Obama Stimulus Undermined by Public Sector Layoffs

The friction between a federal stimulus and local tax shortfalls cannot be overstated. A sharp drop in property values has lowered municipal and state tax receipts. The president’s plan does nothing about rebuilding the real estate markets. A change in the basic economies of cities like Detroit, cities which have lost tens of thousands of jobs because of a fundamental and unwanted restructuring of the manufacturing economy, will not reverse themselves because of a drop in payroll taxes.

The most troubling thing about monthly national unemployment figures is the constant drop in the number of people in the public workforce. Recent data released by the Census Bureau show that over 200,000 public positions were eliminated last year. That figure grows by the tens of thousands in most months.

An irony of Obama’s jobs proposal is that he means to offset the $447 billion expenditure for the American Jobs Act with cuts in federal spending beyond the $2.5 trillion set last month. That means austerity cuts of almost $3 trillion. Some of that, he and Congress have already admitted, will come from elimination of “redundant” and “wasteful” federal government spending. That means public workers will be laid off, whether their jobs are actually wasteful or not.

It will be impossible to count heads if and when the American Jobs Act begins to stimulate new employment and as federal austerity to pay for those jobs reduces the government’s payroll. The American Jobs Act may add a million new jobs. Another $447 billion taken out of the federal budget may mean several hundred thousand jobs lost at the federal and local level. The addition and subtraction of these positions is too hard to track in an economy as large and complex as that of the U.S.

What is certain is that new private sector jobs will need to be paid for, and some of that money will come from the public sector.

Douglas A. McIntyre