How bad is this economy? Former Treasury Secretary Lawrence Summers wrote in The Financial Times this week that the United States is now halfway to a lost economic decade (similar to Japan’s) and that the number of working Americans has dropped from 63.1 percent to 58.4 percent. A net loss of more than 10 million jobs.
Summers defines the problem brilliantly. He writes in the FT:
After bubbles burst there is no pent-up desire to invest. Instead there is a glut of capital caused by over-investment during the period of confidence – vacant houses, malls without tenants and factories without customers. At the same time consumers discover they have less wealth than they expected, less collateral to borrow against and are under more pressure than they expected from their creditors.
Last week I wrote about how this economic crisis will impact Indian Country through the loss of government-funded jobs. Indeed, readers reacted to my commentary with two basic reactions. One group said it’s time for Native Americans to get off the dole; another asked why tribes aren’t solving this problem on their own?
But Indian Country is not unique when it comes to government as a source of jobs. The whole idea of “dole” is pretty funny when it comes from readers living in the rural American West. We live in a subsidized region. We Westerners have an odd birthright, historically receiving far more in federal support than we pay in taxes. Our water delivery, our power, our roads, our way of life were funded in part by taxpayers. In fact, you don’t really need to go beyond water to understand this scheme. It takes massive amounts of federal spending to keep water flowing in a dry land.
The late great author Wallace Stegner wrote about the idea of a West populated by federal employees in Salt Lake City and Boise or any city where government agencies have regional offices. He once told historian Richard Etulain that states “get an awful lot in federal payrolls and an awful lot of jobs and homes and everything else from the federal government.” The West, he said, should acknowledge the federal government is not only a “permanent partner in that collaboration, but a very essential one, absolutely essential.”
Yet as we in the West, often the reddest of red states, demand federal contraction, we forget how many of our neighbors actually work for the government. Of course, government is already shrinking — and as that trend grows it will impact everyone because when those workers lose their jobs, they will not have money to spend as consumers. That’s essential spending in a consumer-driven economy such as ours. On top of that, states, cities, schools, and other governments are trimming jobs making the contraction that much deeper.
Oh, yeah, I know the counter argument, the private sector will hire those soon-to-be displaced workers.
The problem is the math involved. Without a boost in consumer spending (and that’s not going to happen with smaller payrolls from federal, state, and local governments) there is no way the private sector will create enough jobs to hire those already out of work, let alone those who will be laid off in the contraction ahead.
The United States does have a structural deficit problem and it must be fixed. But much of that deficit is related to health care spending, not basic services. That’s why health care reform was so important and just a baby step toward where we need to go. But that’s a long-term problem that requires a long-term solution.
But right now we need jobs. Even government jobs. Especially if we hope to avoid a lost decade or two.