PAUL: The thing I don’t understand is that your arguing that the government sector is struggling. Are you arguing that there are fewer government employees under Obama than there were under Bush?
KRUGMAN: Of course. That’s a fact. That’s a tremendous fact.
PAUL: No, the size of growth of government is enormous under president Obama.
KRUGMAN: If government employment had grown as fast under Obama as it did under Bush, we’d have a million and a half more people employed right now — directly.
PAUL: Are there less people employed or more people employed now by government?
As Krugman quickly pointed out on his blog, the answer is “less.” Now, perhaps Sen. Paul was thinking of employment by the federal government alone, which did tick up just slightly: 2.77 million at the end 2008 versus 2.8 million currently. But add in state and local government jobs, and the hard number for government employment dropped by around 600,000 after Bush left office.
As a matter of fact, the share of jobs in the economy provided by the public sector went up following the 2001 recession under George W. Bush, the 1990 recession under George H.W. Bush, and the 1981 recession under Ronald Reagan. Only after the latest recession, which hit just before Obama took office, did the share of public jobs drop.
In no small part this is due to another point Krugman made — that the stimulus, while large, was inadequate to the country’s needs. This has been particularly true in the area of state aid. Spending cuts at the state level overtook additional spending at the federal level in late 2009 and have been driving a contraction in the public sector ever since.
Rep. Paul capped off his anti-Keynesian argument with the strangely Zen-like assertion that “Roads don’t create business success. It’s the other way around. Business success allows us to build roads.” It’s unclear what this could mean. While tax revenue is dependent on economic growth, the very nature of a depression is a self-reinforcing negative spiral in the private market. Business success is sluggish, meaning employment and income is sluggish, meaning consumers are held back from buying enough goods and services, so business success remains sluggish. The whole point of Keynesian stimulus — of which government employment is one form — is to move money into the hands of consumers by the alternative route of the government and thus reverse the process.