Just some numbers to bring reality into the general discussion:
Figure 1: Employment in government, in thousands, seasonally adjusted (blue), and excluding temporary Census workers (red). Total series is “USGOVT” from FREDII. NBER defined recession shsaded gray, assumes last recession ended 2009M06. Source: BLS, August employment situation release.
Update 8:50am Pacific, Thu 9/9:
Reader John Eckstein was kind enough to send me disaggregated government employment data, so that I wouldn’t have to do it myself. Here are some graphs thus generated. Note, these figures do not include uniformed military; they are based the establishment survey.
Figure 2: Federal (red), state (green), local ex.-educ. (orange) and local-education (purple), as a share of total nonfarm payroll employment (FRED II series PAYEMS). Source: BLS CES data via John Eckstein, and FRED II, and author’s calculations.
Figure 3: Federal (blue), state (red), local ex.-educ. (green) and local-education (purple) employment, seasonally adjusted, in thousands (FRED II series PAYEMS), all series seasonally adjusted. Source: BLS CES data via John Eckstein, and FRED II, and author’s calculations.
Update: 12:50pm Pacific, Thu 9/9:
For those afeared of the Federal government Leviathan, and unwilling to go the BEA website themselves, here is Federal nondefense consumption and gross investment as a share of GDP (see Table 3.9.5 for nominal series, then divide by nominal GDP, from 1.1.5).
Figure 4: Federal government nondefense consumption (blue), and nondefense gross investment (red), as a share of nominal GDP. Source: BEA, 2010Q2 2nd release, Table 3.9.5, and author’s calculations.
Update: 2:05pm Pacific, Friday, 9/10
Many readers have indicated their unhappiness that I did not plot their favored time series. Let me first say that one can search the Econbrowser site, and find many of the desired graphs, using the search facility. Second, many of your favorite series can be found in their most updated form (although not in the desired time period, since everybody seems to want a different sample plotted) at Calculated Risk, specifically this post, as well as this earlier post.
For a little perspective, how about:
1) Overlaying private sector employment on the same graph (on a right-hand scale to show proportionally how government employees are faring relative to private sector employees)
2) Charting government sector employment vs. population over the last 30-50 years?
It would also be interesting to see this broken out by federal vs. state and local.
The federal Leviathan keeps growing because Treasury is stealing from our children’s future to keep bureaucrats employed. State and local municipalities are shrinking because they have to pay with real tax revenues to a greater extent (excepting federal bailout grants, bond issuance, and pension accounting gimmicks, of course).
Federal government employment has risen from a 2.768 million in January 2000 to 2.919 million today including the remnants of the Census workers. Excluding them, the increase is even more marginal.
Most of the growth over the past decade has actually come from state and local governments. However, it varies considerably from state to state. Interestingly, Texas has seen among the fastest rates of government employment growth in the nation, though this is probably justified given its population growth.
Federal Government can access job creation in the private sector by accelerating adoption of technology. For example Gov 2.0 is the largest customer for cloud computing technologies and large providers are spending millions to get in the line. Once the issues of security and regulations are ironed out, it is expected that cloud computing will receive wide adoption.
I am not supporting the expansion of the Govt. sector, but there are things if done right can be of tremendous value.
shall we conclude that paulson’s pocket bazooka worked and we are seeing a continued improvement ever since the end of 2008?
I am not sure, and don’t have time to check this morning, whether the figures include uniform military. They most assuredly don’t include contractors and it would be interesting to see the increase in contractor headcount over time – particularly the GW Bush years.
Anyone know?
Okay, in response to the first commenter: I looked at public/private employment data going back to 1970. Over that time, the ratio of public/total employment peaked at 19.4% in 1975. The low point was 15.7%, reached in 1999. Most of that variability can be explained by changes in the private sector — that is, 1975 was a low point for employment, 1999 a high point.
As for the ratio of government employment to the total population, there is a steady rise during the 1970s, from 6.1% to 7.4% by 1980. After a decline in the first part of that decade there is a second marked increase, from 6.8% in 1984 to 7.4% in 1990. Since then the ratio has remained within a narrow range, reaching an all-time high of 7.5% in 2002. As of July it stood at 7.3%.
I don’t have ready access to government employment broken out into federal/local, but given the narrow movement of the aggregates over such a long time period I think it would be hard to find support for your hypothesis that decline at the state and local level are concealing growth of the federal leviathan.
Please at least consider what the data show when you are forming your view of reality.
Menzie, are those just Fed Govt jobs numbers?
WCV, if you track Fed Govt jobs against state/locals govts you will find that Fed Govt has actually been falling or going up at a rate much below those of the states/locals. Growth in publicly held job growth is overwhelmingly from state and local govts. They after all are the real government service providers, and we are demanding more and more services.
You fail to mention that according to the BLS, the median salary of federal workers is 20% higher than that of a private sector employee in the same profession. That is *before* benefits are taken into consideration. The average benefit cost for a federal worker is over $40k / year, while the average benefit cost for a private sector employee is ~$10k / year. I am sure that ObamaCare will fix all those benefit costs, though. BTW, did you see that Medicare’s actuaries were the latest to jump in line and call BS on the cost savings of ObamaCare?
To be intellectually honest, you should plot the proportion of government expenditures to GDP dating back to the early 1900’s. This will show the ever increasing government clear as day. Try this one
As always, the spin obvious.
1) No comparison to non-govenment employment.
2) Scaled by headcount, not by dollars.
3) Selective start date.
Predicted response: “Why the ranting, its just a data point”
It was selected with intent.
As government is forced into layoffs and furloughs on the state and municipal level watch who gets released.
Union employees are the last to go.
Which is a problem most likely….because dollar for dollar they are almost surely the least productive.
California is leading the way.
I suspect this is how things have been handled in Detroit.
The ticking time bomb is not the level of government workers per se, rather it is the massive increase in unionized governemnt workers with defined benefit pension plans, espcially at the state and local level.
State and local governments are going broke because tax revenue is insufficient to adequately fund the programs and also insufficient to cover the payouts.
Defined benefit programs are turning into another case where union leaders bribe and bully politicians to get their flawed agenda through, and then the taxpayer is left to clean up the mess. Nothing against union members, but union leaders are another story.
The federal workforce is a bit more than a tenth of the total government sector employees (around 2,7 million). That includes the military, but excludes the postal service.
Note that the states employ more than 4 million people (counting parttimers), but it’s the cities, the real local governments, that employ the bulk of the public sector employees: more than 14 million (again counting parttimers).
Don’t forget these numbers exclude all the federal government contractors who are de facto employees.
John –do you have any data to back up your claim that union employees are the least productive.
In the private sector union membership is concentrated in the most productive economic sectors –durable manufacturing.
I am amazed at the amount of polemic here. There a a number of interesting counterpoints from rational people and then there seem to be those who feel compelled to display their ignorance. I come here to learn. Take the last post by John – He makes and assertion but fails to back it up with any studies. Or wcv who wants to turn rational dicussion to pure polemic. You would think they wouldd be better off spending their time at a wingnut site!
T-Dub, show your sources and I’ll show mine.
http://www.nirsonline.org/storage/nirs/documents/final_out_of_balance_report_april_2010.pdf
According to Bender & Hayward (Econ profs at University of Wisconsin-Milwaukee) controlling for the fact that government workers have more education, and more experience than private sector employees, government workers are paid 11% LESS. Controlling for benefits, the gap narrows to 6-7%.
Try more facts, less spin. It really won’t hurt that much.
Kay,
The source you gave is “The center for local government excellence”. What equates to “more education and more experience”? Does getting a high degree deserve higher pay? Does getting a masters in psychology or Ph.D in general education equate to more education? Have you ever worked in a high-impact position in the private sector? Education, what you have learned in academia, becomes dwarfed by industry education and experience.
When I have the time, I will have to see how this “data” is collected. From all the data I have been looking at over the past few years, government workers have been getting paid significantly higher than private workers.
If you want to bring reality into the discussion, change the Y-Axis range on that chart. The selected Y-axis range makes the data seem much more dramatic than it is. The rate of growth in government employment has been slower than that of the population over the same period.
I used all readily available data from BLS and the Census population estimates (although their estimates only go up to July ’09, their annual pop. growth rate from 7/00 to 7/09 is 0.94%). BLS shows average annual growth in government employment at 0.76% from 7/00 to 7/10 (using seasonally adjusted data). From 7/00 to 7/09, there was 0.83% avg. annual growth, and using annual data, from 2000 to 2009, it was 0.91%. All lower or on par with growth in population. Not very exciting.
Set the Y-axis minimum at 0 or 10,000 or so and maybe bring the X-axis minimum to 1990 (or leave it at 2000, either way) and it’s a very boring chart.
In the 80s-90s the public sector achievement was to have deflected on the private sector (a larger share of GDP,a larger share of capital contribution,a larger share of employment)
Throughout the last decade the public sector achievement will have erased all the benefits of above.The end result being a lesser financial ability,a growing share of potential social conflicts.
@Kay–speaking of spin, who funded this “paper” that Bender and Hayward authored? Was it the “Center for State and Local Government Excellence” and the “National Institute on Retirement Security”? So, let me get this straight, an advocacy group for public employees pays a couple of academics to write a paper on their behalf. What do you think the outcome would be? This paper is no more helpful than Rick Mishkin’s paper on the Financial (in)Stability of Iceland. BTW, have you read this paper? The overall discussion was focused on federal employees. This paper was focused on state and local employees, who earn less then federal employees. So, please cut the spin, Kay.
To add to my point earlier about excluding contractors, here is a 2007 NY Times article.
http://www.nytimes.com/2007/02/04/world/americas/04iht-web.0204contract.4460796.html
The money quote is ” far more people work under contracts than are directly employed by the government.”
So we should at least double the number of Federal government employees in the graph.
