The Dangerous Collapse of Public Enterprise

By Dan Kervick

When economists talk about the role of government in economic recovery, they often focus on the question of whether or not we need more economic stimulus.  They ask whether the government should temporarily change its fiscal policies – its taxing and spending decisions – to add some additional publicly financed spending to the economy and help jolt the private sector back to life. But this fixation on countercyclical stimulus as almost the sole economic purpose of fiscal policy can really distort our understanding of the many ways in which public spending supports economic health.  When we take a broader view of the current scene we find that, in addition to its failure to provide adequate countercyclical stimulus, the public arm of our economy is dropping the ball quite dramatically in other ways.

Government participation in the economy does not just promote private sector activity.  Government is itself a large, diverse and important sphere of economic enterprise.  Our federal, state and local governments produce and deliver important goods and service, things that people want and need, and that they have asked their representatives to create and maintain.   And governments employ millions of people in income-earning positions to carry out all of this production.  Ordinarily, we would expect that as a society grows, government will grow commensurately along with everything else.  As our population grows and private enterprises proliferate, we need more schools and teachers, more courthouses and police stations, more public parks, more inspectors and regulators, more paved roads and street lights, and more government clerical workers.  So while it is true that government spending also stimulates additional economic activity in the private sector – just as any economic enterprise stimulates economic activity in the other enterprises it touches and affects – it is also true that the public enterprises governments oversee and the tasks governments perform are all by themselves an important component of overall economic activity.

The part of government spending that is devoted to purchases made in the production of goods and services is called “consumption and gross investment” in the National Income and Product Accounts maintained by the BEA, and it amounts to about 15% to 20% of GDP.   Government consumption and gross investment (CGI) can be contrasted with other forms of government spending that do not contribute to GDP, such as transfer payments to the public under social insurance programs like Social Security and unemployment insurance programs.   As an example of the contrast, note that the money the federal government spends to run the Social Security Administration is part of government CGI.  The money the Social Security Administration actually pays out to retirees, however, is classified as a transfer payment.

Paul Krugman has called our attention to what he calls our “amazing shrinking government”.   Krugman compares government CGI in the Great Recession to CGI following the 2001 recession.  In both cases we see an initial surge in government spending as a result of some federal stimulus.  And following the stimulatory phase of the 2001 recession, the pace of CGI declined only in the sense that it grew at a slower rate.   But after the stimulus that was enacted in 2009 began to wear off in 2011, public enterprise did not just begin to grow more slowly.  It declined precipitously.  Krugman sizes up the impact:

“How big a deal is this? Government consumption and investment is about $3 trillion; if it had grown as fast this time as it did in the Bush years, it would be 12 percent, or $360 billion, higher. Given a multiplier of more than one, which is what the IMF among others now thinks reasonable under current conditions, that ends up meaning GDP something like $450 billion higher, which is 3 percent — and an unemployment rate 1.5 points lower.”

“So fiscal austerity is the difference between where we are now and an unemployment rate not much above 6 percent. It’s a policy disaster.”

To get a clearer picture of this unfolding disaster, and just how large and unprecedented is the collapse in public enterprise during the past few years, let’s shift attention to jobs rather than GDP.   The first chart below shows total government jobs – federal, state and local – in January of each of the presidential inauguration years since 1953.  The second chart shows the percentage increases from January of one inaugural year to January of the next inaugural year, with the first entry – marked “1957” – measuring the 1953-57 period.   (A hat tip is due here to the commentator who posts as “Anne” at Mark Thoma’s Economist’s View, for directing me to these statistics.)

Note the steady increase in government employment over this period, under both political parties, except for two administrations: the Reagan administration and the Obama administration.  The 3.25% decrease that has occurred under Obama is actually unprecedented over the past 60 years.  Obama’s sometime political hero Ronald Reagan, who famously declared government to be our enemy and carried out what is often seen as an anti-government “revolution” in the public sphere of the economy, managed only a 0.15 % reduction.




