Barack Obama and his supporters complained bitterly in the wake of last Friday’s pronouncement that “the private sector is doing fine,” accusing the media of taking the remark out of context. The point of his remark, his backers claim, was that compared to the suffering public sector at the state level, the private sector was performing relatively well. That’s not what Obama’s actual claim was, but we’ll let that pass for now. Let’s focus on Obama’s argument for a moment. Just how badly is the public sector performing?
According to that bastion of conservative thought — the New York Times — state tax revenues will hit a five-year high in 2013, the third straight year of improvement after the financial crisis. In fact, revenues will exceed pre-recession levels:
U.S. states expect to collect higher tax revenue in the coming budget year that combined would top pre-recession levels, according to a survey released Tuesday. The increase could reduce pressure on states to cut budgets and lay off workers. …
Total tax revenue is forecast to rise 4.1 percent to $690.3 billion in the 2013 budget year, according to a twice-yearly survey by the National Governors Association and the National Association of State Budget Officers. It’s the third straight year of revenue growth and $10 billion more than the budget year that ended June 2008. The recession began in December 2007.
Total state spending would increase only 2.2 percent and remain below pre-recession levels, the report said.
“The thing we’re definitely seeing is stability,” said Scott Pattison, executive director of the budget officers’ group. Only eight states were forced to close unexpected mid-year budget gaps this year, he said, compared to 39 states two years ago.
It’s not the only indication that Barack Obama has seriously misdiagnosed the economic malaise that has plagued his presidency. According to the Rockefeller Institute, which tracks state budgets and revenues, states saw a 4.1% increase in revenues in the first quarter of this year, too:
U.S. states’ tax collections rose 4.1 percent during the first three months of 2012, a faster pace than during the previous three months, as economic growth helped ease financial pressure in the nation’s capitals.
The increase is the ninth straight quarterly gain for states following more than a yearlong slide after the 2007 recession, according to the Nelson A. Rockefeller Institute of Government in Albany, New York. The pace was faster than the 3.6 percent rise during the last three months of 2011.
Let’s not forget that in the same period, the overall GDP growth for the economy was a paltry 1.9%. So which sector is doing worse? Better yet, why has there been a reduction of public-sector workers at the state and local levels? In my column for The Week, I look at the data — especially the costs:
Of course, state and local governments have shed jobs. According to federal data, local government employment is down 511,000 since the stimulus bill passed, and state government jobs have fallen by 125,000 in the same period. But that isn’t due to revenue issues. It’s all about the massive increase in costs for government workers. Bloomberg‘s Josh Barro analyzes why voters in San Jose voted last week to reform the pension plan for city workers, and discovers that while city revenues went up 19 percent over the last decade, the cost for a full-time worker increased 85 percent. No wonder local budgets are in crisis.
Wisconsin had similar problems prior to Gov. Scott Walker‘s public-employee reforms. He shaved more than $1 billion off the budget by getting tough with unions, and more importantly, he avoided having to lay off significant numbers of public-sector workers in the state. That’s why he got 125,000 more votes in the recall election than he did in 2010 — against the same opponent he faced last time around, too. In comparison, San Jose cut 28 percent of its workforce over the past decade, and now diverts 27 percent of its operating budget to pension-fund obligations. Much of that money could instead be used to employ people who actually deliver expected services.
Besides, BLS data shows that federal employment still looks pretty good, comparatively speaking. As I noted in today’s OOTD, federal jobs — where Obama can have a direct impact — have risen by 29,000 since Obama took office. That’s a 1% increase. By comparison, private-sector jobs have grown by 55,000, which is a 0.005% increase.
Furthermore, Obama’s argument assumes that public-sector jobs are an end to themselves. Most taxpayers, however, see public-sector jobs as a means to deliver specific and limited public services and regulation enforcement. That means that government at all levels should be right-sized to balance costs and need, and not just presumed to grow through increasing seizure of private capital. Jim Geraghty hits that point today as well:
Ten years ago, the total was 6,065,000. The peak was 6,505,000 in July 2009 — right after the worst of the recession, ironically. (Perhaps this was driven by the stimulus-bill spending.) So we’re only down about 250,000 local employees from the peak; the current total is 96 percent of the peak employment.
But from 2005 to 2007 — economic boom years, compared to what we’ve endured in recent years — the total number of local-government employees surpassed 6.4 million only three of the 36 months. So local governments have about the same number of employees as they did before the recession hit.
In other words, Obama seems to think that the recent peak of local employment is the “normal” level, and that any drop from that is an economic problem to be solved. The notion that the very modest reduction represents localities adjusting their number of employees to a level they can sustain with their post-housing-boom tax base never seems to enter the picture.
Clearly, the public sector isn’t hurting for revenues or workers. The public sector is hurting for disciplined and informed management, starting at the very top.
Update: Fixed the link to my column at The Week.