Per commenter re: Detroit. Wrong. Detroit is not suffering because of unions, work rules or pensions. They are a relatively small part of the huge problem: the city is now less than half the population it was in the same size area AND the remaining population is much, much poorer (and somewhat older). As to size, you can fit all of Boston, all of San Francisco and all of Manhattan inside the city limits of Detroit. It was never dense and now it is hugely empty for large areas. People with money have largely moved out, leaving behind the poor and particularly the poor elderly.
Layoffs have occurred everywhere in every department. For example, the big fire this week seems to have been caused in large part by winds dislodging illegal electric hookups that sparked. People can’t pay the electric bills and the City and the utilities have full time workers whose jobs consist of disconnecting dangerous illegal hookups.
There is no rational way to blame unions for Detroit. There continue to be corruption and management scandals but those matter more in a destitute place.
I think seeing the same charts, plotted using cumulative payroll amounts (and do not forget the value of benefits) rather than employee numbers would reveal the true extent of the ever expanding government. I also think seeing the numbers on a per capita basis would be even more “educational”.
I just want to amplify the points being made repeatedly that one has to include Federal Contractors among the government workers. I’m disappointed with Professor Chinn for plotting up a bunch of stats – and making a politically sensitive claim – without taking the time to make certain the information was accurate and comprehensive enough to back up the claim.
Putting some color on the shift to contractors during the Bush administration: many large organizations, including the NUCLEAR WEAPONS LABS of this country (a government function if ever there was one!) have been run by private-sector contractors for the past few years. (Previously these Department of Energy laboratories were still contractors, but the workers were employees of the University of California and would have been counted as “state” employees.)
The “ever-expanding” government sector should refer to the money spent on government.
How about a graph of total compensation (and promised benefits) versus number of government employees?
From Bloomberg:
The U.S. slipped to fourth in the annual rankings of the world’s most-competitive economies amid a record budget deficit, while Switzerland retained the top spot, the World Economic Forum said.
The U.S. fell from second, a year after losing the No. 1 position for the first time since the Geneva-based organization began its current index in 2004. A budget shortfall of more than $1 trillion and public distrust of politicians were among the weaknesses in the world’s largest economy.
“A number of escalating weaknesses have lowered the U.S. ranking over the past two years,” the study of 139 nations showed. “A lack of macroeconomic stability continues to be the United States’ greatest area of weakness.”
…
The U.S. ranked 87th for macroeconomic stability, and American businesses also increasingly questioned the government’s ability to avoid meddling in the private sector and viewed it as a wasteful spender, the forum said. In its index of financial market development, the U.S. fell to 31st from ninth in 2008.
The comments on this are hilarious, as the “OMG GUVMINT IS TEH PROBLEM!!!!” conservatrolls have to pivot rapidly to other measures not in evidence to defend their “exploding government” belief system, finally falling back on standard RW union-bashing and outright ignorance of the educational distribution (considerably more college-educated) of federal workers.
Because we all know that St. Ronnie couldn’t POSSIBLY have been wrong, amirite?
I don’t find the graph you presented very informative. This is much more relevant and should give hope to the small government types.
http://www.calculatedriskblog.com/2010/09/government-employment-since-1976.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+%28Calculated+Risk%29
More Bloomberg: Highway Fatalities
The number of people killed on U.S. highways fell last year to the lowest since 1950, the Transportation Department said in crediting the slumping economy, seat-belt use and campaigns to combat impaired driving.
Fatalities in vehicle crashes in 2009 declined 9.7 percent to 33,808 from a year earlier…
The fatality rate fell to 1.13 deaths per 100 million vehicle miles traveled in 2009, compared with 1.26 deaths for 2008, the agency said. Deaths declined in all types of vehicles, including motorcycles that had posted increases for 11 consecutive years.
Hmmm. Do the math and the odds of dying in an auto accident over a lifetime of driving is around 1:300. Still pretty high for my taste.
Brilliant! Everyone that has a graduate degree goes to work for the federal government and tax the underclass to pay their salaries!
Posted by: CoRev at September 9, 2010 04:58 AM
You fail to mention that according to the BLS, the median salary of federal workers is 20% higher than that of a private sector employee in the same profession.
___
ROFLOL!!! I notice you do NOT link the source of the supposed data but merely claims it exists.
Fact: New lawyers are paid far far far less than new lawyers in the private sector. The gap is, and has been for decades, 25-30% less pay for those going into law as Federal employees.
Fact: The partner in a law firm of more than 30 lawyers with 20 or so years of experience uaully makes around $250000 a year (national average of large and small firms). Feds don’t even come CLOSE and only the supervisory level attorneys with 20 years experience get close to $120K.
The same difference apply to doctors, administrators with MPA (public version of an MBA), biologists, chemists, geologists, engineers etc.
What they et in exchange for the lower wages is a pension in the future (assuming they live to collect it and collect it for X numbeer years.)
And since the average employee in the private sector does not have even a 401K (less than 50% have such a thing) or are uninsured/underinsured for health insurance, your comparison is disingenuous. I seriously doubt that you averaged in the 401k and other savings mechanisms of the top 10% of all private workers with a BA or up in getting your numbers. That would mean adding Dimion’s ‘bonuses’ into the benefit pool and leaving out the retail clerk who doesn’t even have sick days.
Government employee headcount is irrelevant in determining the size of government. You MUST follow the money! For more info:
“The True Size of Government” by Paul C. Light – Government Executive – January 1, 1999
http://www.govexec.com/features/0199/0199s1.htm
http://www.whitehouse.gov/our-government/executive-branch
Department of Agriculture – employs more than 100,000 employees and has an annual budget of approximately $95 billion. It consists of 17 agencies.
Department of Commerce – oversees a $6.5 billion budget and approximately 38,000 employees.
Department of Defense – The largest government agency, with more than 1.3 million men and women on active duty, nearly 700,000 civilian personnel, and 1.1 million citizens who serve in the National Guard and Reserve forces.
Department of Education – oversees the Department’s 4,200 employees and $68.6 billion budget.
Department of Energy – oversees a budget of approximately $23 billion and more than 100,000 federal and contract employees (ed. mostly contract).
Department of Health and Human Services – oversees a budget of approximately $700 billion and approximately 65,000 employees. The Department’s programs are administered by 11 operating divisions, including 8 agencies in the U.S. Public Health Service and 3 human services agencies.
Department of Homeland Security – The third largest Cabinet department, DHS employs 216,000 people (budget unstated).
Department of Housing and Urban Development – oversees approximately 9,000 employees on a budget of approximately $40 billion.
Department of the Interior – oversees about 70,000 employees and 200,000 volunteers on a budget of approximately $16 billion. Every year it raises billions in revenue from energy, mineral, grazing, and timber leases, as well as recreational permits and land sales.
Department of Justice – is comprised of 40 component organizations. With a budget of approximately $25 billion, the DOJ is the world’s largest law office.
Department of State – oversees 30,000 employees and a budget of approximately $35 billion.
Department of Transportation – oversees approximately 55,000 employees and a budget of approximately $70 billion.
Department of the Treasury – oversees a budget of approximately $13 billion and a staff of more than 100,000 employees.
Department of Veterans Affairs – oversees a budget of approximately $90 billion and a staff of approximately 235,000 employees.
According to Bender & Hayward (Econ profs at University of Wisconsin-Milwaukee) controlling for the fact that government workers have more education, and more experience than private sector employees, government workers are paid 11% LESS.
I don’t think that those are good control factors. Seeing as how union work rules reward increasing education and seniority (i.e. you get paid more if you have a masters degree, you get paid more for each year of “service”), you are controlling out the very things that are causing the increase in wages.
Also, regarding the raw numbers, when the private sector loses millions of jobs, and the public sector only a couple thousand, there is something seriously wrong. There has to be some balance. The purpose of recessions is to trim the fat that has built up in the boom, it’s hard to understand why the public sector should be immune to that. If anything, the excessive tax revenue that comes in during the boom encourages fat that needs to be trimmed in the recession.
“Does getting a high degree deserve higher pay? Does getting a masters in psychology or Ph.D in general education equate to more education?”
Yes and yes. Or do you think people go colleges for entertainment purposes… like to a movie.
Here are a couple of sources on federal pay:
one
and
two
and
three
When looking at pay statistics one does need to consider the skewness in income distributions. Clearly, average and median statistics can be quite different here.
One other thing that gets lost in this debate is job security. It sure doesn’t seem like there are many job losses at the federal level (yet).
To Ann: I notice you do NOT link the source of the supposed data but merely claims it exists.
And by the way, many (maybe all) federal agencies have done away with the pension system. If you have been hired in at least the last 10 years or so you a traditional 401K and not a pension.
“The purpose of recessions is to trim the fat that has built up in the boom”
Recessions aren’t induced to trim fat. Recessions only have a “purpose” when the Federal Reserve hikes interest rates to fight inflation.
The goverment pays for its employees to get worthless dime store diplomas. They have special relationships with univeristy who are also often easier on students in government programs as they bring in big dollars.
To All: I’ve added Figure 2 (shares of employment by level of government, relative to total nonfarm payroll employment), Figure 3 (absolute levels of disaggregated government employment), both since 1955 (thanks to John Eckstein); and Figure 4 (Federal nondefense consumption and gross investment as a share of GDP, from 1967Q1).
aaron: Re: Universities go easy on government sponsored students. Hmm. I must’ve missed that memo, here at UW. And at UCSC. And at UC Berkeley. And at…
There are a number of issues with government pay and headcount:
1. Output, not Cost.
Often, the output of government employees is hard to measure (as there is no market-pricing client), and meaningful work is co-mingled with political jobs. This tends to lower regard even for productive government jobs.
As a corollary, pay is often not linked to productivity. Very valuable people are often paid as much as slackers. As a result, in some cases, people are vastly under-paid.
2. Pay is Politically, not Economically, Determined
Pay for state and local workers, in particular, can be heavily influenced by unions and political lobbying; thus, it is not clear whether employees are paid at market, above or below. This, in turn, engenders suspicion of pay packages, particularly when they have long, expensive and opaque tails as they do in, say, New Jersey.