This is really something of a catastrophe.   We are shutting down government activity and dismantling the capacity of public enterprise just when we need it most.  Recently, a number of Democratic pundits have taken to trumpeting these dramatic drops in government spending and employment – but not to decry them.  Instead the preferred political spin seems to turn in the direction of embracing the austerity agenda, while holding Barack Obama up as a paragon of tight budgets and abstemious fiscal virtue.   Obama, we can recall, told us government must shrink because we are “out of money”.  But notice how absurd it would be if the leaders of private sector industry were to say that the private sector economy has to shrink because it is out of money.  Everybody recognizes that if our economy is to grow and progress, private enterprise needs to spend and invest, and that the means of financing are created along with the initiatives that are financed.   In the case of government, the financial constraint is even less relevant, since a government that controls the very currency which is the monetary foundation of the whole system of financial assets denominated in that currency can never have an inherent financial constraint due to a lack of money.

The next two charts give us a clearer and more detailed picture of what has happened during the Obama administration.   The figures for total government employment and net change in government employment are now analyzed into federal, state and local components.




We see here that the dramatic decline in government spending during this period is not mainly due to a decline in federal government jobs, but to extremely sharp drops in state and local government jobs.  In the local government sector, only the first term of the Reagan administration saw a similar drop in jobs, although that drop was not as large as the Obama administration drop.  In the area of state government employment, on the other hand, the Obama administration collapse is absolutely unprecedented over the past 60 years.  No other four-year presidential term saw a net drop in state government employment.  But state government jobs have fallen by 3.3% under Obama.

None of this should be completely surprising, since the bipartisan political landscape for the past two years has been dominated by a growing turn toward austerity, talk of budgetary “grand bargains,” fiscal cliffs, sequestration, etc.  Both parties seem determined to shrink the role of government in our economy.  Needless to say, not only is the absolute decline in public enterprise very unusual, it runs contrary to the great progressive tradition supporting an active role for government in our economy.  This tradition, which took shape most decisively under the two Roosevelts, long characterized the dominant outlook of the Democratic Party.  Newer Democrats, however, have turned toward the destruction of government.  Notice by way of evidence the dramatic drops in the federal government sector during the two terms of the Clinton administration.

Please note that the issue here is not so much whether the government gets bigger as a share of GDP.  The point is that as the economy grows, we would ordinarily see government CGI and jobs grow at about the same rate as the rest of the economy, even if government was becoming no greater or less a share of that economy.  As I mentioned earlier, government CGI plays two roles.  On the one hand, it stimulates complementary economic activity in the private sector.  Matt Yglesias makes that point in a recent post and pointedly pushes back against the “crowding out” camp:

Had there been more building of military equipment and schools, would that have been fully offset by less private consumption?  By less business investment?  By fewer exports?  It seems to me that there would have been more business investment since private firms would have invested in the capacity to meet those increased orders. And there would have been more household consumption, since people would have had higher incomes.

But again it is important to remember that government consumption and gross investment are not just important because of the boost they give to additional private sector activity.  Government CGI is all by itself a hugely important part of our economy.  At the state level especially, that part of our economy is now shrinking in a dangerous and harmful way.   In my state of New Hampshire, for example, the state’s transportation commissioner has reported on the dire condition of many of the state’s roads and bridges:

Since he was appointed as the New Hampshire transportation commissioner in 2011, Chris Clement has become an evangelist in spreading the word about the urgent need for investment in the state’s roads and bridges.

To be exact, that’s 4,559 miles of state-maintained roads and 2,143 state-owned bridges. Clement and the DOT estimate there are 1,565 miles, or 37 percent, of roads in poor condition, and that includes 970 miles of unnumbered state roads that currently receive no maintenance at all due to budget priorities. There are also 140 so-called “red list” bridges, which require regular inspections due to their degraded state.

“We have been talking about this for some time,” said Clement, who served as deputy commissioner before replacing George Campbell.

Clement has spoken to business groups across the state during the past year about the vital economic need for a more robust effort to maintain and repair the state’s roads.

“This is a nationwide problem and we have tried to take the emotion out of it,” he said. “I believe we have made our message clear and concise.”

State governments, unlike the federal government, do not manage the nation’s monetary system and they therefore operate under a revenue constraint that they cannot fully control.   So if state spending and employment are collapsing as a result of falling revenues, the federal government should be rushing in to support state budgets until revenues return to normal and states can self-fund.

Now, not everyone sees the need for reversing the collapse in public enterprise.  Conservative commentator Larry Kudlow recently argued that the collapse is actually a good thing:

Which leads me to another key point: Even with the fourth-quarter contraction, the latest GDP report shows that falling government spending can coexist with rising private economic activity.

