Jack's Enclave - Public Sector Jobs And The Economy
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President Obama: "Where we're seeing weaknesses in our economy having 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. ."

I know the following logic has to be faulty, what with the Obama administration pushing to increase public sector jobs as a solution to the current economic slowdown. But as yet no one has been able to explain to me where I errored. I'm sure this example is overly simplystic. I probably have not used the correct termonology. Nonetheless, I believe my point comes across.

The government has a budget/revenues of $100,000.

Now consider a public sector employee and a private sector employee, each earning $40,000 a year.

The $40,000 to pay the salary of the public sector employee comes out of the government budget. The $40,000 to pay the salary of the private sector employee comes from the private sector.

If we subtract the $40,000 salary of the public sector employee from the government budget we now have $60,000 left in the government budget. The private sector employee's salary is paid by the private sector and does not impact the government budget.

Since each employee earns $40,000 each will pay taxes at the same rate. Let's say 25%, or $10,000.

The government can now add $20,000 to its budget bringing it up to $80,000. The $20,000 loss in the government budget is a direct result of paying the salary of the public sector employee.

No matter how you slice it, a public sector job represents a net loss in government revenues while a private sector job represents a net gain. Just how is adding public employees, thereby reducing government revenues, thereby increasing the federal deficit, going to help the economy?

June, 2012