Considering the President's Economic Vision

The ads are already out:  President Obama said at a press conference that "the private sector is doing fine."  Republicans are playing the clip of those few words, merry in the sense that it demonstrates that the President is out of touch.

Let's consider the remark in context, though, because it's a revealing description of how he thinks about the economy.

The truth of the matter is that, as I said, we created 4.3 million jobs over the last 27 months, over 800,000 just this year alone.  

The private sector is doing fine. Where we're seeing weaknesses in our economy have to do with state and local government. Oftentimes cuts initiated by, you know, Governors or mayors who are not getting the kind of help that they have in the past from the federal government  and who don't have the same kind of flexibility as the federal government in dealing with fewer revenues coming in.

What's really interesting about this set of remarks is not the factual claim, but the interpretation of the facts.  The facts cited are roughly correct:  for example, government jobs really have declined rapidly during the Obama administration.  The reason is roughly what he says it is:  lots of state and local governments operate under balanced budget amendments, and aren't free to deficit-spend past their eyeballs, hair, and ten-gallon hat.

What we're left with, then, is the interpretation of the facts.  It's pretty clear that the recovery is unusually anemic by historic standards.  It's also true that the 4.3 million jobs 'created' haven't made up for the number of jobs lost:  when you take account of the number of people who have left the workforce entirely, things look different.

Also, we can see that the private jobs that do exist are objectively worse than the jobs that used to exist.  Consider the movement from full-time to part-time jobs by employers -- a way of avoiding having to provide the benefits that have become an expected part of full-time labor in America, and thus a way of paying workers lower total compensation for each hour of work.  Or consider the increasing classification of lower-wage jobs as "seasonal" rather than "part-time."  A seasonal worker can be paid below minimum wage.  And of course, raises and bonuses for lucky workers who do still have full-time jobs are not much forthcoming, while the costs of energy and food are spiking.

All this means that workers are being pinched horribly:  many can't find work, and if they can it pays less than it used to pay, especially relative to the costs they encounter.  They may now  have to buy benefits on the open market, where they are also more expensive.  Companies are finding people will take these jobs in spite of the vastly reduced compensation, though, because there are so many people who have no work that the market value of your work is just less than it used to be.  Presumably you aren't a worse worker, but you're not worth as much anymore.

This is interpreted as "fine."  OK; that's the Republicans' point.

What I find as interesting, though, is the complaint about the shrinking of government.  What the President really finds to be out of order is that state and local governments are having to respond to the economic crisis by tightening belts.  The main thing he wants to fix is to achieve higher levels of government employment.

The thing is, though, this was a policy decision by the electorates of these states and localities.  They can change the laws themselves, if they want to do so.  What they decided was that, during hard times when tax revenues are lower, government should spend less.  That means cutting some of the nice things that we enjoy government doing -- parks and recreation services, librarians, and so forth -- as well as being more careful with essential services.  Perhaps taxes or fees can be raised to pay for these, but if not, services must be more carefully allocated so as to do with less.

If people get tired of this, they can vote to rescind balanced budget amendments.  They want it this way; and at various times, 32 states have passed resolutions asking for a Constitutional Convention to require the Federal government to act this way as well.

So what we have here is a stark difference of opinion, among broad sections of the public, about how government should respond to fiscal crises.  The President is painting this as a government failure, but in fact it's the state and local governments acting exactly the way their citizens want them to act.

There's another issue behind the decline in government jobs.  The failure of Congress to pass a budget for years now has led to tremendous uncertainty; combined with the failure of the so-called "super-committee," even many Federal departments are going to get cut and nobody can be quite sure how big the cuts will be, or whether Congress will finally move to avoid them.  Thus, even some Federal departments -- certainly this is true for DOD -- have great uncertainty that is keeping them from starting new projects or hiring new people.

This last is a much clearer case of government failure.  Congress has failed as an institution, but not in failing to provide extra goodies for state and local governments to use in dodging the will of their constituents.  Congress has failed to do its most basic duty for the good order of the Federal government.

That's the one aspect of the situation the President didn't talk about.  He sees a problem where state and local governments are acting appropriately according to the mandate they have received from their citizens; he sees no problem where Congress is blatantly failing to perform its most basic function.

The private sector?  Well, whether or not you agree that it's "fine," it should be obvious that it's not of particular interest to him.