3. Pay can be bizarre, and to all appearances, unwarranted
8,000 NY MTA employees made more than $100,000 last year. One Long Island Rail Road conductor who retired in April, made $239,148, and in fact, more than a quarter of the Long Island Rail Road’s 7,000 employees earned more than $100,000.
Meanwhile, commuting costs from NJ to NYC have increased by literally $2,000 per year this year, a price increase no private sector supplier has been able to approach. So the state railroads can match out-size pay with monopoly pricing power. For many commuters, this sort of thing is galling.
4. Incentives aren’t Aligned
Politicians have to balance several (three) different objective functions, only one of which relates to efficient use of funds. As a result, decision-makers have only limited incentives to act in fiscally responsible ways. Thus, taxpayers have little confidence that decision-makers have incentives aligned with their own, and this makes government pay and employment levels suspect.
Menzie, thanks for the additional plots! Figure 2 and Figure 4 pretty much demonstrate that we’re all just standing in a circle shooting at each other out of frustration. The real problems that need fixing are elsewhere.
I encourage you to extend your Figure 4 to include Corporate Profits, Proprietors’ Income, and Compensation as a share of GDP, as can be found on Page 21 of National Economic Trends put out each month by the St. Louis Fed (and doubtless available in FRED graphs…)
Steve, all of your complaints about “government pay and headcount” apply equally well to any large, bureaucratic organization, including most of the S&P 500 corporations. Especially the ones that lobby the government to change the rules and boost their profits! And the ones that systematically hire former government workers in order to capture their regulators!
For all this talk about unions, I would be interested in what percentage of federal worker are unionized. Anecdotally, the government worker I know have been lawyers, hospital administrators and foreign service officers – all of whom work hard for less pay than they would have obtained in the private sector. I have worked my entire career (40 years)in the private sector and although it proves little, have found a mix of hard workers and slacker.
The evidence presented here seems to indicate that the rise in the percentage of federal worker in the US has been exagerated most likely to serve as a cudgel.
I think what galls a lot of non-government workers and non-government retirees is the nature of the government employees’ growth annuity pensions. A government worker retiring at age 55 with a $70,000 per year pension with about a 30 year life expectancy has an approximate present value pension of $2,100,000 (with no interest rate risk), plus health care coverage for life (prior to any recent changes). If a non government employee had $2.1 million upon retirement, that person would be castigated by the press as rich.
I love the assumption that pay in the government sector is irrationally determined compared the the private sector.
Seriously? It is eff’ed up in the private sector too: http://www.bloomberg.com/insight/ceopay.html.
Both are human institutions and are therefore not fair. Both governments and private companies make all kinds of stupid employment contracts based on many things other than relative merit. The bottom line is, if you think some other job category is getting a sweet deal you should switch jobs to get some of that sugar for yourself. If you really think that working the MTA is so lucrative, go apply for a job!
Incentives should be aligned. You would think they would be in the private sector, but think again. Even on the pure free market juice they drink on wall street they get it wrong: http://www.ustreas.gov/press/releases/tg786.htm
and those kings on wall street have cost the US taxpayers way more than the 3% percent raise my local firefighters got this year.
It is comment like that one from AS that drive me crazy. How many government worker retire with a $70,000 a year pension? Where is your data?
Ann, you have misattributed a comment to me.
Wisdom Seeker –
I disagree. Most companies hire at market rates, and, at least for non-union shops, pay is market driven. As most companies must pay salaries from revenues in a competitive setting, there is some pressure to make sure that employees are producing. No private company, for example, would pay a conductor $250k when the alternative was available on the market at, say, $60k.
Often government entities don’t depend on their customers for funding–which comes out of (forced) tax revenues. This different orientation can radically change value propositions. For example, my hometown of Princeton has a lovely public pool. However, the pool doesn’t have lounge chairs or enough shady areas, so you have to sit upright or lay on the hard ground, mostly in the sun. So I don’t really go there very much. Consequently, a small change in service–lounge chairs really aren’t that big a deal–enormously affects the value proposition. That’s the problem of not having a paying customer, and that’s the downside of government employment. The value of output can be greatly influenced by small changes at the margin. Government employees face reduced incentives to provide these marginal services which may prove central to the value of the service provided.
As for the private sector, it is possible to hide out in corporations large and small for a while, in part because employers pay, in effect, an option (their salaries) to hold employees during slow periods. But this sort of thing is shaken out during recessions, and most companies I know are pretty lean nowadays.
I am most certainly not a fan of renting seeking behavior and regulatory capture. However, these sorts of things tend to happen more when there are large government programs, state-owned companies, or excessive regulations. Rent seeking is pretty well documented, and I’ve worked for enough state-owned companies to know it first hand.
Don’t know too much about fine points of regulatory capture. It’s an interesting topic, and I’d be curious to read something about it, by way of posting suggestion.
Robert
Does it matter how many government employees retire with $70,000 or $30,000? The growth annuity present value remains a factor that separates government employees from the rest of us. Low risk of unemployment with high safety of retirement and benefits is a constant. At a $30,000 retirement the PV is still about $900,000. Also the press would still castigate the private enterprise employee who retired with $900,000.
Buzzcut: “The purpose of recessions is to trim the fat that has built up in the boom, it’s hard to understand why the public sector should be immune to that.”
One of the dumbest things I’ve read yet on this blog. Apparently you are advocating a pro-cyclical fiscal policy. Dumb squared. Recessions have no purpose. They are just a phenomenon of the business cycle. The public sector is not a business.
Anonymous “many (maybe all) federal agencies have done away with the pension system. If you have been hired in at least the last 10 years or so you a traditional 401K and not a pension.”
Actually, it’s any federal employee hired after 1983. And that includes members of Congress and the Supreme Court.
Here’s a link to the basic pay tables for most civil servants: http://www.opm.gov/oca/10tables/pdf/gs.pdf
In general the pay for those at the low end of the pay scale is somewhat better than what a person is likely to get in the private sector; but it’s just the opposite at the upper end of the GS schedule. To put this in some perspective, roughly speaking grades GS9 thru GS12 typically require at least one bachelor’s degree. Grade’s GS13-GS15 require at least one master’s degree.
For those at the very top (e.g., political appointees), they are on a special executive pay scale:
http://www.opm.gov/oca/10tables/pdf/ex.pdf
Obviously those at the high end of the GS pay schedule and the political appointees under the executive pay schedule are likely underpaid relative to the private sector. So if you’re someone with a low skillset, then you probably want to find some nice GS-03 government job. If you’ve got advanced education and you want to make a lot of money, your best bet is the private sector. Judging by some of the envious comments I’m reading here it’s pretty obvious which posters are stuck in deadend, low skill jobs.
I’m disappointed at this post. If the notion is to show that government is not growing, it fails. The size of government is not measured merely by the number of government employees.
For example, if government increased the capital intensity of its production (more tanks and fewer soldiers), would this be a reduction in the size of governemnt? Even if the idea is to compare shares of total employment, the better comparison would be payroll, not number employed. (Being an economist, Menzie, I’m sure you’ll agree.)
And the better measure of the relative size of government is government expenditures as a share of GDP, not government employment as a share of total employment.
The belated addition of government consumption and investment don’t solve the problem. That misses transfer payment entirely. (You wouldn’t want to exclude those, would you?)
And leaving out the military…….?
AS There are several different federal govt retirement programs and it sounds like you and others may be mixing them up. Older government workers (those hired before 1984) are typically under the Civil Service Retirement System (CSRS). CSRS employees do get a pension, but typically they do *NOT* get Social Security benefits even if they contribute to SS while working in the private sector. CSRS employees do contribute to that defined benefit plan and pay at least the equivalent of the FICA tax plus an additional CSRS contribution. So when you compare a CSRS retirement package you have to remember that there are no supplemental SS benefits. Federal workers generally forfeit any earned SS benefits. And in the rare cases in which they are able to collect SS benefits, their pension is reduced. This means that for those under CSRS they have the advantage of job security, but they also effectively give up the right to quit federal employment. If you were hired after 1983, then you are under the Federal Employee Retirement System (FERS). FERS employees pay into FICA and are eligible for SS benefits at the usual age. They also contribute to a 401k plan and the govt matches contributions up to 5 percent. FERS employees also contribute (1 percent of pay) to a small defined benefit plan. Most of a FERS employee’s retirement is based on the performance of their 401k plan.
Steve Kopits Productivity of federal government workers has increased…look at Menzie’s chart. The number of employees has fallen as a share of the labor force, but output has been increasing. I’ve worked in the private sector as well and there is no difference in the work ethics. You’ve got energetic govt workers just like you’ve got energetic private sector employees; and you’ve got lazy govt workers just like you’ve got lazy private sector employees. And yes, lazy govt workers do get fired…the difference is that it’s usually framed in criminal terms, which is something that private sector employees don’t usually have to worry about. As a private sector employee you may get fired, but that’s pretty much the worst of it. As a federal employee I probably won’t get fired outright, but instead I’ll be charged with some administrative crime, have my security clearance suspended, and then removed from public service because I don’t have an active clearance. And if the administrative crime involves govt funds or improper use of govt property, then I also go to jail. Hey, I know a federal worker whose security clearance was revoked because he appeared on Judge Judy. That led to his dismissal. So federal employees do have an incentive to work just as hard as private sector employees.
You are right about quasi-private contractors that perform government tasks. You see this a lot with janitorial services at federal buildings and with information management & security services at govt sites. Those are almost entirely contracted out, and the these truly represent the worst of all possible worlds. These are rent seeking schemes.
I note with interest the news report of a California city manager who was paid several times more than President Obama. Having read the debate in my small town on the pay of our town manager, the argument for “high” pay was the same used to justify the high pay for the CEOs of the banks that were so well run by the CEOs they needed government bailouts – they are paid competitively.
