Tuesday, July 7, 2015

Making bad times worse through local layoffs

CNN reports that local governments across the country are facing job cuts of up to 500,000 if the federal government doesn't step in. Matthew Yglesias comments:

Making bad times worse through local layoffs

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CNN reports that local governments across the country are facing job cuts of up to 500,000 if the federal government doesn't step in. Matthew Yglesias comments:

That’s 500,000 lost jobs. Conservatives have largely convinced themselves that public servants are such vile and overpaid monsters that anything that forces layoffs is a good thing and the moderates in Congress seem scared of their own shadows so nothing will be done. But economically speaking, the time for local governments to try to trim the fat is when unemployment is low and your laid-off librarian, ambulance driver, or guy who keeps the park clean can get a new job where his or her skills will plausibly be more optimally allocated. But guess what produces less social welfare than driving a bus? Sitting at home being unemployed. And so it goes down the line. Dumping people into a depressed labor market all-but-guarantees an increase in idleness along with a drop in revenue for local retailers that will lead to more idleness and waste.

Of course it's true that local governments don't tend to trim when times are good, but that doesn't make it smart to do it when times are bad. There are ideas for ways the federal government can save jobs while incentivizing local governments to enact things like pension reform.

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