From Ye Olde Inbox yesterday.
Lansing, Mich., June 8, 2012 – Today, Bobby Schostak, chairman of the Michigan Republican Party chastised President Obama for declaring that the “private sector is doing fine.” Obama made the statement this morning at a press briefing.
“President Obama’s message is detached from reality. Nationwide, 23 million Americans are struggling to find work. Obama’s message today is especially disrespectful to Michigan’s hardworking middle class families and demonstrates a complete misunderstanding of the discipline, hard work, difficult decisions required by Gov. Rick Snyder and Michigan’s Republican-led legislature to turn Michigan’s economy around. ...
Bobby Schostak wasn't alone. Willard got into the act, too. There's a slight problem...
But while "doing fine" is in the eye of the beholder, Obama was correct that the job picture in the private sector is brighter than in the public sector. Since the recession officially ended in June 2009, private companies have added 3.1 million jobs. Largely because of cuts at the state and local level, governments have slashed 601,000 jobs during the same period. According to the government, corporate profits have risen 58% since mid-2009.
It gratifies me immensely to finally see this make this into a news story in a way where it's not abutted against a "she said" counterpoint in which some elected Republican or half-baked, politically-driven economist (i.e. Hillsdale College's finest mind, Gary Wolfram) who says that empirical evidence is relative and that in actuality cuts at the state and local level have propelled private sector job growth, which of course is utter horseshit but since the point is "balance" rather than accuracy they're allowed to repeat usually without fear of having it challenged.
By the way, where are those state and local cuts largely taking place? In states where Republicans control the policy-making machinery. In other words, based on empirical evidence, Michigan would be deeper into recovery right now had it not cut business taxes last year, prompting further cuts in public sector employment. For additional insight, we go to Krugman.
Why was government spending much stronger under Reagan than in the current slump? "Weaponized Keynesianism" - Reagan's big military buildup - played some role. But the big difference was real per capita spending at the state and local level, which continued to rise under Reagan but has fallen significantly this time around.
Back when the president capitulated on the first round of stimulus spending, Krugman warned that it wasn't enough and the wrong sort. Half of it was tax breaks, after all. All of that turned out to be fairly precient. Government spending has fallen, largely because everyone bought into this mushyheaded nonsense about austerity (here in Michigan, it was driven not by a desire to bring balance sheets into order, but to punish public sector employees), and it's held back recovery.
A side eddy of that came about a week ago when the Legislature moved budget bills for education. There was a modest hike in per pupil spending, and assistance for pension funds. At the time, Senate Democrats said it was a cut to education because it meant schools were receiving less money than they were a few years ago. Jase Bolger blamed that on an "Obama cut" because stimulus spending ran out. Remember, a couple of years ago, everyone was warning that the stimulus money was a short-term thing, and that no one could count on it permanently. When it ran out, the House Speaker -- rather than accounting for it in the state budget -- simply passed the buck of blame to the White House. And, why did the White House's original stimulus plan eventually run out? Because the White House gave in to the whining of Bolger's own party colleagues in Congress. I haven't seen that sort of brazen shamelessness since a friend convinced me to put a dollar's worth of quarters into one of the shows of a seedy theater above an adult book store off Bourbon Street only -- halfway through -- to have the curtain open to an old man wearing nothing but a rain coat, who stood there staring at the screen unconcered by the look of sheer horror on my face.
The upshot here is that not only was the president factually accurate, but that the same policies that Schostak and the rest of the GOP have gotten behind have not only not aided in economic recovery but have hindered it. That includes the shrinkage of government spending under our benevolent overlord Rick Michigan. It would be nice to see this identified in no uncertain terms, but that would require an objective arbiter of the truth who really specialized in telling objective truths rather than hedging bets to prevent bitching from one side of the argument.
Update! ... This really sums things up nicely.
Brooks may have some magical view of the world where jobs grow up magically in the private sector when the government reduces spending, but in the real world we need a chain of causation. Can anyone tell a story where firms will be motivated to increase spending and hiring when demand drops further due to government cutbacks? There aren’t many business owners who see their demand plummet and then go, “hey, great time to expand.”
I think I've mentioned that I sit on a business's board of directors and right now we're considering an expansion. In fact, we just approved a market survey to see if it's feasible. What are they looking at? Not tax environment (i.e. this). They'll be looking at whether there is sufficient potential business to support it. In other words, if we expand and add workers and products, will there be a matching increase in sales to cover the costs.
Alas, Mt. Pleasant as a community benefits substantially from government spending. There is a major university here and the town's private sector used to be based on a robust oil and gas industry (American oil production reached peak in the early 70s, despite what you hear from the fossil fuel industry, and Michigan's somewhat before that if memory serves correctly). So, the business environment we operate in has taken considerable hits over the last couple of years as public sector employers have demanded concessions from public sector employees in wages, and also as the number of public sector employees employed by the state have shrunk (you may add to this the elimination of college students from food stamps, which under the Granholm administration was a form of soft financial aid owing to a shift in the burden of a college education from the state general fund to individual students, who are financing it through a debt that is both reckless to their own personal lives and since they represent the next wave of home owners, the rest of us as well)
You may argue that it's not government's job to see to the health of local businesses, and you would have a point, except that those cuts were made to aid businesses through cuts in their tax burden, which isn't terribly helpful if by cutting taxes you're also eliminating customers.