It seems California cities somehow ended up with several city managers paid millions a year, with pensions of hundreds of thousands a year, just like the pay packages of similar size for-profit firms.
Now, what I want to join is the union that ensures managers get paid millions of dollars a year in both the private and public sector.
After all, those city managers and public sector agency heads getting the million dollar pay packages are clearly all union members just like all the other corporate CEOs with their unions making sure they get paid these outrageously high wages that are much higher than President Obama or Chief Justice Roberts or Speaker Pelosi.
By the way, CEOs and managers getting paid millions in the private sector are actually the top advocates of paying government managers much higher wages. And their self interest is very apparent.
Imagine if the CEO of UPS or FedEx argued the head of the USPS should be paid $200K a year because managing a corporation that moves billions of pieces of mail and managed the world’s largest number of employees isn’t that hard a job. Imagine if the CEOs of the large US banks argued that managing risks and lending of a large Federal reserve bank wasn’t worth more than $250K a year, because risk management is a piece of cake, forecasting economic trends is mindless, and no one ever needs to worry about fraud when billions of dollars are being managed. Why, the next thing you know, US CEO and managers would see pay cuts of 90% which would place them on par with managers in Europe and Asia.
The problem is the boss and managers union has created a high pay structure in government that does look very bad when you compare someone fired from his government management jobs to the stockroom worker at the grocery fired for stealing food. The high paid government managers singled out in the press are not compared to the high paid managers at ENRON, Wamu, Goldman, GM, BP.
Regarding the posting by: T-Dub at September 9, 2010 05:11 AM–T-Dub links to a plot, which, he states, shows that the proportion of government expenditures to GDP from 1900’s to be ever increasing, as clear as day. The plot at the link does shows rising total government (fed, state, and local) expenditures up until about 1980, after which expenditures are pretty much flat or declining until about 2008, 28 years, after which something unusual apparently happened.
(That plot also appears to include fed to state/local transfers as a fed expenditure, which, because those transfers are ultimately spent by state/local governments, means that those transfers are double-counted, and government expenditures are overstated. It’s not currently huge, about 2% of GDP, but it is noticeable.)
Steve Kopits: Excellent posts. Thanks.
2slug
Thanks for the primer. What I am ranting about is that government workers have very little risk for the reimbursement, pension and healthcare and the taxpayer is on the hook for much if not most of this. In addition there is no reinvestment risk and the pension is a growth annuity. Having worked in the private sector as a CPA, successful CEO of a start-up, and budget director of a publicly traded company (early in life), I compare the risk of government workers with the risk of private enterprise and then as I said, if a private sector employee retires with the same present value benefits as a government worker, the press castigates them as rich. I am also thinking more about California pension issues than the feds. I am also not impressed by the argument related to degrees. Risk and return is the metric I think is more relevant. Not trying to be argumentative, just trying to present what I think is how many private sector folks feel.
I’m a little confused by what seems to be the premise of the post, which is perhaps best represented by this:
“For those afeared of the Federal government Leviathan,…”~ M. Chinn
But then there is this:
The U.S. Census Bureau announced today [Aug. 31] that obligations for federal domestic spending increased 16.0 percent in fiscal year 2009 to $3.2 trillion. The 2009 spending total is equivalent to $10,548 per person living in the United States.
The annual percentage change (16.0 percent) is the largest since the Census Bureau began compiling these data in 1983. The increase is in part from the American Recovery and Reinvestment Act (ARRA) of 2009.
Entitlement programs Medicare, Medicaid and Social Security comprised 45.7 percent of all funding, or $1.5 trillion. Social Security alone accounted for $709.7 billion of that total. The one-year increase ($136.0 billion) in spending for these three programs was approximately $401 for every person in the United States.
States that had the highest per capita federal spending were Alaska ($20,351), Virginia ($19,734) and Hawaii ($19,001). States with the lowest were Nevada ($7,148), Utah ($7,435) and Georgia ($8,538).
These new figures come from Consolidated Federal Funds Report: 2009 [PDF], which describes the distribution of federal funds by department and agency, and by state and county. A companion report also released today, Federal Aid to States: 2009 [PDF], shows federal grants to state and local governments. These reports do not include interest paid on the federal debt and foreign aid. Although federal expenditure and obligation totals for fiscal year 2009 in these reports include money from the ARRA, specific dollar amounts are not identifiable for all programs.
Federal spending includes expenditures or obligations for grants, salaries and wages, procurement contracts, direct payments for individuals for retirement and disability, and other direct payments.
Grants represented nearly one-quarter (23.0 percent) of federal spending in fiscal year 2009, totaling $744.1 billion. Three federal departments accounted for 77.9 percent of all federal grant money in 2009 — Health and Human Services ($414.9 billion), Education ($83.2 billion) and Transportation ($81.6 billion).
Salaries and wages for federal employees accounted for $299.4 billion (9.2 percent) of all federal spending. The largest share of this category went to Department of Defense payrolls (45.8 percent), followed by federal civilian payrolls (35.3 percent) and U.S. Postal Service payrolls (18.9 percent).
Approximately one in six federal dollars went to procurement contracts, which totaled $550.8 billion, or 17.0 percent of total federal spending. Defense contracts comprised 64.4 percent of that amount, followed by Energy (5.8 percent) and Veterans Affairs (4.0 percent).
Retirement and disability accounted for more than one-quarter (27.2 percent) of all federal spending, at $881.1 billion.
Here is a link to the Census Bureau report posted above:
http://www.census.gov/newsroom/releases/archives/governments/cb10-131.html
Wow, Menzie. What a shameless, disingenuous, deceitful, and epic failure of integrity, though perhaps a stunning propaganda piece. Academics should be disheartened by this partisan stunt in your suggesting there is no “ever-expanding” government sector. It’s one thing to be frustrated by conservative and libertarian philosophies on the role and size of government. But if you seriously do not understand why the data you presented here in no manner supports your claim, you have no business claiming authority on this subject and do a tremendous disservice to economics and logic in general.
AS “In addition there is no reinvestment risk and the pension is a growth annuity.”
This is a common but false assumption. And for those in FERS the risk is the same as in the private sector. Many lost bigtime when the market crashed.
Ray Love, I think you need a conclusion to your comment.
Menzie, unfortunately not every goverment employee gets their degrees from Wiscon or Berkley.
Of course, maybe there is no favoratism, the curriculum as whole may be slack.
You can’t access any media nowdays without hearing some variation of “…Obama’s unprecedented expansion of the federal government.” Usually included is the “takeover of over 1/6th of the American economy by Obamacare” followed by a takeover of the auto industry, the banking industry, and the thousands of special czars that force millions of freedom-loving Americans into divorcing their wives so they can get gay married.
So I would say the purpose of this post was to provide a little factual perspective to all of that hyperbole. And by all accounts has succeeded in its mission.
2Slug
Are you saying that government employees who have a defined benefit pension plan lost money on the defined benefit portion of their pensions? I understand the loss on 401Ks or 403bs, but not on government defined benefit plans.
You have omitted contractors. See growth in SAIC or CACI or Terramark or any other number of government contractors. Do you think there were only 150k Americans in Iraq, too? It also excludes compensation and benefits for those employees, which have grown MASSIVELY over the period presented. The compensation aspect is probably why there are not more government employees – they are too expensive.
Worse, this says nothing about entitlement growth, which is the real expansion problem headed our way.
If you could present those charts and show a similar trend, it would be interesting. In reality, government spending as a share of GDP hockey-sticked in the last few years.
I would have hoped for better from this site.
CoRev,
As you may know, I have been active on the side of the labor-left for more than 3 decades. So… if were to add a conclusion to the info that I included above… well, I might be perceived as a traitor to my chosen cause. I am also a little confused about what is being argued here. Menzie is clearly a smart guy but total government spending has risen from below 5% of GDP in 1900, to about 38% today, with a recent spike of course. So I feel that I am probably missing something here and so consequently I am stalling.
I also have quite alot of respect for Slugs but he seems to actually believe that government employees work just as hard on average as do folks in the private sector. But I live on the grounds of a State Park in Texas where my wife works as Park Ranger and, as the only civilian on site I am a witness, daily, to the fact that the Texas State Parks and Wildlife Dept. is ‘inefficiency squared’. Hundreds of educated people just driving around in over-sized 4-wheel drive vehicles with nothing of any consequence to do. And on the rare occasion that they do find a project to pursue… they do it poorly because their base of experiences typically do not match-up with their duties. Recently, for example, our park’s Director (Masters degree) decided to build a small fuel-depot but the slab was made much too thin and it broke when they tried to build on it. So instead of re-pouring the slab they built what is essentially a freestanding cage and then they simply set the cage on the broken slab. Now though, stealing the fuel, which is in 5-gallon containers (many), is as easy as lifting the cage off the slab.
Where this gets interesting though is that ‘all’ of the ranchers and farmers in this remote area simply have their fuel delivered from companies that provide storage tanks for a small fee as part of the service. But then of course there would be no reason to drive into town about every third day to buy fuel.
Ding, ding, ding, JB hits a home run with: “The compensation aspect is probably why there are not more government employees – they are too expensive. We have had discussions of the highly paid Fed employee salaries, and their extremely lucrative retirements compared to those lower in the private sector. So, which makes sense, continue the ?high? Fed employee costs or shift to the seemingly lower private sector?
Some here complain we are not including contractors in the count/costs. Some complain that there is extensive Fed employment growth, which the latest charts disprove. But, few realize that the private sector representative sitting across the negotiating table is usually higher paid than his Fed counterpart. Nor those working on a Fed Govt contract has few if any public sector counterpart. That’s why that contract was awarded in the first place.
Fed Govt is legally restricted from competing against private sector companies. Which eventually moves the work force from the public to private sector.
Occasionally a private sector firm will point an area of competition and then the wheels go into motion to contract out that service. Additionally, there are always budget pressures to reduce employee expenses so internal studies are often underway to determine whether there are potential conflict or targets for out sourcing.
