Your critique is succinct and accurate. The problem with the last remnants of the conservative intellectual elite is that they are smart enough to understand how their policies have not lived up to their sales pitches over the last 30 years but not yet honest enough to admit that their entire economic world view is based upon pure fantasy. One by one, the key pillars of conservative dogma since 1980 are getting hammered by objective review of their results. If DF cannot be a conservative, what will he do? Be a libertarian? Becoming a liberal would be apostasy to him, he might as well join Hamas at the same time and make it a complete mid-life meltdown.

      • _will_

        if Frum ever openly backed a moderate Dem candidate in lieu of an insane GOP candidate (which is hardly unlikely, given what we’ve seen over the last decade), he would no longer be the lone wolf intellectual/ moderate Republican, and thus his work would likely dry up.

  • dugfromthearth

    Frum is correct. This country’s economy would be far better off without roads, railroads, canals, the internet, or the electric grid. Only communists would support such things.

  • LFC

    “Yet it’s precisely since the advent of the Internet that the gap between rich and poor has widened most spectacularly and that the wages of the middle have stagnated.”

    Why would you blame this on the Internet? The Internet produced many higher paying jobs that previously did not exist. Even lower end jobs like support are better than many other service jobs out there such as working retail. This sounds like a classic line from somebody who wants to expound on one of the greatest economic forces in the world but who actually knows very little about technology.

    The technologies that have been killing low skill manufacturing jobs have been robotics and automation. Effectively we are in the midst of another Industrial Revolution. Back then it was technological advances like the flying shuttle and the cotton gin that put many people out of work, the former skilled and the latter unskilled. Today it’s cars, toys, anything molded, etc. Over the centuries these types of advances have put some people out of work but added new jobs elsewhere in the economy. Today it seems to be different and it’s tough to predict where the new jobs are going to come from for unskilled labor.

  • jg bennet

    Here is an interesting free trade situation that went down & was exposed by wikileaks.

    A clip

    The cables read like a political thriller: In the Dominican Republic, a “small, powerful coterie of infuriated sugar barons” was trying to sabotage a top American priority, a free trade agreement.

    Layoffs in Glades

    As in the Dominican Republic, Big Sugar predicted that the pact would mean the end of the American sugar industry. It warned that more foreign sugar on the U.S. market would drive American operators out of business.

    Ahead of the 2004 elections, sugar interests spent more than $4.1 million on lobbying and gave $2.9 million to members of Congress, according to the Center for Responsive Politics. The Fanjuls gave at least $171,700.

    Then, in December 2004, six months before Congress was to vote on the trade deal, the Fanjuls’ Florida Crystals company announced it was laying off 182 truck drivers in Palm Beach County.

    “CAFTA and agreements like it will have significant effect on the industry,” Crystals spokesman Gaston Cantens told the South Florida Sun Sentinel at the time. “We need to make the cuts in order to remain viable in the future.”

    In July 2005, the trade deal squeaked through Congress, passing the House by a two-vote margin. Two months later, the Fanjuls’ Atlantic Sugar Mill, between Wellington and Belle Glade, announced it was closing. The company blamed the trade deal.

    the whole article http://www.palmbeachpost.com/news/wikileaks-fanjuls-among-sugar-barons-who-muscled-lawmakers-2074022.html