Memo To Obama: It's Government That Is Doing Fine
resident Obama's claim Friday that "the private sector is doing fine" sparked a firestorm of attacks from Republicans and prompted a quick retraction, of sorts, from Obama, who later said "it is absolutely clear that the economy is not doing fine."
But what has gone largely unnoticed was Obama's complaint that it's the government that's hurting these days. "Where we're seeing weaknesses in our economy," he said Friday, "have to do with state and local government."
Even when he tried to walk back his comment later that day, Obama said that the private sector is showing "some good momentum" but the bigger problem is state and local government cutbacks.
And over the weekend, Obama's top adviser, David Axelrod, argued that the private sector is "certainly doing better than the public sector."
But a review of data from several government sources paints a different picture. State and local government spending and revenues are up, and while state and local government jobs are down slightly, these losses pale in comparison with the damage done to private-sector jobs over the past four years.
Here's a rundown:
State spending: Despite the deep recession and the slow recovery, annual state spending overall hasn't dropped once. In fact, by fiscal 2011, total outlays at the state level were 14% higher than they were in 2008, according to the National Association of State Budget Officers. (See nearby chart.)
State general-fund spending: Meanwhile, states' spending from their general funds — which is more than a third of total state spending — climbed in 2011 and 2012, and is expected to rise again in 2013. While still not back to 2008 levels, general-fund spending in 2012 will be slightly higher than 2007, NASBO reports.
Midyear state budget cuts: Another sign of the improving health of state governments is the fact that the number of states making cuts to their budgets in the middle of the year has declined sharply. Last year, just 19 states did. So far this year, only eight have.
Combined state and local spending: Annualized state and local current expenditures were almost 10% higher in Q1 2012 than just before the Great Recession started, according to the Bureau of Economic Analysis.
State and local tax revenues: According to the Census Bureau, state and local tax revenues climbed 4.5% in 2011 — a year when the overall economy grew just 1.7%. Tax revenues are now above their previous peak of 2008.
Federal grants: Even as the $830 billion stimulus program — which pumped huge sums into state and local government coffers — runs out, federal grants to these governments in 2012 will be almost 23% higher than they were in 2008, even after adjusting for inflation, according to the White House Office of Management and Budget.
State and local jobs: While President Obama has focused on job cuts at the state and local level, even this measure is less dire than the president suggests. Overall, state and local jobs are down just 490,000 — or 2.5% — from January 2008, the month national employment peaked, according to the Bureau of Labor Statistics. By contrast, private-sector jobs are still down 4.6 million — or 4% — from that peak, despite the fact that the recession ended three years ago.
What's more, that recent drop in state and local government jobs came after eight years of sharp increases, which saw these jobs climb 10% — double the private sector's hiring pace.
Education jobs: The same holds true for education jobs. They've declined slightly over the past four years — 1.2%. But those modest cutbacks came after a 12% jump from 2000 to 2008, a time when public-school student enrollment climbed just 4.4%, according toDepartment of Education data.
As a result, even with the recent decline, the ratio of public education jobs to students is still higher today than it was a decade ago.
Of course, none of this touches the federal government, which has seen employment (not counting postal workers) climb by a whopping 11% since January 2008.
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