This is an important point in terms of the upcoming spending sequester. Lower federal spending, limited government, and a smaller spending-to-GDP ratio will be good for growth. The military spending plunge will not likely be repeated. But by keeping resources in private hands, rather than transferring them to the inefficient government sector, the spending sequester is actually pro-growth.

Of course, the numbers don’t at all bear out this supposed pro-growth message, because government CGI is itself part of the national product.   Naturally, if the government stops producing things of value, the private sector will pick up at least some of the slack, but the private sector is not the whole economy, and stagnant GDP growth due to a collapse of government CGI is stagnant GDP growth tout court.  Here we see that Kudlow hates what the government does so much that he is willing to accept a lower level of overall national product if the private sector component of that product increases.  That’s the sort of fanaticism we have seen lately in our public discourse.

Government is a productive enterprise.  We are insanely destroying much of that enterprise – and along with it the jobs, incomes and forms of national wealth public enterprise creates – in a misguided push toward austerity.  There is no hope that the private sector can itself perform most of these governmental functions, nor would we want it to do so in most cases since the result would be to turn over vitally important and democratically controlled systems to private ownership and corporate domination.  What in the world are we doing to ourselves?   The government’s capacity to spend is one of the few things we directly control during hard economic times.  The path of austerity and public enterprise destruction is madness of the kind only puritanical government-haters like Kudlow could celebrate.

Robert Reich recently wrote in celebration the 100th anniversary of what he calls “America’s first progressive revolution”:

The 1880s and 1890s had been the Gilded Age, the time of robber barons, when a small number controlled almost all the nation’s wealth as well as our democracy, when poverty had risen to record levels, and when it looked as though the country was destined to become a moneyed aristocracy.

But almost without warning, progressives reversed the tide. Teddy Roosevelt became president in 1901, pledging to break up the giant trusts and end the reign of the “malefactors of great wealth.” Laws were enacted protecting the public from impure foods and drugs, and from corrupt legislators.

Following the progressive revolution of which Reich speaks, we saw the flowering of progressive government during the New Deal period, a bold embrace of public empowerment which initiated activist trends in public self-determination whose momentum carried through during the next several decades of spectacular national development, broadening prosperity and progress.   A renewed commitment to public enterprise progressivism can shake off our current stagnation, and launch a new era of full employment, social progress and rising hopes.


45 responses to “The Dangerous Collapse of Public Enterprise

  1. A little off-topic and probably a stupid question, but when one is talking about ‘sector analysis’, in what sector does a government employee fall? A lot of government spending is not purchasing goods and services from the ‘private’ sector, but paying government employees for services, etc. Those people have bank accounts. When they save some of the excess money spent by the government (on their salary) does that count as ‘net financial assets’ of the private sector. What is the right way to think about the sectors?

    • I might be wrong about this Steve, but it seems to me that if the government buys a plane from a defense contractor, the money spent is income for the private sector and and an expenditure of the government sector. So if you use the income or production approach to calculating GDP, it would show up in the private sector, but if you use the expenditure approach it would show up in the government sector. The total GDP should come out the same either way, but you get different classifications by sector based on the accounting technique.

      On the other hand, if the spending is on something the government itself produces with government emplyees, then it would show up in the government sector on all three ways of calculating.

      • I’m not so sure myself. A postman is a government employee, not a private contractor. The government is paying him to provide a service. But, I certainly consider him a ‘private’ person and that his savings are NFA of the private sector.

        What I am wondering is this; is the ‘government sector’ simply a bank account and has no actual persons in it. I don’t think it is any less useful to think about it that way. You’re plugged into the gurus more than I am I would guess, maybe they can tell you.

        • The Post Office is a treated like a poor orphan these days. It receives no money from the government, and is forced to pay its own way–it has for years. It must sell stamps and services in order to pay its employees and show a profit. In fact, the whole reason the Post Office is having problems now is that Congress has mandated that the Post Office pay for medical benefits for its employees for seventy-five years into the future! Congress has demanded that the P.O. turn over $5 billion dollars to cover this! No private business is required to do such. It must pay its own way, even though the Constitution mandates that Congress shall provide for the Post Office. In addition, Congress calls in management of the Post Office and beats up on them regularly, accusing their workers of making out like bandits–accusing them of having too good a retirement system, etc. (See the hearings on C-Span video) Then when the Post Office tries to innovate and sell phones or other services, Congress tells them no, you can’t compete with private businesses. They tell the Post Office to act like a private business when it comes to providing for their own upkeep, but refuse to let them be competitive. They make them raise their own funds, yet dictate what they may and may not do. It is treated as a step-child by the Congress that was entrusted to oversee it in the Constitution. It is as if someone’s rich father died and left a trust to a banker–the banker sits on the trust and tells the orphan to get out and earn his own keep then bops him on the ears if he isn’t meeting the banker’s expectations.

