While the national economy looks to be picking up, Idaho’s employment situation remains bleak. Idahoans have to do more with less.
In February the national unemployment rate fell below 9 percent for the first time in nearly two years. At 9.7 percent, Idaho’s unemployment rate remains well above the national average.
Idaho’s lagging employment situation can be attributed in large part to losses in the construction industry — jobs that are not soon to return. Employment opportunities in new and different industries will need to arise.
Toward this end, many policymakers are suggesting more government “investments” in education and job training. In the long run, a better-trained and educated work force will be more productive. In turn, higher productivity leads to a higher standard of living for all.
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However, new or expanded government spending requires a new level of government revenue. The money just isn’t there.
Keynesian economic theory calls for deficit spending by government whenever the economy falls into a recession. This theory says a fall in aggregate demand from the private sector is overcome with increased public sector spending.
Keynes also said that government should run a surplus when the economy is growing. Dallas Federal Reserve President Richard Fisher put it clearly in a recent speech: “The same economic theory that prescribes deficits during recession prescribes surpluses during recovery to help meet the next economic challenge that might develop.”
Keynesian supporters must look at the economic growth of the past two years and ask, “Where are the federal and state government surpluses?” Real economic output for the United States is back to 2007 levels.
No government surpluses existed then or now.
This same level of output is being produced with far fewer workers. There are 7 million fewer workers in the United States today than in 2007.
Idaho workers are also more productive. Idaho employment is down 8 percent since 2007, but real personal income, the measure of state’s total output, is down only 2 percent.
Private firms in Idaho and across the nation are able to do more with less. Why not the public sector?
At approximately 19.4 million workers, U.S., state and local government employment is unchanged since 2007. Idaho has just 110 fewer government employees since June 2007.
At the same time, state and local governments are spending more. Since late 2007, expenditures by state and local governments are up more than 10 percent, to say nothing of the increase in federal spending.
All this additional spending occurs in the face of declining revenue. Idaho tax revenue, for example, is currently 5 percent below what it was in 2007.
Shortfalls in state budgets are being made up through transfers from the federal government and borrowing. Outstanding U.S. municipal debt has risen nearly 12 percent.
Both sources of funds are drying up quickly.
Economists will long debate whether Keynesian policies lessened the severity of the recession or not. Regardless, Keynes’ theory and budget realities now call for belt-tightening.
Private and public workers must make do with less.
PETER R. CRABB Professor of finance and economics at Northwest Nazarene University in Nampa