President Obama’s claim that “the private sector is doing fine” is sure to be repeated over and over and over again the next few months. And the White House will continue to argue that the president’s comments were taken out of context. That’s missing the point. The context is the problem. The administration’s and Congress‘ misplaced faith in the power of government to solve problems and stimulate the economy is what is holding back our recovery.
In fairness, let’s look at the president’s whole statement: “The truth of the matter is that, as I said, we’ve created 4.3 million jobs over the last 27 months, over 800,000 just this year alone. The private sector is doing fine. Where we’re seeing weaknesses in our economy have to do with state and local government, cuts initiated by governors and mayors who are not seeing the kind of help that they have in the past from the federal government and who don’t have the same kind of flexibility as the federal government in dealing with fewer revenues coming in.”
The president later clarified his statement and acknowledged that the private sector is not doing fine. But, again, his context and assumptions are the problem. The weaknesses in our economy are not the result of indiscriminate cuts but indiscriminate spending. Neither side has had political courage to be specific and make hard choices. For the past 30 years, federal, state and local governments have lived off the next 30 years, and the bill is due.
As President Reagan reminded us, government is not the solution - government is the problem. Case in point: By “investing” billions in short-term, nonpermanent public-sector jobs in the stimulus bill, the Obama administration helped create a public-sector employment bubble along with a housing bubble and education bubble. Republican administrations helped inflate this bubble as well, but Mr. Obama’s solution is to repeat the mistakes of the past. At the same time, the administration wants to dramatically expand Medicaid enrollment through the not-so-Affordable Care Act, which will further burden states. Imposing new mandates and creating dependency and unsustainable funding streams hurts rather than helps states.
Meanwhile, instead of taking steps to pass a budget and a serious deficit-reduction plan that reforms our tax code and preserves our safety net, we see from the White House and its allies a pattern of behavior that says cuts during a downturn are bad and “investment” in public-sector jobs is good.
The idea that wasteful spending should be protected during a downturn is Keynesian superstition. Some spending is so wasteful it never has a positive multiplier effect. Is wasting $100 billion a year on health care fraud OK during a recovery but not a recession? Or what about allowing $70 billion to sit around in unspent funds? Or spending millions to build turtle tunnels in the name of job creation? My office alone has identified more than $350 billion in annual waste, fraud and duplication, yet we have seen the administration and Congress take no initiative to make smart cuts.
Another flawed assumption behind the president’s comment is his misplaced confidence in the economic power of the public sector. Columnist Paul Krugman and others who point to cuts in the public sector as the reason for our troubles are confused. Public- and private-sector jobs are not on the same economic footing. No one wants to see vital public servants lose their jobs, but artificially expanding the public sector at the expense of the private sector (federal employees already are better compensated than their private-sector counterparts) is a recipe for disaster. Public-sector employees may be honest, hard-working people, but they don’t innovate and create real wealth. That’s why we tend to see new ideas and new products come from companies like Apple, Intel and Space X rather than your local Department of Motor Vehicles. As Milton Friedman explained, spending your money on yourself in the private sector is vastly more efficient and productive than spending someone else’s money on someone else in the public sector.
When Mr. Obama was elected, he challenged both parties and the country to ask a pragmatic question: What works? The past few years have reminded the country that government doesn’t do a very good job of managing a recovery. Our founders understood this lesson very well, which is why they drafted a Constitution to limit the size and scope of the federal government. They weren’t anti-government. They simply knew from history and experience that government itself was limited in what it could effectively do in a free society.
The challenge today is to remember what we once knew and reapply the principles of limited government to our debt and economic crisis. If America is going to survive and thrive for the next generation and beyond, we need to focus on what works, reduce the size of government and expand freedom and opportunity for every American.
Sen. Tom Coburn, a physician, is an Oklahoma Republican and author of “The Debt Bomb” (Thomas Nelson, 2012).