David Brooks makes a not-very-convincing, and somewhat confused, case against more economic stimulus in his column today. His argument, essentially, is that since the economy hasn’t boomed in the wake of Obama’s stimulus plan, the plan probably didn’t work. I’m no economist–and, as Brooks accurately points out, most economists are far too convinced of their own righteousness, regardless of the policy results–but I’d guess that the stimulus pretty much worked as planned: it prevented the bottom from dropping out of the economy.
The question is, what to do now–now that we may be sliding, as the American economy did toward the end of Franklin Roosevelt’s first term, back toward recession or, at best, stagnation? Brooks argues that piling up more debt would have an intense psychological impact on the business community, dampening their optimism and stifling growth. I don’t know about that. My father was a small businessman and he operated this way: when demand increased, he expanded; when demand contracted, he tightened his belt judiciously. He was not affected by, or much interested in, macro economic decisions made by the federal government (although he did cast his first vote for FDR). I’d guess that the business community will respond to demand, even if that demand is the result of government-stimulated jobs.
But Brooks does make an important point toward the end of the column: this is absolutely the moment to make state and local government more efficient. He proposes a program similar to the Education Department’s “Race to the Top,” which rewards–at Education Secretary Arne Duncan’s discretion–those states that come up with the best new innovations. A few weeks ago, I proposed here that if we’re going to spend federal taxpayers’ money to retain teachers who are about to be laid off, those teachers should be retained according to ability, not seniority. Sadly, I haven’t seen many Democrats–slavish in their devotion to the teachers’ unions–take up that call.
The fact is, that the rules governing the hiring and retaining of public employees are vestiges of another era–an era when government had to provide some perks to compete with higher-paying manufacturing jobs. Those perks usually involved job security and generous pension packages. I met a fellow the other day who had just retired from his state’s corrections system at the age of 47, after 20 years of service as a prison guard. He was getting a full pension and working full-time on top of that as a mechanic. I don’t begrudge him his double-income; he played according to the rules and he deserves it. But I do question the rules.
It is time to revise the public pension system. There aren’t so many high-paying manufacturing jobs anymore; the relative security of government work doesn’t need to be augmented by ridiculously obstruse procedures for firing incompetents or by 20-year pension packages. A nice 401k, with healthy matching funds, should be sufficient.
This is a sad choice, but an essential one. We can either continue to fund the pension system and lose essential services; or we can change the pension system and continue the service-levels–the policing, firefighting, emergency response and garbage pickup–that we’ve come to expect. The public seems quite unwilling to continue to pay the higher taxes necessary to sustain both. And given our straitened circumstances, and the need to encourage a new burst of private entrepreneurialism, there is a strong argument that any further government stimulus needs to be accompanied by a rigorous program of governmental reform.