Friday, July 8, 2011

The Effects of Austerity

Nate Silver:
The jobs numbers are a really important news story that people mistake for being a really important horse race story.
Ah, I like that a lot better than the way I put it earlier.

I also agree with those who are saying that a big part of this is public sector jobs -- as David Leonhardt calculates it, state and local government austerity in the last couple of years have cost about a million jobs. Steve Benen reminds us that "Those laid off workers, in turn, rely on unemployment benefits — which Republicans also want to cut — to try to get by, and have no choice but to spend less, thereby hurting the local economies, too."

But that's not the worst of it!

What they don't mention is that for every teacher, cop, or prison guard who actually loses her job, there are, what, ten? twenty? fifty? who are worried about their own jobs. And that means that each of those state and local government employees are going to hesitate before they book their next trip to Disneyland, or upgrade their wardrobes, or buy a new house. Even though they're still employed. Austerity makes every government employee fear for his job, and surely that has significant economic consequences, even for those who dodge the bullet.

Hey, economists! Does anyone have a good estimate of the effect of all this stuff put together?


  1. Don't you think this only raises the stakes of the budget/debt ceiling talks? This is a warning- which you summarize yourself- of what more austerity will bring.

    Do you think think this means Obama should try moving the discussion towards jobs, and away from short term deficits?

  2. How about the political effects? I've long wondered whether voters react to unemployment levels to the degree that their own job security is an issue to them--a difficult relationship to capture.


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