Is Government Employment Growing?

We hear often that more and more people are living off of government jobs than ever before. Well, as we all know, size is relative. And the relative size of government, especially on the federal level, is shrinking. (Most of that shrinkage occurred under President Clinton.) 

Courtesy of Calculated Risk, who points out that the bumps every ten years are the census, which is just wrapping up now.

Event Tomorrow – Accelerating Job Creation & Innovation w/ Asst. Secretary Fernandez, Ask Jeeves Founder Garrett Gruener

As the American economy moves from a stage of catastrophic job losses to anemic job gains, it has become clear that new strategies are needed to accelerate job creation and innovation. Please join NDN and the New Policy Institute tomorrow at 12pm as we host a discussion on job creation and innovation with Assistant Secretary of Commerce for Economic Development John Fernandez, venture capitalist and Ask Jeeves founder Garrett Gruener, and New Policy Institute Senior Fellow for Innovation Dan Carol. At the event, we will overview the Economic Development Administration’s newly announced Jobs and Innovation Partnership, discuss real-world perspectives on innovation, and release The Acceleration Agenda, a new working paper authored by Dan Carol on speeding the creation of the jobs of the 21st century.

Accelerating Job Creation & Innovation
Wednesday, September 15 at 12:00 p.m.
NDN/New Policy Institute – 729 15th St NW, First Floor
Live webcast will begin at 12:15 p.m.


John Fernandez
Assistant Secretary of Commerce for Economic Development & Administrator, Economic Development Administration

Garrett Gruener
Founder, Ask Jeeves, Co-Founder and Director, AltaPartners, and NDN Advisory Board Member

Dan Carol
Senior Advisor for Innovation and Clean Economy, NDN and the New Policy Institute

Dazed and Confused - Coming to Terms with the Economic Incoherence of the Modern GOP

The last few weeks we've seen something NDN/NPI has wanted for a long time now - a real debate about our economy has broken out. 

Like many I have been frustrated as the very same Republicans who oversaw some of the most disasterous economic policies in American history attacked the President for not getting America out of the troubles they created fast enough.  A couple of weeks ago we decided to do something about it, and committed to take the opposition party's rather thin economic proposals at face value, take a deep look at them, and helped make sure others did too.

What we have all discovered during this period of learning more about the current Republican leadership's plans for our economy has not been reassuring.  Several weeks ago the Speaker-In-Waiting Rep. John Boehner proposed an economic plan which would explode the deficit, make no effort to curtain spending, role back the recently based health care reform bill and essentially do nothing about the structural challenges the American economy faces.  Yesterday Senator Minority Leader McConnell introduced a bill which, at first glance (we hope to have an analysis out later today) actually explodes the deficit even beyond what Boehner had proposed a few weeks earlier.  Later this week we get a new book from the GOP's "Young Guns," which if it tracks the Ryan budget proposal from earlier this year, also increases the deficit in the short term and gets around to balancing it in the 2nd half of this young century. 

Paul Ryan gave us a rather ugly preview of the new book yesterday.  In an op-ed in the Wall Street Journal he argued that the President's economic policies are a road to "serfdom" for the American people.   And of course we've seen Rep. Boehner, smartly, offering to cut a deal with Democrats on a fall economic plan, acknowledging that the American economy needs more not less help right now.  His reward for his constructive overtures? Immediate repudiation from the rest of the GOP Congressional leadership, exposing a political fissure in their ranks that is going to be very difficult to mend in the months ahead.

The through line to all this recent GOP economic activity is a powerful, and I would argue, dangerous, incoherence.  Nutty and ideological Republican policies in the past decade brought us near to economic ruin.  Wages and incomes dropped for the typical family, unpaid for tax cuts created huge structural deficits the nation will be struggling to close for decades to come, global advocacy for economic liberalization waned, an unaddressed housing bubble became a full fledged global financial meltdown, the auto industry collapsed and we entered the worst American recession since the Great Depression.  Our immigration and health care systems went unreformed, nothing was done to limit our dependence on fossil fuels largely held by nefarious global actors, and amazingly, the unsustainable fiscal condition of our entitlement programs was actually made much much worse by this party of fiscal constraint.

Polls show that even today, two years after President Obama was elected, the American people understand that it was the Republican Party which created the economic mess we have today. 