          The Post Office is also one of the employers that has the highest rate of hiring veterans. Now Congress is forcing them to down-size and lay off workers. In addition. the Post Office has a legal mandate to deliver mail to every Podunk place in America. In fact, you will see the UPS truck at your local P.O. at least once a day sending mail that is not profitable for a private business to send. Fed-Ex doesn’t have to take your letter to grandma down a long dusty road, either–and if they do, they will likely charge you $15.

          This is the shameful state of affairs. Next August, the P.O. will cease Saturday deliveries. Too bad Congress can’t follow through with its Constitutional mandate and provide postal services for all Americans–if necessary at the expense of the Treasury–instead they have turned the P.O. into a hybrid creature that is neither private nor public.

          I really think that certain members of Congress dislike the fact that the P.O. pays a decent wage and has decent working, and it may have the last worker’s union left to break.

          Just my two cents.

          • The objective of squeezing the Post Office, is to eventually privatize it, so that profits can be made by the private sector.

    • As an Employee: Government sector.
      As a Consumer: Private Sector

  2. Ben Johannson


    I would think that anything not specifically labelled ” property of U.S. government” is part of the non-government sector. So if you’re a HUD employee your services are being appropriated to the government, but your pay is going into a private bank account. By employing you the government’s real wealth increases and the private sector’s financial wealth increases also.

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  4. Woo-Hoo is the Man, “Public Enterprise” probably isn’t a new term,but its powerful influence exists only as a matter of limited $ and cents and so languishes under this burden of “government is the problem” point of view. Needs are real and no butt kissing “holier than thou” marriage agreement will ever change that fact. We aspire to Democracy,capital D, “Who do You Love” anyway!

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  6. broge kilrain

    Think we are heading for a credit downgrade?

  7. It’s not “public enterprise” that’s lacking per se; it’s public money so the interest can be paid to the government backed credit cartel. That cartel creates the principal but not the interest for the debt-money it creates to enslave the population (with their own stolen purchasing power). That interest must come from even more debt (unsustainable) or be spent into existence by the monetary sovereign.

    Why complicate the problem, Dan? The population does not need “public enterprise” or government make-work but government MONEY (as restitution for theft under color of law) and reform to abolish government backing for the banking cartel that has looted them.

    • I know your position F. Beard. You say the very same thing every time. You never argue for it, but just repeat it. It seems to be a religious position with you.

      I disagree with you. I think we need a very active government sector producing all sorts of things that only government can do well. And I don’t think the fate of the Republic hangs in the balance depends on eliminating credit and interest.

      The government is not going to send you a pile of free money tho pay you back for the purchasing power you think the usurers have somehow stolen from you. And you know what? Even if we moved to a system of totally public banking, those banks are probably still going to charge you interest.

      • Even if we moved to a system of totally public banking, those banks are probably still going to charge you interest. Dan K.

        Oh, Danny boy. Sigh. You think I’m in favor of public theft of purchasing power? Or that I’m personally lusting after a big wad of cash?

        It’s you Dan, who are loading up the solution to this problem with non-essentials – non-essentials that will divide the victims into pro and anti big government factions. Or is increasing the size of government more important to you than solving this problem?

        Dan K’s or Steve Keen’s solution? I’ll take Steve Keen’s, thank you.

      • And I don’t think the fate of the Republic hangs in the balance depends on eliminating credit and interest. Dan K\

        Then you’re ignorant of 20th century history. The Great Depression, caused by the government backed credit cartel, was a (the?) major cause of WW II which killed 50-86 million people.

