For the Public Sector, There is No Recession
A good percentage of the structural increase in the deficit is because last year’s “stimulus” was not stimulus in the traditional sense. Rather than a one-time injection of spending to replace a cyclical reduction in private demand, the vast majority of the stimulus has been a permanent increase in the base level of government spending — including spending on federal jobs.
Bloomberg News reported that from the last peak businesses have let go 8.5 million people, or 7.4 percent of the work force, while local governments have cut only 141,000 workers, or less than 1 percent.
Full article by David Einhorn in the New York Times.
No surprise here. Government workers aren’t suffering a bit.
Obviously government is a growth industry.
Einhorn is smart guy, but he’s been wrong more often then he’s been right. His success is that he knows how to manage risk and when to exit a trade. You always have to careful when you listen to a hedge fund manager. His first job is to tell the truth but talk his book.
I agree with the author that low interest rates encourage debt creation.
Certainly, our debt looks more manageable at such low interest rates.
The debt looks even better at zero interest.
What debt has zero interest?
The intragovernmental debt, primarily throough borrowing the Medicare and Social Security trust funds (or, to be more accurate, borrowing debt itself).
How can the government not charge interest on debt?
In reconciling the 2 agencies, Treasury and the trust funds, the government has an asset on one hand (the trust funds), and a liability on the other hand (the Treasury), thus it’s a wash!
Imagine, increased debt, with no interest outlay (and, of course, no principal outlay – that is simply rolled over).
Is it possible that consumers are influenced in debt decisions by the government?
Don Levit
A proposal by the City of Dallas to partially close a budgetary gap by cutting back on police overtime hours drew condemnation from the Police Unions. It’s as though generous overtime hours has become an entitlement even during a recession.
When family income is down, families tighten their belts. Is ther some reason why that cannot happen in the public sector?
I agree with Bruce. Government is a growth industry. It was interesting that Einhorn believes the current spending will cause a crisis much sooner than most are predicting. He says that Boomers will be around to pay the price.
I think the stimulus spending accomplished exactly nothing, except pile up debt we are going to some day have to pay off.