Nothing coming out of the mouths, books or websites of the new GOP Congressional leadership indicates a rethink of the economic philosophy and policies which did so much harm to the US and its people over the past decade.  But what is most gauling and upsetting to me is how much the core promise they are making to the American people - a bold commitment to fiscal austerity and deficit reduction - is itself a big lie.  In all of the speeches and statements these deficit hawks warn of the danger our debt, and yet, not one Republican running for federal office anywhere in America today can produce a plan to reduce the deficit by even a single penny over the next ten years.   There is nothing serious or real about their commitment to reducing the deficit.  What has become crystal clear in this GOP economic coming out party of the last few weeks is that the only thing they are really serious about is cutting taxes and reducing the income of the federal government, while continuing the Bush era strategy of simultaneously allowing federal spending to go unchecked. We tried this strategy in the last decade, and predictably, it didn't turn out very well. 

Even if the Republicans are returned to a degree of power next they have painted themselves into a politically unsustainable ideological box.  There are only four real ways to execute on their most treasured promise of reducing the deficit - increase revenue through economic recovery, increase revenue through new taxes or increasing current taxes, cut defense spending, or cut entitlement spending.  Everyone's favorite target - discretionary domestic spending - has already been frozen by future Obama budgets, and just doesnt have enough money in it to amount to a great deal of savings over time.  The Republicans are unlikely to cut defense or raise new tax revenue, and the recovery is uncertain.  So what is left to focus on is entitlement programs, and specifically Medicare.  But will the Republican Party, now the party of old people in America, really be the one to tackle entitlement reform in the years ahead?  Imagine those town halls next summer when GOPers are going to their own base voters with huge reductions in long promised federal benefits.

Hard to really see how given the current ideological rigidity of the GOP, a condition which if anything will get worse next year as the new Tea Party radicals come to Washington and the GOP Presidential primary contest becomes an unpleasant race to the bottom and radical right, they can actually act upon the deficit then if they come to power.   Which means in plain simple language the modern GOP has no real economic plan for the nation at a time of economic peril, something which has become clear and evident by their incoherent forays into fiscal policy this week.

America deserves better.  We are in a time of great national challenge, brought about to a great degree by eight years of some of the worst government America has ever had.  The ideological recklessness of the modern American right should not just be an issue of debate, but needs to become understood as the central cause of what has gone wrong in America in recent years. As I listen to the Boehner, McConnell and perhaps worst of all Paul Ryan's cynical lies, their  blindness to the true and serious economic challenges we face, their ideological and discredited bromides I get angry, energized, spirited.  It is not the Republicans the nation must not return to power this fall, but their wild, radical arguments which will bring further national decline and economic ruin if inacted. 

The good news is that we are finally having this debate now, so long overdue.  The question you have to ask yourself is what role you are going to play in the next two months in ensuring that responsible parties win this critical debate about our future, and once and for all put this current era of radical right politics into the dustbin of history where it belongs.

Update - Mike Hais and Morley Winograd have an interesting take on this debate too.

Update 1030am - The right's piling on Boehner continues.  WSJ editorial page today wonders outloud whether Rep. Boehner is "ready for primetime."

Boehner Changes Position on Extension of Bush Tax Cuts

When asked about the extension of the Bush tax cuts this weekend on Face the Nation, House Minority Leader John Boehner said:

If the only option I have is to vote for those at $250,000 and below, of course I'm going to do that. 

This is of course a major change in Leader Boehner's position on the tax cuts, and it's a good one. I look forward to his vote in favor of the extension of the tax cuts for the middle class. As Simon just tweeted:

Should Speaker Pelosi immediately accept #Boehner's offer to cut a deal on Dem econ plan? Perhaps a face to face tomorrow between the 2?

I look forward to hearing about this meeting - it will be great to have the two parties working together to come up with reasonable economic policy. And, while Mitch McConnell doesn't see room for movement in the Senate, this leadership from the House side should help move things along. Plus, the cuts were passed the first time around by reconciliation, so I don't see a reasonable standard for requiring a super majority this time around.