        • ” The Great Depression, caused by the government backed credit cartel, was a (the?) major cause of WW II which killed 50-86 million people.”
          You really must fill me in on this and I am so serious. I need the dots connected-I suppose there about 30 pages worth at least. Or maybe 300? Do you have a website that would have pages and pages showing how the statement you made is true. Because again, if you do I really would like to see; you have summarized about 20 years of history in one sentence. There must be proof somewhere.

          • 1) Ben Bernanke agrees that the Fed caused the Great Depression:

            Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve System. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.

            “Remarks by Governor Ben S. Bernanke at the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois,” (2002-11-08)
            Commenting to Milton Friedman’s public statement that the Great Depression was caused by the Federal Reserve Bank
            from [bold added]

            2) The Great Depression was a major cause of WWII:

            The main causes of World War II were nationalistic tensions, unresolved issues, and resentments resulting from World War I and the interwar period in Europe, in addition to the effects of the Great Depression in the 1930s. from

            Note also that the Fed financed US entry into WWI which led to an unjust Armistice which was another major cause of WWII (“and resentments resulting from World War I and the interwar period in Europe”).

            • Robert Lavergne

              Ben Bernanke is wrong here (I’m sure, like others have already noted, that it wasn’t the first time he got something wrong). WWII wasn’t just an inter-imperialist war. It was also an anti-socialist war. Yes, there were inter-ally debts following WWI, imposed by the US, which further developed into openly antagonistic contradictions. But, WWII was a unique war, an imperialist war distorted by the presence of a Soviet state, which developed into a mixed imperialist and anti-socialist war. Remember, it was on the eastern-front where Germany lost the decisive battles and suffered the most casualties. Although the main imperialist antagonists were the same as WWI, the UK & France not only allowed Germany to rearm, but made concessions, allowing them to take Austria, Czechoslovakia, and other territories on the understanding that these new economic & military resources would enable them to wage war against the USSR.

              By saying it was the “Great Depression” that caused WWII, it lends support to the view that wars, like depressions, are not the result of planning/policies promoted by the ruling classes and their puppets.

              • Ben B said nothing about the causes of WWII; he was talking about the cause of the Great Depression. Many others implicate the Great Depression as a major cause of WWII.

                Think about it. War time spending provides jobs for the unemployed and massive profits for businesses. And scapegoats are needed to divert attention from the real villains – the banks.

  8. Nicely, nicely done.


    January 4, 2013

    Total Government Employment, 1948-2013

    (Thousands) *

    December 1948 ( 5,888)
    December 1952 ( 6,935)
    December 1960 ( 8,597)
    December 1968 ( 12,145)
    December 1976 ( 15,075)
    December 1980 ( 16,373)
    December 1988 ( 17,736)
    December 1992 ( 18,878)
    December 2000 ( 20,804)
    December 2007 ( 22,376)
    December 2008 ( 22,556) (High)
    December 2009 ( 22,480)
    December 2010 ( 22,267)
    December 2011 ( 21,950)
    December 2012 ( 21,873)

    January 2013 ( 21,864)

    Clinton ( 1,926) Total government jobs created
    Bush ( 1,752) Total government jobs created
    Obama (- 692) Total government jobs lost

    * Establishment data, seasonally adjusted.


    January 4, 2013

    The Truman experience in monthly government job creation from 1949 to 1952 was,

    21,810 x 48 months = 1.05 million government jobs created in all;

    the Eisenhower experience from 1953 to 1960 was,

    17,310 x 96 months = 1.66 million government jobs created in all;

    the Kennedy-Johnson experience from 1961 to 1968 was,

    36,960 x 96 months = 3.55 million government jobs created in all;

    the Nixon-Ford experience from 1969 to 1976 was,

    30,920 x 96 months = 2.93 million government jobs created in all;

    the Carter experience from 1977 to 1980 was,

    27,040 x 48 months = 1.30 million government jobs created in all;

    the Reagan experience from 1981 to 1988 was,

    14,200 x 96 months = 1.36 million government jobs created in all;

    the Bush experience from 1989 to 1992 was,

    23,790 x 48 months = 1.14 million government jobs created in all;

    the Clinton experience from 1993 to 2000 was,

    20,060 x 96 = 1.93 million government jobs created in all;

    the Bush experience from 2001 to 2008 was,

    18,250 x 96 months = 1.75 million government jobs created in all;

    the Obama experience from 2009 to 2013 has been,

    – 14,120 x 49 months = – 692 thousand government jobs lost in all.

