Private sector doing fine?

The United States economy is no longer driven by private enterprise, but by government. That???s the message President Barack Obama sent the American people June 8. In a press conference on the economy that morning, the President said:

???The private sector is doing fine. Where we???re seeing weaknesses in our economy have to do with state and local government???

???And so if Republicans want to be helpful, if they really want to move forward and put people back to work, what they should be thinking about is, how do we help state and local governments…???

But four hours later, when asked to respond to Mitt Romney???s comment that this statement showed that the President was ???out of touch??? with the economic realities faced by Americans, Obama responded, ???The economy is not doing fine. There are too many people out of work??????

So the economy is not doing fine, but the private sector is. Too many people are out of work, true, but not because of job losses in the private sector, but because of job losses in government. If only Republicans get on board with more tax hikes and growing the government by hiring more bureaucrats, the economy will boom.


As of last month, the Bureau of Labor Statistics reported about 142 million jobs, a loss of nearly 4 million jobs since the last recession began in December 2007. Of these 4 million, about 3.2 million jobs lost were in the private sector; less than 800,000 were in the public sector. (See chart below.)

In other words, more than four out of five lost jobs were in the private sector; the public sector accounts for less than one in five lost jobs. (See pie chart.)

Whatever this says about the private sector, it???s not that it???s ???doing fine.???

Regarding that portion of the public sector for which the President actually bears responsibility — the federal government — the nonpartisan Congressional Budget Office reported in January that overall, federal employees receive 16 percent more in compensation than their private-sector counterparts with similar levels of education: ???Overall, the federal government paid 16 percent more in total compensation than it would have if average compensation had been comparable with that in the private sector, after accounting for certain observable characteristics of workers.???

It???s no wonder that four of the five wealthiest jurisdictions in the country are now in the Washington, DC, Suburbs: Falls Church, Loudon County, and Fairfax County Virginia, and Howard County, Maryland. In 2000, only two of the top five were DC suburbs (Fairfax and Loudon County). If any sector can be said to be ???doing fine,??? it???s the public sector.

Moreover, Obama???s point is wrong: Even if 770,000 more new bureaucrats were to be hired to make up for the loss in public-sector jobs, this would only make up one-fifth of the job losses in the U.S. economy. Meanwhile, hiking taxes to pay them their inflated salaries would only further burden job creation in the private sector, increasing unemployment.

The fundamental fact the President seems to have forgotten is that every tax dollar spent by the public sector must first be produced by (and taken from) the private sector. If President Obama wants to grow the public sector, he must focus first on growing the private sector.