The Economic Debate Continues: Avoiding Japan, Andy Stern Has a Plan, and Myths About the Bush Tax Cuts

A few interesting pieces this morning, as the economic debate intensifies:

  • Also on Japan, Sushil Wadhwani in the FT writes that we should learn the lessons of Japan, and avoid premature fiscal tightening in Europe and the U.S. 
  • Andy Stern, now with Georgetown’s Public Policy Institute, talks to Ezra Klein about his economic plan:

Job Sharing Program. 
Cost: $54 billion 
Pay-for: Loans to Unemployment Insurance (UI) Funds to be repaid with a small UI surtax starting in 2013 on all employers. 
Jobs created: 2.4 million

Infrastructure Bank. 
Cost: $30 billion 
Pay-for: One-time repatriation break for corporate earnings 
Jobs created: 8.4 million

Youth Employment Programs. 
Cost: $46.5 billion 
Pay-for: Financial Speculation Tax
Jobs created: 3.1 million jobs
Total $130.5 billion 11.8 million jobs 
Net Cost to Taxpayers = $0

Details of the Stern plan.

  • And Brookings' William Gale describes Five Myths About the Bush Tax Cuts. Draw your own conclusion; mine is that extending the tax cuts for the highest earners is awful economic and fiscal policy.

Time for a Mid-Course Correction in Economic Policy

The economic proposals unveiled this week by the Administration suggest that the President’s determination to target his policies for the long-term has led the White House to misread the economy today. Allowing firms to deduct their capital investments in the year they occur instead of slowly depreciating those costs, and expanding the R&D tax credit and making it permanent are measures that can help sustain growth once it returns, but they won’t lift the economy’s current faltering pace. To do that, they need a midcourse correction aimed directly at the economic distortions which brought down the economy and produced today’s abnormally slow and halting recovery. It’s time for presidential leadership and big initiatives, starting with the housing market.

Since 2009, when the White House famously forecast that strong growth would return this year and unemployment would top out at 8 percent, their program has relied on models and analyses that see the current period as part of a normal business cycle. If only that were so, because then the massive fiscal and monetary stimulus of the last 18 months would, indeed, have produced the robust V-shaped recovery they expected. But that isn’t the economic hand we’ve been dealt. Much like the sorry story of post-bubble Japan in the 1990s, the structural distortions in housing and finance which brought on our crisis remain largely unaffected by stimulus. While all that stimulus stopped our slide towards a depression, it was neither sufficiently large nor long-lasting to offset the structural problems.   

So, the banking system, still saddled with hundreds of billions of dollars in shaky mortgage-backed assets and fighting additional drag from falling values in commercial real estate and European debt, remains too weak and wary to resume normal lending to most businesses. The problems with housing have even more far-reaching effects for the recovery. With high unemployment dragging on – as it typically does following a financial crisis – housing foreclosures are stuck at three times normal levels, pulling down the value of most Americans’ homes. This continuing decline in housing values not only has left 23 percent of households with mortgages under water. It also continues to eat away at the net wealth of everyone who owns their own homes, producing a “negative wealth effect” that leaves most Americans, much like the banks, too financially weak and wary to resume normal spending.

Even if a second round of stimulus were possible politically, it wouldn’t cure these structural problems with any greater success than the first round. Until the administration and Congress tackle the forces holding down consumption spending and business lending – or wait another half-decade for this dismal cycle to run its course – the American economy will remain weak and unemployment high.  

A real opportunity here lies in a new approach to keep Americans in their homes and so help stabilize housing values. Subsidies for banks to rewrite troubled mortgages haven’t worked, because the approach glosses over the weakness of the banks and the way they conduct business. Even if these institutions were in better shape, very few bankers are willing to extend new credit to people who couldn’t keep up with their mortgages. Only a government can assume such risks.    

The best approach for this would be a new two part program aimed at housing and unemployment. The first part is a loan program, modeled on student loans, to help Americans with troubled mortgages. Those families could apply for five-to-ten year government loans to stave off foreclosures, with the repayment schedules linked to people’s incomes recovering. With many fewer foreclosures, housing values could stabilize and staunch the negative wealth effect now holding down consumption. The second part of the new program would reduce the cost to businesses of creating new jobs, by expanding and extending the administration’s modest cuts in an employer’s payroll taxes for new hires, the approach that CBO calls the most effective way to jumpstart job creation. Every new job will enable another family to earn the income needed to help keep up with their mortgage, further stabilizing housing values and so ultimately supporting consumption.

If the economy were poised to take off, the Administration’s proposals for another $50 billion in infrastructure spending and $200 billion in tax breaks for small businesses might help. Unhappily, that’s not the case. But the President has time to seize the opportunity to make a mid-course correction, and put in place the foundation for a strong recovery in, say, 2012.

