This is really astounding, even for Krugman. If you have 10 minutes, and you’re the kind of person who loves to see Krugman executing a mob hit on an ideological opponent, then first read Krugman discussing Robert Samuelson’s piece on government job creation. Based on Krugman’s commentary, imagine what you think Samuelson’s actual article must have said. Then, go read Samuelson’s actual article. Your jaw may just drop.
For those who don’t have the luxury of doing the above, let me walk you through some highlights. Here’s how Krugman opens:
Both Dean Baker and Josh Bivens weigh in Robert Samuelson’s outburst at the New York Times for saying that the government can too create jobs. (He went so far as to call it “flat-earth” thinking). Sadly, Samuelson’s attitude is widely shared — even, at least rhetorically, by Barack Obama.
So let me not focus on Samuelson’s piece so much as on the general proposition. What can it possibly mean to say that only the private sector can create jobs?
It could mean that government jobs aren’t “real” jobs — presumably that they don’t supply something of value to society. Samuelson disavows that position, I think — and rightly so. After all, the bulk of government workers are in education, protective services, and health. Do you really want to say that schoolteachers, firefighters, and nurses provide nothing of value? [Bold added.]
Now, the first part I put in bold is important, because–as we’ll see–Krugman actually can’t use his attack on Samuelson’s actual piece. So, that small little pang of the Conscience of a Liberal told Krugman he needed to be clear that really what he would critique in this post was someone who had the same conclusion as Samuelson, but used a different train of thought to arrive at it.
Now the second thing I put in bold is very interesting. Krugman says that somebody might mean that government jobs don’t add something of value to society. Krugman then very graciously says “Samuelson disavows that position, I think.” Well, Samuelson was probably really slippery about it, eh? That’s why Krugman says “I think”?
Actually, here is what Samuelson said, after his general case for why government doesn’t “create jobs” the same way the private sector does:
Now, let me add three crucial caveats to avoid misunderstanding.
First: I am not saying that private-sector jobs are superior to public-sector jobs. Obviously, we need teachers, soldiers, police officers, epidemiologists and the other workers the Times mentioned. How many we need and what they should do are political questions. It’s also true that many government activities — basic research, highways, schools — can support the private sector. I am not making an argument for or against a given size of government; that’s another debate. My aim is merely to explain how government employment increases. [Emphasis in original.]
So in light of the above, I am going to live dangerously and venture to guess that Samuelson was not saying that he thought governments jobs didn’t contribute to society. But Krugman is an objective scientist, and always likes to hedge himself, apparently. Hence the “I think” caveat when discussing Samuelson’s position. (And notice what I meant about Krugman switching from Samuelson’s piece to the “general proposition”–Krugman asks rhetorically in the block quote above, “Do you really want to argue…” because even Krugman with his liberal conscience can’t say, “Does Samuelson really want to argue…”)
After the above fiasco, Krugman continues like this:
What then? Well, Samuelson argues that when the government adds jobs, these come at the expense of jobs elsewhere. This is manifestly not true when the economy is depressed; all the evidence on big multipliers amounts to saying that under current conditions government jobs create additional jobs in the private sector, rather than crowding them out.
Under near-full-employment conditions, however, it’s true that expanding government employment displaces other employment. But this is equally true of any expansion in private employment!
Now if you had just read Krugman’s post, you probably would have bet $1000 that Samuelson did NOT have the following in his original article:
And third: There is one glaring exception to the logic I’ve outlined. When the economy is in a deep slump, government can — in theory — increase hiring by borrowing and spending when consumers and businesses are retrenching. If the Times had confined its argument about government job creation to this possibility, it would have been on more solid ground. Note, however, that economists fiercely debate how much government “stimulus” succeeds in practice. If stimulus programs inspire offsetting private-sector behavior — suppose consumers and companies react to larger government budget deficits by increasing their saving — then employment gains would be muted. I don’t intend to settle this debate either.
But if you did, then you’d be out $1000, because that was the third caveat Samuelson put at the end of his article.
In closing, let me confess that Samuelson was indeed a bit confusing. I had to think a minute about what his basic point was, since he hemmed and hawed his way to apparently undercut it. So I don’t fault Krugman for disagreeing with Samuelson, I am merely faulting him for bringing up two “zingers” that Samuelson himself brought up.
Here’s what I think Samuelson was getting at, and there’s nothing wrong with this claim: There is a fundamental sense in which private sector job creation is the bedrock, and government job creation is laid on top of it. When the government expands employment in some sector, those resources come at the expense of potential employment elsewhere.
Krugman argues that this same logic applies to private-sector employment, but actually it doesn’t–at least not in the same way. If I am a private firm and hire somebody, I didn’t take money away from somebody else to do so; I used my own money (or borrowed it). When the government does the same thing, there is a qualitatively different sense in which it really does take away from other entities, in order to expand its hiring.
Yet another way of seeing the difference is to realize that the private sector could exist without government workers; we could at least imagine a complete laissez-faire market. In contrast, government as a “mixed economy” could NOT exist without a private sector to tax; it would turn into outright socialism. So in the present system, there is a sense in which the government could arguably provide important services that the market couldn’t (I personally disagree with this, naturally), but even here the means with which to provide those services come out of the bounty of the private sector.
If one wanted to use loaded terms, one could say the government is a parasite on the host. Yet that’s not even what Samuelson is trying to say. It’s more like saying, infants and senior citizens depend on the workers for their survival. To say this doesn’t imply that we hate infants and senior citizens. Indeed, infants are necessary for the continuation of society. But there is a genuine sense in which society can’t function just with infants, but it can function (at least for a few decades) just with middle-aged workers.