    [ Notice the Kennedy-Johnson years which marked the finest employment period for growth in employment relative to population and growth in real median wages we have experienced since 1948. ]

    • So Anne, how far back do we have to go before we find another administration with a net loss of government jobs? I assume we have a big net increase during FDR, although the data doesn’t go back before 1939. What would be your guess?

      • Apart from periods following war and widespread mobilization, I am aware of no general loss of government positions during a Presidency. Also, we were adding uniformed military position through 2011:

        January 15, 2013

        Total Federal Uniformed Military Personnel, 1992-2011


        1992 ( 1,848)
        1993 ( 1,744) Clinton
        1994 ( 1,648)

        1995 ( 1,555)
        1996 ( 1,507)
        1997 ( 1,439)
        1998 ( 1,407)
        1999 ( 1,386) (Low)

        2000 ( 1,426)
        2001 ( 1,428) Bush
        2002 ( 1,456)
        2003 ( 1,478)
        2004 ( 1,473)

        2005 ( 1,436)
        2006 ( 1,432)
        2007 ( 1,427)
        2008 ( 1,450)
        2009 ( 1,591) Obama

        2010 ( 1,602)
        2011 ( 1,583)

        Clinton (- 422) Total uniformed military personnel reduced
        Bush ( 24) Total uniformed military personnel added
        Obama ( 133) Total uniformed military personnel added

    • Anne,

      I see that most jobs have been lost by the local sector during the Obama administration. This probably comes about, because these jobs are funded by property taxes. Since property values have fallen and many homes have been foreclosed, local authorities can no longer afford to have the same number of employees. Consider also that private sector incomes have stagnated or fallen during this period inducing people to vote against local tax increases. These days government jobs have better pay, better benefits and decent pensions compared with their private sector equivalents, who probably have no pension benefits. It is considered unfair. For example in NY, the police retire on half pay after twenty years of service with a defined pension. This is not the norm in the private sector and people are rebelling.

  11. “State governments, unlike the federal government, do not manage the nation’s monetary system and they therefore operate under a revenue constraint that they cannot fully control. So if state spending and employment are collapsing as a result of falling revenues, the federal government should be rushing in to support state budgets until revenues return to normal and states can self-fund.”

    In Michigan, 61% of the 2011 budget was allocated for two major items, Medicaid, $13,917.2 billion and Education $15,269.6 billion. Another huge chunk is for Human services (‘welfare’ cash payments to individuals, food stamp programs, adoption agencies and other family services)-$6,423.3billion. Corrections is fourth in line with $2,863.9 and the last large chunk is transportation (roads, bridges, streets, including about $900 million for a rickity bus system) at $2,460.6. Rolling Human services and Medicaid together, $20,340.50 billion or 42% of the budget. All I can say is mind boggling. Unreal. Stupendous. OH, not that the numbers are so large-that they are, but that the state of Michigan should be carrying such a huge burden is really mind bending. 75% of the state budget goes to the top three items; and this is on a hugely pared back budget, particularly for funds to higher education. The New Conservatives- {or are they the new Liberals or just the new brand of idiots in Washington?} have so slashed funding to the states in two areas-Medicaid/ Medicare and post secondary education that the states are forced to fill in potholes and to patch the roads and bridges with worn out prisoners jump suits . Lord knows, in Michigan we have tons of those since we incarcerate thousands of people yearly!

    To summarize what the numbers mean then is that the new brand of nihilism running rampant in Washington has deliberately set out to insure that people’s backs are to the walls especially the bottom 30% who need assistance-just for survival- for food, housing, transportation and Education. The remaining 68% are strapped with higher taxes, higher college tuition, higher gas prices. Meanwhile they have lost billions in vanishing housing values, horribly eroded pensions funds and can expect fewer benefits each year they spend in retirement. All of this is unnecessary. I’ll leave it to the reader to use the articles and tools on this website and the blog roll at the right to figure out what needs to be done.

    • It’s depressing Ray. Progressive government is under attack everywhere, but when Democrats bring this stuff up, more than half the time they are bragging about what an awesome spending-cutter Barack Obama is!

      One of the more depressing aspects of our disordered society is the massive number of people locked up in jails, who don’t even count in the unemployment figures. Rather than investing in work opportunities, we exile millions of people externally from the workforce, and then expensively lock them up as they turn to criminality.