Dueling in Cleveland: The Difference Between Ideas and Bromides

If you listen to John Boehner or take a look at any of his recent proposals on the economy, you’ll notice that they’re either not particularly serious – Repeal health care reform, fire Summers and Geithner – or are just not new – 2008 spending levels, full extension of the Bush tax cuts. What they signal is a genuine lack of seriousness and focus on political bromides on one hand, and a lack of new ideas on the other.

Let’s take a look at Boehner's ideas from today, as discussed on Good Morning America:

Idea 1 - Move next year’s non-security discretionary spending to 2008 levels. He doesn’t actually specify his cuts. I get four immediate points that make this idea laughable:

1) I don’t think you’ll find any economist who believes that the difference between 2008 levels and the current levels or next year’s levels are actually causing economic problems in the present. From an economic perspective, America’s deficit next year is relatively meaningless. Medium and long term deficits and debt are important – they’re what drives bond markets, inflation, etc – and to address those, you have to address entitlements and defense spending. 

2) Boehner says this change will save $100 billion – my math gets me to $8 billion ($530 in 2011 according the budget, $522 in 2008). Either way, next year’s deficit is over $1 trillion. So it’s relatively inconsequential savings.

3) President has already done something in this spirit, with his three year non-security discretionary spending freeze, so Boehner’s not making an argument that’s actually any different from the man he says is spending us off a cliff.

4) What was so great about the economy in 2008? Didn’t the worst economic downturn in over two generations start in 2008? Why should we do things like they were that year? Next thing Boehner’s going to tell us is that we should have the financial system we did in 2008. (Oh, wait.)

Idea 2 - Freeze current tax levels for the next two years. By this, he means extend the full Bush tax cuts, including for those making above $250,000/year. Keeping the full Bush tax cuts for two years more than eliminates any savings that his spending cut creates, so it’s clear that his interest is more in the tax cuts than in reducing deficits. Of course, this is not a new idea, it’s a really old idea. I haven’t heard an explanation as to why this tax cut, as opposed to, say, the ones the President is proposing.

Let’s take a look at the President’s ideas:

$50 billion in infrastructure – roads, bridges and runways – plus financing an infrastructure bank.

Expand and make permanent the R&D tax credit. 

Allow companies to fully deduct qualified capital investments through the end of 2011

Permanently extend the tax cuts for those making under $250,000.

Pass tax cuts and expand credit to small business.

Make the American Opportunity Tax Credit for college permanent. 

People may disagree with these ideas, or think there are better ones out there - the only criticisms I've really heard is that they’re too small (obviously not an argument from the right), and that they can’t pass Congress before the elections. The reality is, though, these are real ideas, and, while they are obviously offered in a political context, they are real policy initiatives and not bromides. Plus, of these ideas, the business tax credits and cuts, as well as the permanence of the tax cuts for the middle class, should in no way be objectionable to conservatives – in fact, the deduction of capital investments is a conservative favorite. 

So, here’s the reality. There is one set of real ideas, and another set of bromides. John Boehner said on Good Morning America that he was open to the President's ideas – that's almost certainly not the case two months before an election. What he has yet to do is produce a set of real ideas of his own.


For more, take a look at NDN's Analysis of the Boehner Plan.

Event: Accelerating Job Creation & Innovation with EDA's John Fernandez - Wednesday, Sept 15 @ NDN

On September 15, NDN and the New Policy Institute will host a discussion on new regional initiatives to accelerate economic growth, private entrepreneurship, and bottom-up job creation. Speakers will include US Assistant Secretary of Commerce and head of the Economic Development Administration John Fernandez, who will discuss his new Jobs and Innovation Partnership; Entrepreneur, investor, and Ask Jeeves founder Garrett Gruener, who will share his practical perspective on what makes new businesses succeed; and NDN Senior Fellow for Innovation and Clean Economy Dan Carol, who will discuss the New Policy Institute's new working paper, The Acceleration Agenda, which highlights low-cost ideas to go faster on job creation and the new innovation "software" we need to create the jobs of the 21st century.

Antiquated and silo'ed federal programs offering one-size fits-all economic solutions need an upgrade. This discussion will focus on the new policies and needed private sector partnerships that can drive smart, bottom-up economic development and turn global competition into regional economic opportunity for entrepreneurs, new businesses and everyday Americans.

