Austerity—American style

More times than I can count, I have attempted to explain to students, colleagues, and friends that we’re not on the “road to Greece.”

That’s what they believe: that, because of fiscal deficits and growing public debt, the United States is quickly moving in the direction of Greece. And that disaster awaits.

Well, no, as I’ve explained on this blog many times before. The problem is not growing debt but, instead, the imposition of austerity policies. Austerity is a term we often use to describe the situation in Europe but rarely in the United States. And it’s not clear why. Perhaps because of the Obama administration’s half-hearted stimulus measures. Or because of the oft-cited but barely perceptible recovery.

In any case, there’s a quick and easy way to calculate the effects of austerity in the United States: figure out the average number of government jobs that were created after every recession in the United States going back to 1970 and then add to that the number of government jobs that have been destroyed during the current recovery.

That’s exactly what Michael Greenstone and Adam Looney do. The number they come up with is 2.2 million.

In the forty-six months following the end of the five other recent recessions, government employment increased by an average of 1.7 million. During the current recovery, however, government employment has decreased by more than 500,000. Put together, the policy differences have led to 2.2 million fewer jobs today. Such a large contraction of the public-sector during a recovery is unprecedented in recent American economic history.

Cutting jobs during a period of already high unemployment is austerity—American style.