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Writing recently in Investor’s Business Daily, Bob Higgs reports a disturbing trend in employment data [2]. Here are his concluding paragraphs:
While taxpayers (and unemployed former taxpayers) no doubt were hoping that Washington would focus on economic growth, much of the Obama administration’s “stimulus” spending was directed toward ensuring that state and local government workers don’t lose their jobs, while the normal appropriations process has been increasing spending for practically every department and agency of government.
This situation bears an eerie resemblance to the employment situation during the Great Depression, when private nonfarm hours worked fell steeply from 1929 to 1932 and did not return to 1929 levels until 1941, while millions were added to government payrolls during the New Deal. In both cases, the possibility that government employment crowds out private employment, rather than stimulating it, should not be dismissed.
Keynesians like to suppose that whenever the government undertakes new spending to augment the ranks of its employees a multiplier effect will result, causing private economic activity and employment to follow the same upward course.
The jobs data tell a different story.