Accelerating Job Creation & Innovation
Wednesday, September 15 at 12:00 p.m.
NDN/New Policy Institute Event Space
Live webcast will begin at 12:15 p.m.

Simon on CNBC on the Estate Tax

Simon went on CNBC yesterday to discuss the Estate Tax, in part in response to former Treasury Secretary Robert Robin and investor Julian Robertson's op-ed in the Wall Street Journal calling on Congress to reinstate the estate tax.

I really have no idea where Kate Obenshain is getting her figures on the estate tax, especially the idea of it killing 1.4 million new jobs. Probably from the same reality as one that questions the idea that the economy is in a better place than it was 18 months ago.

Here's what the former Treasury Secretary has to say about the economic effects of the estate tax:

An estate tax can provide revenue—with little, if any, adverse supply-side economic impact—to fund deficit reduction, additional public investment or added assistance to those affected by the economic crisis. Used for public investment that has a rapid spend out, or applied to assistance for economically displaced citizens, the net effect will be to increase demand. That's because roughly 100% of the funds would be spent, while part of any large inheritance is highly likely to be used for savings or debt repayment. And either deficit reduction or public investment will better position our country for future economic success.

NDN Analysis: The Fiscal Impact of the New Boehner Economic Plan - Update 1

A fully-sourced pdf of this analysis can be found here.

Last week, NDN issued a fiscal analysis of the five point economic plan outlined by House Minority Leader John Boehner in a speech in Cleveland, Ohio. Since that time, clarifications regarding his spending plans and a new CBO analysis have made providing an update worthwhile. The following brief analysis examines the impact of John Boehner’s stated plans on the federal budget deficit and the national debt over the next ten years.  

The Fiscal Impact of the Boehner Plan

1. Fully Extend the Bush Tax Cuts.

Increase deficits and debt by $3.8 trillion over ten years. 

2. Have the president veto the Employee Free Choice Act, a carbon tax or cap and trade, and “any other tax increases on families and small businesses” if passed during a lame-duck session of Congress.

Unable to assess impact of hypotheticals, but the provision impairs ability to address deficits and debt, including the potential loss of $624 billion in revenue over ten years from a carbon regime. 

3. Health Care Agenda: Repeal the entire Patient Protection and Affordable Care Act/Repeal the provision in healthcare reform mandating that small businesses file IRS 1099 forms on purchases of over $600.

In his Cleveland speech, Boehner called for the repeal of what some call the “1099 mandate” as included in the Patient Protection and Affordable Care Act in order to close the business tax gap. This would increase the deficits and debt by $17 billion over ten years per Congressional Budget Office estimate.  However, since our last analysis, the Congressional Budget Office has released an analysis of the costs of repealing the entire Patient Protection and Affordable Care Act. Boehner has previously referred to repealing this legislation as his “No. 1 priority.” Doing so would add $455 billion to the deficit over the next ten years. 

4. Reduce non-defense discretionary spending to 2008 levels.

In 2008, non-defense discretionary spending was approximately $522 billion.  Boehner’s office has stated it wants a “hard cap” on such spending and claims a total of $340 billion in savings over ten years, but does not document such savings. Our analysis reveals that, against current policy such a hard cap would actually yield a savings of $67 billion over ten years. Most of these savings come at the end of the decade. Against the President’s budget, which includes a three year freeze on non-security discretionary spending, savings are negligible. 

5. Resignations of the President’s economic team, starting with Secretary of the Treasury Geithner and National Economic Council Director Larry Summers.

The position of NEC Director is not Senate confirmed, so it is fair to estimate that it would take the Administration two weeks to fill that position. Estimating for the taxes paid on his $172,000 annual salary , two weeks without an NEC Director would save the Federal government between $5000 and $6000.

Treasury Secretary Timothy Geithner makes an annual salary of $191,300.  Because he is Senate confirmed, it is safe to estimate that it will take two months for his confirmation. Therefore, two months without a Treasury Secretary would likely save the Federal government between $25,000 and $26,000. Therefore, these resignations amount to a fiscal impact of $30,000 - $32,000 of deficit reduction over the next two months.

Total Fiscal Impact of the Boehner Plan: Increase Deficits and Debt by roughly $4.188 trillion over ten years.

Related Posts:

Boehner Plan Raises All Sorts of Questions About GOP's Economic Arguments by Simon Rosenberg, 8/25/10

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