      • “It’s snowing still,” said Eeyore, “ and freezing . . .However,” he said brightening up a little, “we haven’t had an earthquake lately.”

      • And as we continue to privatize prisons, the goal will be to keep people in prison to maximize profits. As we contnue to privatize government functions, the goals of those functions change from trying to re-habilitate, from trying to educate, from fixing bridges, etc to maximizing profits. Republicans have no interest in lessening inequality. We need a way around them and the democrats who work with them.

  12. So, you’re telling me what I already know? As a leftist, I know what’s going on. And it is leading to no good.

  13. But but I was told we are going broke and running out of money. The President even said that the gobment had to tighten its belt just like all of us. Everyone says we have an enormous debt that our children and grandchildren will have to pay.

    Nice blog post, Dan. I wish I had the magic words or the good book to spread the word. Our neoliberal gods will destroy us. We need another religion.

  14. All our money is now in the form of numbers entered into bank computers.

    It constantly amazes me that this constitutes a crisis. All we have to do is change the numbers in the computers, and hey presto the problem is solved.

  15. A situation in which people are short of money should be dealt with by giving those people money, either through government spending or an increase in the federal minimum wage.

    93 percent of income gains in 2010 went to the wealthiest 1 percent of Americans. To borrow from Oliver Stone, that kind of inequality, when it smells like it, feels like it, and looks like it, you call it what it is: Fascism.

  16. Conservatives always say that goverment is inefficient. But private sector is even more inefficient; in sectors anything to do with knowledge millions upon millions of people are producing the same thing.

    It’s like digging up holes, and then filling them up just so that they could be dig up again. Or building a house just to demolish it and build again. Million times over.

    Talk about efficiency.

    • I’d probably agree if I understood what you meant by ” in sectors anything to do with knowledge”.

      • For example when there is 20 car companies each developing basically the same 1.3l engine. People employed are expensive highly educated skillfull people so opportunity cost is high. Those same people could have done also useful engineering and r&d projects.

        Maybe developing 3-5 engines would be enough?

        What about news? Same news appear in every paper and news portal, yet each require their own editorial staff.

        This happens because profit-seeking ventures are able to frakture existing markets and divert some of the income to their own pokets even tought they are doing same work that others have already done.

  17. Yes, OK.

    What about news? Same news appear in every paper and news portal, yet each require their own editorial staff.

    Less true, there is scope for local, narrow purpose, targetted news. And getting a different slant on common stuff is valuable. One should be very careful about the word “efficiency” as applied to whole economies and the whole world, and not try to go for too much, for fear of creating a fragile, false, intellectual monoculture, among other reasons.

  18. Robert P Willis

    I submit the following suggested state tax revision to Iowa legislators to alleviate collapse of state public enterprise.
    2011 Tax Reform for Iowa’s Economic Recovery

