Cuts in gov’t? Conservatives rejoice! RT @nytimes: Cuts in Government Led U.S. Economy to Lose 95,000 Jobs http://nyti.ms/cNGBWU
Cuts in gov’t? Conservatives rejoice! RT @nytimes: Cuts in Government Led U.S. Economy to Lose 95,000 Jobs http://nyti.ms/cNGBWU
All jobs are not the same. Jobs in government fall in the Liabilities side of the ledger. Jobs in the private sector fall in the Assets side of the ledger. Ergo, job losses in the former is indeed worth rejoicing.
I liken it to making the best use of your money: If CDs, money market funds, stocks, and bonds are all giving dismal returns, then diverting your investment monies to pay off that mortgage with a 5% interest rate, or that car loan with a 7% interest rate, is the way to go. Similarly, if we can’t seem to grow the economy, let’s hack away at the state that leeches off it.
Poor logic is poor.
The idea that somehow public sector jobs are a liability and private sector ones are an asset makes absolutely no sense, and if I’m properly guessing your reasoning for it is incredibly simplistic.
The *only* concern about a private sector job (in a ledger sense, we could have a different discussion about market efficiency) is that you must tax to pay for its existence, where as a private sector job you do not. But since money in our economy is finite (although not static, I’ll get to that in a second), whether you tax to create that job or the private sector creates it itself is irrelevant. Either way, you’ve transferred some amount of money into the economy. That money is now being spent instead of saved, for sure. That’s what we want.
To the idea I mentioned about the money supply not being static, in the event we do not tax and instead borrow, we actually grow the money supply. This is helpful in instances where people are (perhaps rightfully) being stingy with their money. We grow the money supply to get the private sector going. Prime the pump, etc.
I’ll admit I was being overly simplistic (certainly there is value in government jobs that do things like provide for law enforcement and national defense, without which the private sector could not function properly), but in general, my logic is sound. Have you ever read Rich Dad, Poor Dad? One of the concepts that Kiyosaki pushes in that book is that buying a house is not necessarily an investment or an asset — from a personal finance standpoint, it should be treated as a liability. A similar logic holds with government: in general, you have to treat government as a “necessary evil” in philosophical terms, and a liability in economic terms. When you start to treat your house like an asset, there typically lies the road to financial ruin. The same goes with growing government to “help” the economy.
Now get back to flippin’ burgers. 😉
AML, you are still way over simplifying things. More to the point, property is an asset, a mortgage is a liability. Which is, I’m sure, the operative point that Klyosaki was driving at, not having read the book. If it isn’t then the book ins’t worth the paper it’s printed on. If we are talking about the entire US economy and what is an asset and what is a liability to it, well that’s a whole lot more complicated. But certainly not all private sector jobs are an asset and not all public sector jobs a liability.
I could rationally argue that all Boeing defense jobs are a liability and that having those same jobs as part of the public sector defense department would be far more cost effective, an asset? Knowing how government contracting works this is in some sense absolutely true. But it also probably wouldn’t work. But then by your logic those Boeing jobs are still a liability to the economy?
The point here is nothing is as simple as it may seem.
Including this recent story. http://thinkprogress.org/2010/10/04/county-firefighters-subscription/ In this case the home owner made a bet and he lost, the fire department did what they were supposed to. But, as a fundamental question, are these the types of bets people should be allowed to make? I would argue that in an urban setting, no this isn’t a bet you should be allowed to make, as doing so endangers others. Likewise in a suburban area. In a rural area? That’s a harder question. Which loops back to the main point. Not all private sector jobs are good, not all public sector jobs are bad. (Asset or liability) it just isn’t that simple.
Unless you are rich and buying your house in cash (and even then, many rich folks would still take out a mortgage to take advantage of the tax writeoffs), a house and a mortgage are always inextricably tied together. Kiyosaki’s point is that, from a wealth accumulation / creation perspective, buying a house is a poor way to go about it. Even if you have a low interest rate and can take full advantage of the tax writeoffs, and factoring in maintenance costs, and considering things like appreciation and rent substitution (the idea of a mortgage as a substitution for rent — since you have to live somewhere, you’re better off paying a mortgage than rent), the numbers do not support it being considered an asset due to the decades it takes to build equity, the illiquidity of that equity, and the fact that you have money going out the door every month for the mortgage. Kiyosaki’s solution isn’t to rent instead of buy (he sees rent vs. buy as a lifestyle choice with tradeoffs affected by various scenarios), his solution is to structure your assets and liabilities, income and expenses, under the legal / tax framework of a corporation.
