| September 6, 2012

What Oklahoma knows, but Obama doesn't: Protect public-sector jobs, imperil the employment rate

To most Americans, a job is a job is a job -- but, in the quest to generate employment for the more than 12 million Americans currently out of work, statists betray a prejudice in favor of public-sector jobs, while free-marketeers betray a prejudice in favor of private-sector jobs. That is, a private-sector job seems barely a job to the statist, while a public-sector job seems barely a job to the free-marketeer.

To big-government advocates, growth in the public sector is essential to lowering the unemployment rate -- and it apparently need not come at the expense of the private sector. The government can somehow provide stimulus funds for local and state governments without having to take anything whatsoever from the private sector.

Unfortunately, the idea that the government can "create" jobs is no less a myth than the equally potent idea that the government can "create" wealth. In fact, the government can do neither. The best the government can do is expropriate wealth from the private sector and redistribute it -- sometimes in the form of jobs, sometimes in the form of services. Private taxpayers -- or other of America's creditors -- inevitably must finance the salaries of public workers.

It's too neat a formula to say, "Expanding the public sector by a job shrinks the private sector by a job," but it's not too neat to say, "Expanding the public sector by a job removes resources from the private sector, which likely would employ those resources more effectively than the public sector."

Government bureaucracies are famously inefficient, not just in terms of the number of people they employ to do work that could be done by fewer, but also in terms of the pay they provide workers and the security they often unwarrantedly offer employees.

None of this is to suggest public-sector employees are somehow lazier than private-sector employees. In reality, government employees are highly rational economic creatures who make decisions based on the incentives. Vaunted as "public servants," they're as self-interested as any of us. Why not opt for a notably high-paying job or an exceptionally secure one or a tranquilly cushy one or a job that's some combination of the three?

It is to suggest that the public sector makes poorer use of capital than the private sector. Denied by statists but nevertheless true, job destruction is just as vital to the overall growth of the economy as job creation. It's not just that government is incapable of creating jobs; it's also notoriously bad at eliminating obsolete jobs within the public sector. When the automobile came into vogue, the job prospects for horse-shoers and saddle-makers dwindled. Hardly anyone today would argue that that was to the detriment of the economy as a whole. If the government ran the transportation industry, though, horse-shoers and saddle-makers might not have lost their jobs. Neither, though, would the economy have gained as many jobs as it did through the automobile industry.

As counterintuitive as it might seem, cutting jobs can actually be good for the overall employment outlook of a place -- particularly when those jobs come from the public sector and the resources needed to sustain them can be returned to the private sector. For proof of this, we need look no further than our home state.

In an editorial today, the board of The Oklahoman writes:

Oklahoma state government has slashed the number of its full-time workers by more than 2,000 and reduced monthly payroll by $4.2 million. Yet Oklahoma's July unemployment rate was 4.9 percent, among the lowest in the nation. ...

Those statistics must bewilder Obama. Much of his focus in office has been on boosting the number of government employees and protecting their jobs rather than unleashing the private economy. A huge share of stimulus money sent to the states was to prevent state worker layoffs, yet the national unemployment rate remains above 8 percent. On the other hand, Obama's tax and regulatory policies hinder private business growth and job creation.

Oklahoma policymakers responded to the recession by right-sizing government and reducing the burden on the private sector. The results suggest that economic approach is superior to Obama's theories.

At the same time, while Obama could certainly learn from Oklahoma, the state still has too many government employees. Additional, thoughtful, intentional "right-sizing" still needs to occur.

As The Heritage Foundation's Bill Beach explains, the feeble recovery that has followed the Great Recession on the national scale has been a "case of the missing job generator."

Entrepreneurs, not government bureaucrats, have been the authors of past economic recoveries. Lawmakers typically have reduced tax and regulatory burdens to facilitate the entrepreneurial process. The sharp recovery from the awful recession of the early 1980s is a key example of these doctors at work.

While millions of Americans intuitively understand the importance of innovation and entrepreneurship to our economic well-being, this understanding does not run very deep in Washington. Nowhere else in this country will you find as many people who believe that government creates jobs and that innovation automatically occurs once government cuts a subsidy check.

When the latest recession struck, Washington decided not to enlist the army of innovators and entrepreneurs to lead us back to prosperity by making their economic lives easier. Instead, policymakers embraced a more than $1 trillion government-directed economic stimulus program.

If Oklahomans want to continue to enjoy a low unemployment rate, Oklahoma lawmakers would be wise to continue to develop policies with primarily private-sector job creation -- i.e. entrepreneurship -- in mind.

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