That whole process is formalized under OMB circular A-76, which was first implemented under Reagan.
So when we see these comparative wage studies what is being compared is often apples to oranges, except for those functions needed to manage the contracts/grants/ and all the other ways the Fed Govt feeds your tax dollar back to the economy.
JB: I apologize for not meeting your standards.
The post was addressing concerns about domestic spending/employment. I understand that there are contractors in Iraq and Afghanistan. There are multiple Econbrowser posts to that effect, should you care to check.
In addition, I have had numerous posts regarding the entitlement challenge. In fact, the last time I mentioned entitlement reform, I was accused of repeating “Republican talking points”.
In other words, a given post cannot address all relevant points. Once again, I apologize for not writing a post up to your standards. If you should decide to skip my future posts, I will of course fully understand and appreciate.
I do not think that CoRev or JB really prove anything. There are two reasons to contract out to the private sector. First is when the tasks are time limited and second is when it would save money. As someone who lives in the private sector I can tell you that sometimes outsourcing costs more and even wheen it cost less there are hidden costs – loss of control over quality etc. The other thing to consider is that these are fuctions taht the public wants and has voted in foavor of. As for the rise in entitlements, Social Security and Medicare are the major forces driving the rise. They are also two of the most popular programs.
Just in case anyone has any doubts about whether or not the Beige Book Boyz have the ability to forecast or even recognize a recession as it is occurring, see the following:
http://www.startribune.com/business/102498339.html?elr=KArks:DCiU1OiP:DiiUiD3aPc:_Yyc:aUU
NBER business cycles: http://www.nber.org/cycles.html
July ’08: http://www.federalreserve.gov/fomc/beigebook/2008/20080723/default.htm
Sept. ’08 http://www.federalreserve.gov/fomc/beigebook/2008/20080903/default.htm
Mar. ’01: http://www.federalreserve.gov/fomc/beigebook/2001/20010307/default.htm
Apr. ’01: http://www.federalreserve.gov/fomc/beigebook/2001/20010502/default.htm
Aug. ’90: http://www.minneapolisfed.org/bb/reports/1990/90-08-su.cfm
Sept. ’90: http://www.minneapolisfed.org/bb/reports/1990/90-09-su.cfm
June ’81: http://www.minneapolisfed.org/bb/reports/1981/81-06-su.cfm
Aug. ’81: http://www.minneapolisfed.org/bb/reports/1981/81-08-su.cfm
Jan. ’80: http://www.minneapolisfed.org/bb/reports/1980/80-01=su.cfm
Mar. ’80: http://www.minneapolisfed.org/bb/reports/1980/80-03-su.cfm
Oct. ’73: http://www.minneapolisfed.org/bb/reports/1973/73-10-su.cfm (very strong with shortages, no less)
Nov. ’73: http://www.minneapolisfed.org/bb/reports/1973/73-11-su.cfm
Dec. ’73: http://www.minneapolisfed.org/bb/reports/1973/73-12-su.cfm (pace of activity strong)
May ’70: http://www.minneapolisfed.org/bb/reports/1970/70-05-su.cfm (can’t see the recession occurring)
How appropriate that the NBER e-CON-omists are preparing to date the end of the recession. 🙂
Looking at federal employment misses the point that employment at DHS and DoD contractors (e.g., Lockheed Martin, Xe, etc.) has really exploded. These people make much more money than direct government workers, and are counted as “private sector” employees, despite leeching immense amounts of tax-dollars to create a big brother state. Because so many of these jobs were moved to red states over the last two decades, Republicans desperately advance the myth that these breath-taking pork sluices somehow support “efficiency.” In other words, hiring a contractor to manage some fraction of the 28,000 people working for intelligence agencies to eavesdrop on phone calls is more “efficient” than hiring them directly into, say, NSA. Farm subsidies support “efficiency” in the agricultural sector. (Clearly, these kinds of argument actually miss *a lot* of points).
Wingnuts think this kind of vast expansion of “the beast” is just dandy, because its in their districts. They also want to keep every one of the hundreds of useless military bases we have open (and the golf courses that they all seem to have well-tended).
If one really wanted to attack the leviathan, the Lockheed Martins of the world are like a necklace hanging right next to the jugular. Focus the axe-swinging there, and you might actually get somewhere.
Of course, Republicans would *never* allow that to happen. Republicans only want to cut blue-state federal spending, which means they axiomatically have to go after social insurance. To cut military, transportation, or agriculture subsidy pork would hurt their constituents, so that stuff is off the table.
Its a measure of GOP success that red states now get something like ~$1.43 in federal spending for every $1.00 they pay in taxes, while blue states average about $1.10 in in federal spending for every $1.00 in taxes (both are over 1 because of borrowing; almost all of the 16 states getting less than $1 back in spending for every $1 in taxes are blue states).
If you want closer to balanced budgets, pass a constitutional amendment requiring every state to get back in federal spending as much as it pays in taxes +/- 5%. Then Republicans would be off the hook for providing the home pork, could slash military spending, and could actually walk the talk (for once).
I love the attacks by the Cons. Typical is “Gus Satkowski” who calls Menzie “shameless, disingenuous, deceitful”, etc., then absolutely fails to back up his attacks with well, even a shred of anything.
Unfortunately, this passes for logic on the right wing.
I also note that no Con has commented on the final graph, which pretty much shows that any increase in federal spending since 1975 has been on the military and entitlements (SS & Medicare). Why aren’t all you Cons calling for smaller government agitating for a smaller military & cutting wasteful military spending?
aaron: Well, I’d love to have you take one of my classes, so you can judge if there is any “favoratism” (as you call it) or slack. Here is my last semester’s intermediate macro course. I don’t think I heard anybody say it was too easy, grade-wise or in terms of material.
To All: Additional series graphed at Calculated Risk.
2slugs:
Let me couch the argument a bit differently.
If an agent is allowed to optimize against more than one objective function (that’s the only condition), then the principal will lose control over him.
There are three objective functions in politics (since at least the French Revolution): liberty, equality and fraternity (community, to Hayek; social conservatism, for our purposes). These functions provide durable dividing lines in the body politic.
Almost any policy can be justified as serving at least one of these functions. Take, for example, how the different ideologies might respond to deficit spending during a recession:
Socially conservative (“Conservative”)argument: “We have to take care of the weak members of society.”
Fiscal conservative (“Liberal”): “Markets need to adjust, and while the system should be protected, society is best served by letting markets adjust as fast as possible.”
Liberal (“Egalitarian”) argument: “Everyone needs to be equal and we need to prevent suffering.” (Paul Krugman has the conscience of an egalitarian, not a liberal, by the way.)
Now, politics can use any of these philosophies as a justification for a policy, and that’s how we get politicians “talking out of both sides of his mouth.” In effect, by allowing politicians as agents to access to more than one objective function, the principals–the voters–lose control over their elected officials. If anything and it’s opposite can be justified as ‘in the voters’ interest’, then the politicians get to decide for themselves which objective function they want to use at any given time. Hence, for example, the propensity of democracies to run deficits in good times and bad–it reflects politicians acting on multiple objective functions. That’s why government employment is suspect to fiscal conservatives, because they can’t tell which system is driving it, and at least two of the value systems in use do not maximize long term value (GDP).
That’s also what I mean by ‘incentives aren’t aligned’. Just electing a guy to office doesn’t bind him to produce results in any given ideological system. The voters have left out a step: establishing an explicit incentive structure tied to one or more ideologies. I would argue a lack of incentive structure explains why the approval ratings of Congress are so low.
In any event, if you put values (politics) up front and demote economics to the inferior role of optimization of those values, then life suddenly becomes a lot easier, because we now have an explicit way to address ideological differences. Further, the analysis a number of governance-related issues becomes straight-forward. And of course, it provides a whole set of tools and vocabulary for explaining the behavior of politicians.
CoRev is right in saying that a lot of this is like comparing apples and oranges. He referred to A-76 studies, and that’s a good place to start. A-76 rules are deliberately biased towards private contractors. For example, overhead costs must be included in the burdened government rate but must be excluded when estimating the private contractor rate…the government is supposed to provide overhead free of charge to the contractor. That makes for a godawful economic analysis, but it gives the results that fat cat contributors like. Another difference is that many contractors hire retired government workers and are able to offer a lower salary because the retired government worker is receiving a government pension. This is very common. Basically the contractor salary is being heavily subsidized by the taxpayer, but goofy govt accounting rules make it look like the contractor is working for a lower wage.
The one legitimate rationale for contractors in the government workplace is that they can help smooth out “bow wave” retirements, which is what’s happening now. The government went for a long time without hiring and this created a big gap in experience. A few years the mean age for workers in the Army’s arsenals, repair depots and repair shops at posts/camps/stations was 56…and this is physically demanding work. That’s not a biologically sustainable workforce, so DoD had to go out on a big hiring binge to try and bring in fresh blood. They relied on retired workers coming back as contractors to provide the training. I think a lot of people would be surprised if they saw all of the whiteheads and gray beards working in Kuwait and Afghanistan. And this is true even within white collar jobs…go into just about any government office and you’ll see a lot of 50-somethings and a lot of 20-somethings with very few in-between.
Steve Kopits You seem to have been strongly influenced by Alasdair MacIntyre. My hat is off to anyone who can struggle through After Virtue. Reading it was a painful experience 20 years ago and somehow I doubt that it would be any less painful deep into middle-age.
I didn’t think I was making an especially ideological argument…I was simply stating that productivity of federal governement workers has been increasing (fewer workers as a share of the labor force producing more government goods and services). This is just a quantifiable piece of data. My second point was that government workers are just like anyone else and are not immune from being fired for poor performance. It happens. I wanted to add that one important difference is that in general private sector employees do not ordinarily face criminal penalties, whereas government employees do. For example, failing to write a strong policy memo in the private sector might get you fired for not doing your job, but it’s unlikely you’ll face criminal charges. But failing to write a strong policy memo can (and has) brought criminal charges against folks as a result of audits. And being deceptive to an in-house auditor in the private sector might get you fired, but that’s about it. Acting deceptively to an auditor from GAO or the DoDIG can earn you an orange jump suit. So it’s just not true that government workers have it on easy street and there’s no consequences for bad behaviour.
