Thursday, December 30, 2010

Beating Up on Bureaucrats, US Style

I have to link to this column from Paul Krugman because it's argument is so similar to ones I've made in the past.

Krugman in November 2010, in relation to Obama's announcement of a unilateral freeze on public-sector pay:

The truth is that America’s long-run deficit problem has nothing at all to do with overpaid federal workers. For one thing, those workers aren’t overpaid. Federal salaries are, on average, somewhat less than those of private-sector workers with equivalent qualifications. And, anyway, employee pay is only a small fraction of federal expenses; even cutting the payroll in half would reduce total spending less than 3 percent.

So freezing federal pay is cynical deficit-reduction theater. It’s a (literally) cheap trick that only sounds impressive to people who don’t know anything about budget realities. The actual savings, about $5 billion over two years, are chump change given the scale of the deficit.

Me in January 2008, in response to cheap bureaucrat-bashing in the New Zealand media:

These pundits...give the impression that the salaries of chaps in ties take up a significant chunk of taxpayer dollars. A common anecdote is about the increase in central Wellington office rents over the last couple of years, due to demand from the various ministries. Some even go so far as to blame the country's macroeconomic ills on the hordes of 'pdf pushers' spilling out of offices along Molesworth St and The Terrace, claiming that their high wages are creating inflation and pushing up interest rates.

It may therefore come as a surprise that, as a burden on the country's economy and taxpayers, the cost of the public service almost fails to register...Let's say we entirely eliminate every bureaucrat, every government job, every department, ministry, commission and quango. This would free up the same amount of money as if New Zealand's GDP grew by 3 percent, rather than 2 percent, for just one year.

There are differences between the two countries but also similarities. Krugman points out that a supposed "surge in government employment" under Obama was nothing more than temporary blip in hiring for the Census. In New Zealand, increases in core public sector employment up to 2008 (still tiny as a proportion of the total workforce) were largely driven by those well-known dens of policy wonks, the Inland Revenue and prisons.

But while quibbling on the details is necessary, the main point is that the focus on public servants is ideological and not at all about economics.

More in another post if I have time. In the meantime, other links to digest: Krugman describes the "systematic, even industrial" production of "humbug" by conservative think tanks, while Matthew Yglesias points out the basic perversity in demanding a unilateral decline in public sector employment.


Susan said...

Hear, hear. So "they" really think that "frontline" doctors and nurses for example should do all the paperwork, make all the appointments, write all the reports, create all the "quality controls" that the general public demand etc etc etc or what? And that's just an example from the health system.

terence said...

Hear, hear from me too. Great post. Agree entirely.