By Al Norman
These two guys walk into a restaurant and order a sirloin steak — well done. One of the men is a social worker at the local welfare office, and the other is the branch manager of an area bank. Both guys leave a $20 bill under their plate.
While clearing the table, the waitress sees the two $20 bills, and detects no difference between the bills — even though one customer worked for the government, and the other works in the private sector.
In point of fact, the $20 bills are identical. The waitress holds them both up to the light to see if they have authentic watermarks — but both bills are the real thing.
Despite this simple transaction, there are many people, including some economists, who say that the man who got his $20 bill from the government is somehow of less value than the man who works in the private sector. Many members of Congress also believe that “the government does not create jobs.” The only job-creators you hear them talk about are the private entrepreneurs. Anyone employed in the public sector is a drag on the economy and the taxpayer. Yet back at the restaurant, the waitress cannot tell the difference between the customers. Her restaurant took in $40. The public dollar and the private dollar spending created the same impact on the economy.
On March 1, when the automatic sequester cuts of $85 billion in federal spending began, it was obvious to some that reduced government spending would have the same impact on the economy as reduced private spending. The Congressional Budget Office predicted that the sequester cuts ($42 billion of which will happen in this federal fiscal year which ends Sept. 30) would result in the loss of about half a percentage point of Gross Domestic Product for this year. Even worse, the sequester will mean a loss of 750,000 jobs. Using my restaurant analogy, those 750,000 workers won’t be buying lunch at the restaurant. And that’s a real loss to that business. Eighty-Five billion dollars a year is only about a half of 1 percent of the U.S. economy. But the point is: Government itself can be an engine for growth, and slowing down government spending slows down the recovery.
In addition, the sequester as passed will mean 712,882 less meals on wheels for Massachusetts seniors, 171,492 less meals at congregate meal sites, 117,662 fewer rides, 2,783 less hours of legal aid, 20,183 fewer information counseling sessions and 2,067,576 lost gallons of home heating oil assistance.
Our public spending is a great stimulus to the economy, and slashing payrolls or cancelling government contracts all hurt the economy. It is a myth that only private sector spending matters, and that government spending is bad for the economy.
The next time someone starts ranting to you about how government spending is bad for the economy, open up your wallet and pull out two $1 bills. Ask your friend to identify which bill is the public dollar?
Al Norman is the executive director of Mass Home Care. He can be reached at 413-72-6289, or at email@example.com.