Steve Kopits As to your larger point, I view most voters as nitwits. Economics is technical stuff and most people just don’t have the quantitative skills needed to follow the arguments, which is why they are easily swayed by the kind of Ersatz economics coming out of places like the Heritage Foundation or Club for Growth. Outfits like that try to appeal to a generally educated and concerned citizenry, but not a technically educated citizenry. They appeal to folks who are politically active, have genuinely strong political feelings, and can understand intuitive (and usually wrongheaded) arguments in National Review or The Weekly Standard; but those folks would be completely lost in an academic paper because they have neither the time nor the technical training to follow a modern economic analysis. And it’s at that level that conservative (and to a lesser extent liberal) political operatives are able to advance all kinds of intellectually inconsistent arguments that somehow all just “feel” like they’re right. Heritage and Club for Growth and Grover Norquist are not interested in actually making a serious economic case for this or that policy; they just want to provide those who are already inclined to agree with them some kind of “analysis” that looks and feels like it’s serious. And here’s why we need blogs like this one; it’s one place where technical arguments try to challenge Heritage Foundation nonsense and do so in a way that the man-on-the-street can understand.
kay, regarding this study:
http://www.nirsonline.org/storage/nirs/documents/final_out_of_balance_report_april_2010.pdf
Let me draw your attention to page 18.
What do you see?
I see something truly incredible: the control for occupations is saying “if you are on this occupation, you should make a lot less”, and guess what, the “a lot less” is mostly given to occupations where the private sector is overrepresented !!!!
So in general, what this study is saying is this: “if we account for the fact that private sector emplyees work in occupations that are lower paid, then, public sector employees are actually paid lower than private sector employees”. (this beyond the control for education, experience, etc, which is partly warranted).
Lol.
Let’s apply the three ideology rule and see, 2slugs, if it can help us understand the how rent-seeking, corruption, and maybe some reg capture might occur. I’ll use the example of Malev Hungarian Airlines, Hungary’s flag carrier and a company which I knew quite well a few years ago when it was state-owned. The lessons would probably be more or less applicable to, say, Amtrak, as well; and it should provide some insight into government employee behavior more broadly.
Why did Malev turn a chronic loss? Because of the conflict of ideologies. For social conservatives, the most important part of a flag carrier is the flag. Conservatives believed that all countries need national anthems, flags, diplomatic corps and national airlines. If you didn’t have these, you weren’t a real country. But, alas, Malev’s two big losers were its Boeing 767’s, which flew the prestige New York route. Malev management offered to cut them; the conservatives said no. Then Malev management offered to cut jobs to save money, and the egalitarians said no. So, in effect, Malev was forced structurally to fly at a loss, which fiscal conservatives decried. But the underlying cause of Malev’s losses was not poor management; it was the result of conflicting political ideologies.
But if Malev wasn’t maximizing profits, what was it maximizing? As it turned out, subsidies, with Malev chronically begging for funds from the Finance Ministry. This begging–or rent seeking behavior–was directly the result of a lack of clarity about the airline’s objective function. How was the size of the subsidy decided? It was ultimately determined as a part of the national budgeting process. But for politicians and the Finance Ministry, Malev was not an investment (no one really expected to get the money back). It was an outlay, to be negotiated against other outlays like health care, education and the Foreign Ministry budget. The allocated funds had nothing to do with ROI considerations at Malev per se. Except that the Finance Ministry would always ask, “Well, what’s the minimum you need?” And that would be operating expenses–but no capital expenditures. Thus, the airline was perennially starved of capital–and this explains, by the way, why socialist countries were so polluting: they couldn’t afford to replace their capital stock because it was constantly being gutted by consumption. This is the same thing as is happening to, say, Venezuela’s PDVSA oil company right now. In a somewhat different way, to Petrobras, as well.
Multiple objective functions also influenced governance. Because Malev was, in effect, obstructed politically from making a profit, how could one tell if the CEO was doing a good job? In fact, one couldn’t; his performance couldn’t be benchmarked. This, in turn, gave the CEO wide latitude to run deficits. He could hire friends and siphon funds in various ways, because his pay wasn’t tied to profit, and no one could tell what the ‘right’ level of loss actually was.
Of course, after a while, the airline was looking pretty shabby. The solution: a new fleet of aircraft for $400 million (as I recall). But at what price? Well, it was the government’s money, not the shareholders, so price was flexible. And more to the point, the CEO of Malev had been appointed by the Prime Minister. Did anyone have an incentive to insure the aircraft were purchased at the best possible terms? Indeed, no, just the opposite. A lack of a single objective function had unleashed the agent to act on his own behalf. (I would add the CEO later started his own airline with a mysterious source of funds.) Political ownership–because it operated using multiple objective functions–in effect allowed the agents to come to dominate the principals. The result, in the end, was rent-seeking behavior and the strong suspicion of corruption.
To make an excessive post even longer, let me add a note about the effect on service and employees. Malev’s lack of cash deprived it of sufficient funds to fix the entertainment system on its 767. I have reason to believe so, because I flew on one of the aircraft, and the system didn’t work. The stewardess said it was just going to be fixed when they returned to Budapest. Six weeks later, I was on the aircraft again, and the system was still down; and the stewardess told the same story. Imagine: Those poor stewardesses had to lie multiple times every flight for weeks on end. Their employer had made them liars, and it made them bitter. It gives a sense of where the expression ‘going postal’ comes from.
As for me, I stopped flying Malev. It’s a long flight without a movie.
The debate about government employees ultimately does not revolve around their numbers or pay or work ethic. It is ultimately about the motivation for their hire, the nature of their tasks, the thinking behind their pay, and their behavioral incentives. While members of Congress and other political bodies are given latitude to swap objective functions at will, arguments about government spending and employment will never cease. No fiscal conservative will ever be convinced that government is a very good use of money—and rightly so.
But put an incentive system into place in Congress, and then we’ll have some confidence that government employees are performing needed tasks, paid competitively, and are working in the interests of the public.
Richard, yours is a nice, but standard partisan response to a harsh plea for impartiality, and your analysis of the political leanings of this blogger is off. There is no need to defend “the sky is green argument”, especially from someone who knows better, indeed nothing to “back up”. Menzie has adopted the strategy of the right, something many liberals have been nobly able to avoid. If it is not obvious to you why this argument is invalid, one can begin with Menzie’s teaser first, un-updated post, starting with the straw man argument that there is some mainstream claim that government employment levels are equated to big government. This is just sad. Certainly there are some libertarians or conservatives who have claimed this, but mainstream? Not remotely.
You make the same mistake the right does – any attack against partisanship that serves your philosophy must mean that person is illogical. Take a look at Calculated Risk’s recent posts for a more academic approach. For one, Menzie’s data does not include active duty military. This is no longer a cyclical phenomenon, unless you believe the U.S. hasn’t been at war for the last 10 years and won’t be in a few more. Also, not only are government contractors not included, they are included as private employers and therefore are double counted against the private workforce. As a federal government employee, I can attest to the fact that contractors represent an ever increasing and significant portion of federal expenditures. Menzie also avoids showing data for the last 100 years during which there is an unmistakable growth in government’s share of the GDP. It is not surprising that over the last 30 years there has been little change in this share. Most economists would agree that during the last three decades a private sector bubble of sorts, formed by shadow banking, creative financial instruments, leveraging, internet and housing bubbles, etc, strongly contributed to private GDP “growth” during those years. Today much of that is being unwound. A review of the last 100 years also shows that after each world war, the government portion of GDP becomes slightly, though significantly and irreversibly higher, yet after the great depression it is permanently and significantly higher. Any guess where we are now and will be in a few years with our great recession? Also, as Calculated Risk points out, if one is using BEA data, no unfunded future liabilities are captured by the data. One could go on and on, but that’s not the point. It’s okay to say what is and is not known, but cherry-picking data and straw man arguments are not becoming of an academic. Menzie is entitled to and should call the right out on their propaganda, but he chooses to do this by lowering himself to their level. It’s funny that Calculated Risk, not formally an academic, does a better job of logical and rigorous analysis than many left and right economist mainstream bloggers.
And not that it matters, but I do support “big” government, especially when it comes to regulation. There is nothing one can do if this sounds like the musings of a conservative or libertarian to some.
A good chart with more extensive time series from BEA data of Government spending as a percent of GDP (includes and corresponds to Calculated Risk time series):
http://carriedaway.blogs.com/carried_away/images/economics/u.S.%20Spending%20And%20Revenue%20In%20Relation%20To%20GDP.GIF
It does matter that we go back a few more decades to see the underlying trend and consider creative “growth” in private GDP over the last three decades suppressing government GDP growth.
An assistant fire chief making $662,000? In Nevada no less?… Yes it’s true. That is the insanity of government. Here are the facts. Names and all.
http://ttbth.blogspot.com/2010/08/states-begging-for-obama-bucks-check.html
Wow, the conservatives really got clowned on this post. good work.
Gus Satkowski “Also, as Calculated Risk points out, if one is using BEA data, no unfunded future liabilities are captured by the data.”
Are unfunded future liabilities of the private sector captured in BEA data? If not, then I don’t see how this is particularly relevant unless you are trying to suggest that the rate at which unfunded liabilities for public sector employees is somehow growing at a rate that is higher than it is for private sector employees. And I’m not aware of any data that addresses this question one way or the other.
I don’t know about state and local retirement systems, but for federal employees their is no meaningful difference in future unfunded liabilities for retirement. In fact, contrary to what Calculated Risk implies, federal pensions as a share of GDP are expected to decline over the long run:
http://www.policyarchive.org/handle/10207/889
Over the short run there is likely to be an uptick in the “unfunded” portion of retirement benefits paid out for those retirees under CSRS, but we’re all mortal and eventually CSRS pay outs will go to zero. And FERS is 100% funded.