I’ve already said it’s more complicated, but as a general rule, absolutely — a private sector job on an average basis is a net asset, while a government sector job on an average basis is a net liability.
Government contracting / procurement / outsourcing illustrates my point pretty well. Government procurement is no different than procurement in the private sector — you want the lowest cost for the highest quality and/or the optimum timeliness available. If government can do it faster/better/cheaper, great, but typically private contractors are the ones able to do it better/faster/cheaper. Similarly, if Boeing can build parts for the 787 faster/better/cheaper internally, they will, otherwise they’ll set up a supply chain and outsource those parts and subsystems they’re not efficient at building.
Can the government design and build a bomber faster/better/cheaper than Boeing or Lockheed? If so, go for it. But in reality, there are scores of reasons why this is unrealistic and you need to have a defense contractor do the work. The same concept is operative with things like building highways or installing IT systems.
But really, whether the government does it or the contractor does it, that’s a question of efficiency and efficacy; the underlying issue pertinent to this debate is whether the job, product, or service is something the state should be involved in doing or not. For example, maybe there’s an outfit up at NSA that can write software code with the best of them, but does that mean NSA should be writing operating systems to compete with Apple and Microsoft? Whatever the underlying work is, we should do everything we can to make the government more effective and efficient in performing that activity, but whether or not the government is good at it doesn’t bear strongly on whether or not it’s the government’s place to be doing the work in the first place.
I think the biggest problem we’re going to have with your assertion (asset v liability) is that you keep saying it, and yet you’ve made no attempt to explain why you believe it to be true. You’ve laid it out as if it’s a first principle.
AMLTrojan – correct me if I am wrong about this, please …
As I understand such things, one major difference between a private sector job and a public sector job is that the private sector job’s employer pays all sorts of taxes – property tax, income tax, corporation tax, etc … the public sector job’s employer doesn’t pay those taxes …
Is that a fair statement ?
Jim, I think that’s a reasonable question. I think AML’s point is that being tax payer funded makes a public sector job a drain on the economy, or rather something that we all have to pay for. The problem I see with this logic is that you can make the same argument for any job, and thus any job is a drain on the economy if you look at the people that do the paying for that job. But is a plus for the economy if you look at those getting paid for it. In other words the employees of Boeing are a liability for boeing. The employees of the US are a liability for the US, and ispo facto all of us, instead of just Boeing. Which AML is arguing is a more significant liability. Personally I’m not really seeing the distinction and see all of the logic involved in this as very circular. Basically it comes down to if you possess the standard conservative view point that government is evil or if you accept that government can be useful. I really don’t see there as being much more to this debate than that.
I’m not sure what Al’s question has to do with anything in relation to this debate so I’m just going to ignore it, unless he can tie it back in?
Alasdair, yes, governments don’t pay property and income taxes, etc.
Jim, if I understand your complaint correctly, you’re alleging it’s not clear how government outlays are a net liability vs. private sector economy which is a net asset. The answer is, income to sustain the former is derived either from what can be internally generated, or taken / borrowed from the latter.
In cases where government generates income (e.g. USPS), they are typically insulated from market pressures and tend to produce an inferior product / service at a greater cost and lower quality than what could have been achieved through competition in the private sector. One might call this “opportunity cost”, and that is why countries that once nationalized their industries (e.g. mines, steel, and other critical resources) find it almost immediately advantageous economically to privatize them.
In cases where government operations are funded based on revenue taken out of the private sector (taxes), the logic of asset vs. liability is immediately clear: the private economy is the asset that is producing income, and the government is the liability racking up bills. Printing money has the same effect on the economy by devaluing the currency such that the bills to pay for government expenditures are less costly, but at the expense of privately held wealth, which is now worth less.
In cases where government operations are funded based on monies borrowed from the economy, then the equation is whether the government can allocate that capital back into the economy smarter than the market would on its own. While that is possible in theory (e.g., build new roads to unclog the transportation system and allow for more efficient movement of goods in the market), in reality that’s almost never the case (e.g., the monies go to money-losing transportation ventures that don’t take many people off the road, like light rail and carpool lanes, and there are usually rules about paying the “prevailing wage”, which drives up the cost of the project and erodes its ROI).
Private sector jobs create wealth, public sector jobs cost wealth.
gahrie – if you ask certain soon-to-be-fully-ex-Bell-California-politicians, as far as they are (well, were) concerned, public sector jobs (like theirs) create wealth (for them, even if not for anyone else) …
Th only bad thing about the loss of these government jobs is that most of them were temporary in the first place, and few if any permanent jobs were cut.