    Low wage jobs or no jobs leave families and children facing hunger, debt, homelessness and shortened lives while families, farmers, and firms pay job-killing sales, income and improvement taxes to support schools, state and local government and provide ‘property tax relief’ (i.e. aid land speculation). The Iowa Dep’t of Revenue reported $10.26 billion (less $1.7 billion direct tax on land) in such taxes in 2007. In addition, rent paid to landowners for access to sites on which to reside, invest capital, create jobs and produce goods takes a large share of wages and profits. Iowa’s governments are taking $8.56 billion from family, farm and firm production when they could be collecting over $10 billion in land rent. States can end ‘double takings’ of earnings and spur landowners into creating jobs and producing goods by taxing the land portion of property value more and cutting taxes on property improvements, retail sales and personal incomes as follows.
    First, the Director of the Department of Revenue shall require annual appraisal of building values as the residual of the annually and uniformly appraised unitary market value of a parcel less the annually and uniformly appraised market value of land.
    Second the Director shall require taxation of all classes of land at 100% appraised valuation and the percent of taxable improvement values (rollback) calculated to hold each class of property valuations within the 2007 legislated annual growth limit. For example taxing land at 100% appraised value would lower Iowa’s 2007 rollback of taxable agricultural improvement values to 2.95% from 90.1%, residential improvement values to 30.57% from 44.1% and commercial improvement values to 99.66% from 99.7%.
    Third, the Director shall require ten year property tax abatements on new construction but not tax on land. Capitalization of savings from tax free construction will add to tax bases by raising the present value of land.
    Fourth, Tax rates shall be calculated for the full dollar amount of each jurisdiction’s appropriations including rates to replace local public user charges, fully cover an additional $200 per credit in individual and dependent state income tax credits regardless of income and provide funds to cover full repeal of state and local sales tax.
    Land when correctly appraised is a reliable, equitable, transparent and job-creating tax base. Taxing land collects unearned rent created by natural conditions and by public spending on infrastructure. The higher tax on land will not add to the price of housing space, office floors, factory floors or farm improvements. It instead capitalizes to a lower price for sites for homes, farms, business, industry, railroads and utilities. It frees markets from land owner monopolization of building sites and farm fields and eliminates taxation of wages and profits. In a free market buyers pay less for land, pay less mortgage interest and maintain property titles by paying a tax that has no affect on production costs.
    I found family savings with all classes of land in Polk County Iowa taxed at 100% of 2007 appraised values for four jurisdictions with improvement values rolled back as above. Up to 95% of Des Moines families, 81% Ankeny, 100% Runnells and 56% Lincoln twp. would have paid less total tax. Aggregate family savings came to $55.6 million in Ankeny, $310 million Des Moines, $0.618 million Runnells, and $0.446 million Lincoln Twp., or $1,371; $1,553; $1,606 and $798 savings per family.
    Since commercial, industrial, agricultural, railroad and utility sites produce goods and create jobs owners of all sites in Iowa would pay more tax. However, many of 309,748 individuals and businesses who collected $1.65 billion in retail sales tax for the state in 2008 rent floor space on Iowa’s 94,771 commercial and industrial parcels. They and farm tenants who farm 53%% of Iowa’s agricultural acres don’t pay property tax on land but do create jobs and produce goods although burdened with rent payments and taxes on earnings. Income tax cuts and repeal of sales tax would raise net incomes for tenants and offset added tax on owner-occupied land. Given consumer tax cuts, more tax on land and less improvement tax with residual appraisal of building values the more intensively improved parcels would earn more and pay less tax, least improved earn less and pay more tax. Landowners can protect property rights by (1) paying added land tax out-of-pocket, (2) paying added tax and investing capital to create jobs, produce goods and earn more or (3) sell sites at tax discounted price to anyone ready to invest capital, create jobs, buy materials and earn wealth producing for a growing market. Iowa can lead its sister states and the Federal government in spurring job creation and providing funds for welfare, health care and education with full collection of land rent and repeal of taxes on wages and profits.
    Robert P. Willis
    2808 E.16th apt 32
    Des Moines, IA 50313
    (515 244-4380)
    Tax Capitalization ‘Criteria for Good Proposals’ by Thomas F. Pogue, Professor of Economics, U of Iowa, Macroeconomics in One Lesson by Fred E. Foldvary, Senior Editor, June 29, 2009 ‘Land-Residual vs Building-Residual Method of Real Estate Valuation’ also ‘A Tax Program for U.S. Economic Recovery’ by Michael Hudson, Professor of Economics, University of Missouri, Kansas City ‘How to Thaw credit, Now and Forever/Solutions’ by Mason Gaffney, Professor of Economics, University of California, Riverside, October 2008 Iowa Dep’t of Revenue 2007 Annual Report, Tax Collections; 2007 Property Valuation Report;
    2008 IOWA REAL PROPERTY APPRAISAL MANUAL 2007 Iowa Code: 441.21 ACTUAL, ASSESSED AND TAXABLE VALUES ‘rollback’ Polk County, Residential, commercial and agricultural land and building valuations 2008-2009 Tax Levies Payable Fiscal Year July 1 09 – June 30 10 Polk County IA

  19. What concerns me is that the republicans don’t want government activity. They believe all these activities should be privatized: roads, schools, prisons, etc. They believe that the EPA just inhibits economic activity. Business should be free to pollute freely and they shouldn’t be regulated. They applaud the drop in governmental activity and encourage it through bills presented to the states by ALEC. The only government spending of which they approve is the military and subsidies for the rich and powerful. They aren’t interested in your economic analysis because they are true believers in their philosophy and if it doesn’t work at first, you just do more of it and it will work. You aren’t dealing with people who are going to reason with you.

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