You should also note that for many years the CSRS Trust Fund ran a large surplus and this surplus was used to offset deficits in other government accounts; i.e., the CSRS surplus from employee contributions was loaned to the Treasury and much of what CSRS is collecting is the interest from those loans. In this regard it’s the same problem that conservatives have with the Social Security surplus…they are only too happy to borrow the surplus in order to pay for tax cuts, but when the bill comes due and it’s time to cash in those IOUs, then suddenly we hear a lot of whining about how unaffordable it all is.
I think we know how to increase comments to a web page now.
Gus Satkowski: Thank you for your commentary.
For your information, here are my recent posts on contingent liabilities: [1] [2] [3] [4].
I don’t think anybody disagrees with the proposition that total government spending (either on consumption plus investment, or including transfers) as a share of GDP has risen over the last 100 years. I didn’t even know that was being debated. Rather, it’s a question of what it’s done over the recent past, relevant to policy. If I may use an example in current consciousness, we don’t care that at some point in history, bedbugs were more prevalent than now; we care about how prevalent they are relative to some time period against which we want to compare (public health) policy against.
Reference to data 100 years ago is fine, then, but I think extension of the sample period runs the risk of having to deal with structural breaks. I can think of two big ones — the rise of the mixed economy, and the rise of what some people have called the “national security state”. As you might recall, prior to WWII, the US did not maintain a large standing army. After WWII, it did. This makes it highly problematic to include national defense expenditures and then mix it in with the “big government” critique as commonly expressed.
In any case, I think that rising defense expenditures have not been part of what you characterize as “the mainstream conservative” critique. Please document the basis for your disagreement. I will also note that if you peruse this blog, there have been many conservative arguments centered around employment (Professor Mulligan’s comes to mind). He might or might not constitute what you consider mainstream. Unfortunately, I cannot anticipate your specific (and to me, somewhat arbitrary) definition of mainstream.
By the way, one post (early 2007) that pre-dates the crisis, where I worried about total expenditres and contingent liabilites is here. Heck, I wrote a whole Council on Foreign Relations special report on this in 2005.
2slugbaits “Are unfunded future liabilities of the private sector captured in BEA data? If not, then I don’t see how this is particularly relevant unless you are trying to suggest that the rate at which unfunded liabilities for public sector employees is somehow growing at a rate that is higher than it is for private sector employees”
Yes, it is difficult to calculate unfunded liabilities (such as benefits) as part of GDP for either the public or private sector, but what is known is that most of the private sector, compared to the public sector, has and continues to move toward defined contribution retirement plans as opposed to defined benefit plans. To my knowledge, unfunded liabilities are excluded from the BEA data.
I do not recall that Calculated Risk implied either way that federal pensions as a share of GDP were or were not expected to decline over the long run.
My general point continues to be that Menzie scoffs at the argument of an “ever expanding” government sector. Many with conservative and libertarian political philosophies probably protest too much, but the truth likely exists somewhere in between.
For some more charted BEA data showing more recent growth in government spending as a share of GDP:
http://innovationandgrowth.wordpress.com/2010/06/24/government-spending-1979-vs-2007/
Gus Satkowski I thought it was pretty clear that Calculated Risk was arguing that unfunded liabilities for government retirement pensions were expected to grow over time. He did not specifically comment on federal pensions, but if he meant to exclude those then he needs to go back and correct the record. It’s not a trivial distinction that can be swept under the rug. There are no unfunded federal pensions in the outyears because FERS employees contribute to Social Security with most of the remainder of their retirement coming from a 401k style plan. There is a relatively small “defined benefit” add-on, but that too is funded by employee contributions.
No one disputes the fact that over the very long run (measured in centuries) the government has taken a larger share of GDP. But by the same token religious establishments have taken a smaller share and much of what monastaries used to perform centuries ago is now performed by government. So it’s not at all clear that the economic burden of “government like” functions being performed today is any more than it was a 1000 years ago. You get a rather distorted view of history if you imagine the wild west of 125 years ago as somehow the historical norm for government like functions as a percent of GDP.
It also strikes me as a bit odd how the many of the people who complain about growth in government are the very same people who are strong supporters in the virtues of state and local government, but as the data clearly show it is the growth in state and local government pension and benefit plans that is causing so much worry.
Menzie Chinn: Thanks for clarifying. I don’t recall referencing defense expenditures, but suggested that a mainstream argument of conservatives is usually one of bigger government in general, and government’s share of the economy (GDP) in particular. One can certainly find cases of bloggers who mistakenly posit that there has been “big government” increases in employment, but this is relatively rare to be found in the usual media channels. By mainstream I would suggest the output of right leaning economists and their channels.
You make a specific valid point in terms of government employment having no growth trajectory, and in some employment sectors an actual decline, but unless this is an issue you have with a few bloggers, this doesn’t seem to represent a significant conspiracy theory.
For the left, to make an argument that government has become smaller in recent years, it seems that the decline of regulation over the last three decades would be one of the best arguments for this claim.
On the economic front, one can argue that the significant increase in government GDP spending of the last 2-3 years was purely cyclical, largely consequent to a fall in private demand and need for government to fill the output gap, but the great depression, our closest but only reasonable model, does not bear this out. Even before WW2, it seems the government’s share of GDP was permanently fixing higher.
Interesting discussion. With respect to the unfunded pensions and health care issue, there is an op-ed in the New York Times today suggesting that there is a very significant difference between government accounting standards on pension and health care benefits. According to the author, if the corporate acctg standards were to be applied to retirement benefts of state and local employees, the unfunded amount would increase from $1 trillion to $3.5 trillion. That excludes the feds and seems to assume no accounting fraud at the state and local level (a recent problem apparently in NJ and NY and who knows where else). Health care seems to be a bigger issue. So, maybe there is a point here that the total cost of government employees is understated even in relation to the private sector.
http://www.nytimes.com/2010/09/11/opinion/11kramer.html?hp
Viv
2slugbaits: it does seem strange and contradictory at some level that there are those who complain about growth in the federal government but are strong supporters of state and local government when the latter have large fiscal problems of their own.
With respect to the history of growth of the government’s share of GDP, I don’t suggest going back as far as the industrial revolution. However, I think if one looks no farther than the last 100 years the following trends appear:
1) 1907 forward: noncyclical sustained uptick following that financial crises
2) WWI: noncyclical sustained uptick
3) Great Depression, deep impact (1929-1933): noncyclical, sustained uptick
4) WW2 aftermath: noncyclical sustained uptick
5) Post WW2 to ~1980: slow growth in government’s share of GDP
6) The “great moderation” (1980-2007): leveling off of government’s share of GDP
7) The Great Recession to current: uptick, ?sustained?
During the last 100 years there were a number of recessions, but they appeared to be cyclical and the government’s share of GDP returned to the underlying trends. As I posted earlier, perhaps the “great moderation” period represented a real trend, but I would argue instead that this was a time of unsustainable GDP growth in the private sector and the reason things are as economically troubled as they are today: financial “innovations”; shadow banking; unprecedented levels of banking, personal, and commercial leveraging; and real estate and other smaller bubbles. To me this suggests that our Great Recession will turn out to be more like the Great Depression than simply cyclical recessions and manifest as a sustained uptick in the government’s share of GDP.
I’m not trying to make a political statement by this, that more or less direct control of the GDP by the government is good or bad and find many flaws in conservative and libertarian political arguments surrounding this topic. But it is important to lay the facts out on the table and have open and meaningful discussions about them.
I get FRB Boston reports. The data from the current report shows that government employment in NE for the region has grown slightly faster than the rate for the nation as a whole. (The numbers for the nation are of course exactly as described in the original post.) BUT and this deserves to be in capital letters, the current figures are higher than the average for the year because the current figures reflect summer hiring (and perhaps some related to the census, but I don’t know that). The numbers have started to decline on a monthly basis and so we won’t know the exact rise until the end of the year. The annual average looks to be around the 2009 level, meaning no material increase, even perhaps a total decline.
As an amusing note, NH – run by conservatives – is one of the 3 of 6 NE states to show an increase in government employment. Do as I say, not as I do. MA shows an increase- though mostly seasonal – and VT shows a tiny, mostly seasonal increase.
I wonder if another contentious conversation might be incited by an investigation of just what percentage of GDP is generated by commerce that is not directly assisted by government by way of subsidies, contractual arrangements, direct employment etc.(all economic activity presumably benefits indirectly). That would of course be the other side of the coin so to speak, but… the important underlying question here is whether the private sector is still able to provide an adequate number of adequate jobs. If the only choice is in fact between low multiplier jobs and unemployment costs, that may well bring our national conversation to where it should have been all along.
Ray L. Love
People work about 40 to 50 years of their lifetime. During this time, people must accumulate enough wealth to maintain and even increase their standard of living and to support themselves and their children and for retirement. Higher taxes make accumulating wealth difficult. Why is this important? Wealth provides the foundation for economic growth. Unless wealth is formed and economic growth is achieved, the succeeding generations will have less chance of finding work, accumulating wealth and increasing their standard of living. The Marxist-Socialist policies of government will insure that our children and grandchildren will have a lower standard of living. They will work not to accumulate wealth, but to pay the taxes for the spending excesses of our government.
As part of this shift to socialism, politicians use the class warfare tactics of rich against poor to generate support for policies. The fact is, most people start out with nothing and accumulate wealth over time. Many people move from poverty to being millionaires. Andrew Carnegie, Cornelius Vanderbilt, Bill Gates, Steve Jobs…all started with nothing and accumulated wealth that created well paying jobs so that others may accumulate wealth and so forth. The current economic and political policies will destroy this process of improving living standards for generations to come.
Gus Satkowski Perhaps Menzie has an eager young graduate student in need of a thesis topic who would want to look at the demand for government goods & services as a function of population density. Externalities are much more of a problem with dense populations than sparse populations, and so you need government services in the form of regulations to deal with those externalities. Another subtler point is that the demand curve for public goods is summed vertically, whereas the market demand curve for private goods is summed horizontally. If you’ve got increasing population density, then it’s likely that demand for largescale public goods will increase faster than the demand for private goods. And as society becomes wealthier the demand for public and near-public goods (e.g., art museuems, parks, clean air, security, justice, “good government”, etc.) is likely to increase relative to demand for private goods. In other words, I suspect that there’s a kind of “Maslow’s hierarchy” at play here. For example, advanced western societies place a much higher value on “green” issues than do developing countries.
Gus Satkowski: To quote:
Which admittedly, wasn’t in a comment addressed to me, but was still part of your indictment of my post as:
I hope in real life, you research a little more the other writings of people before you cast such broad and wide ranging aspersions. I my view, context is important.
The “Ever-Expanding” Government Sector, Illustrated –
I think most of you have missed the key issue.
The key issue is that Obama is creating and stocking federal agencies with Progressives with socialist agendas. Let’s hope that conservatives are able to wrestle power from these kooks in November. The increasing reach of government may not show up in employment, but it is certainly showing up in legal challenges as the newly appointed socialists attempt lay their their foundation for fundamental change.
Menzie, you titled the post “The “Ever-Expanding” Government Sector, Illustrated” not “In response to that guy or guys on my blog who claim a while ago that growth in the Government Sector is manifested by public sector employment growth”.
Most people, except for the die-hard followers, which likely are only a small but vocal part of your readership, probably do not read every comment under your posts, so would not have guessed at such a specific connection.
It doesn’t seem obvious that you were targeting some misinformed commenter(s) for the regular reader based on the title.
So yes, I have read quite a bit of your blog writings, most in the last year in fact, and followed comments on some more interesting posts. I therefore know that most of your subjects are de novo, not typically a continuation of some commenting string. So no, I don’t think most readers would have been aware of any posts in the comments section about active duty military, if there were any. Unless you consider this blog a private inner circle of commenters, one should not have to have read every comment over the last few months to have some “context”. So my point then, is if you were truly only responding to comment(s) in the past, you did not convey that.
Your post suggested that big government was an illusion propagated incorrectly. This would appear to many that you sought to prove this with unemployment data.
Merriam-Webster online defines “Sector” as the following (“d” would apply here):
a: a geometric figure bounded by two radii and the included arc of a circle
b (1): a subdivision of a defensive military position (2) : a portion of a military front or area of operation
c: an area or portion resembling a sector
d: a sociological, economic, or political subdivision of society
I genuinely apologize if I missed some discussion that was going on in prior comment strings, if this post was specifically in response to only the number of persons employed by the government. If that be the case, I think the title certainly warranted such an explanation. Many readers are regulars who simply come for Dr. Hamilton’s and/or Dr. Chinn’s posts, certainly fewer routinely read comments in their near entirety, and even fewer would regularly post comments. There are a number of good sites out there to get a diverse picture of the economy from academics, so it’s not possible for most to regularly keep up with comments in their entirety. Hopefully this does not make such persons uninformed or poorly researched.
Gus Satkowski: If I’m not mistaken, you made the statement about active military, specifically, your comment on this string, posted at September 10, 10:26pm. I thought you would be familiar with a quote from your own comment. Please correct me I am wrong, and somebody has hijacked your ID.
Furthermore,
If I were to accuse someone of being “…shameless, disingenous, deceitful”, then I would do some research. But that’s just me.
Menzie, the September 10, 10:26pm post is correct. As stated, as a stand-alone title, “The “Ever-Expanding” Government Sector, Illustrated” implies big government is purely a conspiracy, a sham, something falsely propagated. As stated, if you were seeking to convey something much more specific, only a few die-hard commenters would know this, so one would expect better of a professor. So yes, I threw out a few potential examples of why your titled statement was false at face value. Indeed I included active duty military, government contractors, time series bias, and anyone’s lack of ability to paint a good picture of unfunded liabilities. There have been and are many other arguments to be made.
So again, perhaps the military statement was never in a comment addressed to you before, but that is neither here nor there. One can’t assume that even your regular readers dig through every comment ever written under your posts. Most read your posts, undoubtedly some selected comments as well, so when a post like this goes up, one has to take the title premise at face value unless there is good reason to believe otherwise.
As for the harsh initial comment I made, this is rather a double standard on your part as you have also made some rather harsh critical remarks in the past. Here is a relatively recent one, and some more “research” for you:
“Bruce Bartlett Reminds Us: WMD, Medicare Part D, Steel Tariffs, Harriet Miers
Bruce Bartlett reminds us of the George W. Bush: Screwup-in-Chief, 2001-2008.”
– July 22, 2010
“Screwup-in-Chief”, hmmm. Using someone else’s words then supporting them is tantamount to saying them yourself. I am not here to defend whether you were justified in making such “aspersions”. But you are supposed to be the academic and are held to a higher standard. The vitriol within my initial post in this string was in no small part inspired by your occasional lack of poise. And yes, poise is a characteristic more becoming of an academic.
Anonymous/Gus Satkowski: My understanding of the blog world is that a comment, even if addressed to one specific person is, by the nature of the technology/format, open for all to read and react to. Further, since your critique was directed at my post, it certainly seemed appropriate for me to respond. Do you have a different view of what is the nature of the blogosphere, and the appropriate nature of discourse? Do you mean to say that the poster in an blog should respond to only those posts which are addressed to the poster, and ignore all others? That is the logical implication of what you have written.
By the way, I never mention the “conspiracy”. This word only appears in your comment.
Once again, thank you for your participation, and thank you for your advice on what attributes become a good academic.
Menzie Chinn: “My understanding of the blog world is that a comment, even if addressed to one specific person is, by the nature of the technology/format, open for all to read and react to. Further, since your critique was directed at my post, it certainly seemed appropriate for me to respond.”
Response: Of course, it didn’t seem this was in question. Who is saying otherwise? One is entitled to write and respond to whatever he chooses, especially since this is your shared blog.
Menzie Chinn: “Do you have a different view of what is the nature of the blogosphere, and the appropriate nature of discourse? Do you mean to say that the poster in an blog should respond to only those posts which are addressed to the poster, and ignore all others? That is the logical implication of what you have written.”
Response: It’s unclear how you arrived at this “logical implication”. I make no such claims. I have a fairly mainstream view of logic. Therefore, a starting premise must have clarity. Your title was one of an intentional false premise that you sought to disprove: “The “Ever-Expanding” Government Sector, Illustrated”. Is this not correct?
If this title was in response to a specific previous comment or comments, another economist, politician, journalist, or what have you, what would be wrong with that? Why would you not be entitled to respond?
The problem is that the routine blog follower doesn’t know if you had intended to specifically convey in your title that you were only talking about the quantitative employment numbers in the public and private sectors. How could they? They are not clairvoyant. Consequently, since the average reader is not privy to that which you did not write in your title, he has to take the title at face value. Your premise therefore is read that big government, in all manner of speaking, is big. Yet you only address a small portion of the government sector, namely employment numbers alone. Since this does not nullify the premise, the argument is invalid. This is dangerous, because unlike an uninformed blogger, you are held to a higher standard because you are considered an expert in your field.
If you are maintaining that you are responding to something much more specific than the stated premise, just say so in the future. It’s about logic, not blogging rules.
Gus Satkowski: Then the logical implication of your argument is that each post should comprehensively analyze a phenomenon in all its dimensions. Hence, a discussion of exchange rates cannot be restricted to just a nominal bilateral exchange rate, but must address trade weighted, asset weighted, as well as real exchange rates, where deflation is accomplished by CPIs, PPIs, or GDP deflators — or perhaps unit labor costs. Not to mention whether to use PPP weights. Of course, one needs to decide whether to use market rates, or black market rates, when that is relevant. Or perhaps shadow rates, if capital controls are in place. Oops, I think that’s a dissertation…
Menzie Chinn: No, a comprehensive analysis is not required to make a point, but the post could have simply been revised slightly to read “The “Ever-Expanding” Government Employment Sector, Illustrated”, and no dissertation would be required. It still would have been a straw man argument, unless the title was followed by something like: “in response to comments by other(s) on previous posts”.
Gus Satkowski: Thanks for the advice on titling. My advice for you — read a bit more widely. Lots of folks (not just the odd blogger here or there) have focused on the increase in government employment. Perhaps even more on contractors, etc. (which the government consumption numbers speak to). Peruse Heritage and Cato — unless you believe they fall into “the odd blogger” category.
By the way, my post on contingent liabilities is much more detailed than anything you have put up or referenced, in terms of numbers. I note that you never acknowledged that point.
Gus, you’re fighting a valiant but losing battle here. It’s Menzie’s blog, and he is able to manipulate “context” at will. He speaks/writes and behaves hypocritically, and plays the role of a very unabashedly partisan water carrier. (So obviously that it is still surprising to see him insist otherwise; even Krugman and Delong openly admit their hyperpartisanship.)
This is par for the course, and has been since I began reading years ago.
Thanks MPO, but he is an entertaining guy, you must admit, and as far as I know, he doesn’t get paid to do this, and it’s still valuable to hear his perspective whether you agree with him or his methods or not.
Menzie Chinn: Thank you, I do read widely despite not holding a PhD in economics, and continue to enjoy reading broadly, even your posts and even Heritage and Cato from time to time. However, I did not know this was some sort of competition. I also enjoy discussions with others about subjects in my field of expertise, most who do not also hold a post-doctoral degree in this field, but I don’t feel they are required to produce peer reviewed articles of their own authorship if they happen to disagree with me about something.
You really are a moving target, but an entertaining guy none-the-less.
ahhh, the hysteria of those for whom dogma and ideology must trump empirical reality