Early Evidence Public Austerity Killing Private Sector Jobs

Posted by Michael A. Kamperman on November 11, 2010

Well, it’s looking like 60% of the American population is wrong.  Those that believe cuts in government spending will lead to more private sector jobs have to take a good look at Cisco.  The giant networking company warned that sales will miss forecasts because of a dramtic drop in orders from austerity crazed European governments and U.S. states forced to balance revenue starved budgets.  Simply put, when governments order technology products they are creating private sector jobs.  When governments build roads, bridges, and buildings they are creating private sector jobs.  When they increase healthcare spending they are creating private sector jobs.  We have yet to see the real impact of the cuts in private sector jobs in the U.S. because we still have enhanced federal spending from the stimulus bill.  The rubber will meet the road when that stops in 2011.  In my own state of Texas the two year budget looks to be $25 billion short of revenue.  Since Governor Perry dreams of a Presidential run tax increases are off the table.  Yesterday, local school districts were told to brace for multi-million dollar cuts per district in state spending for K-12 education starting with the 2011-2012 school year.  There are over 1,100 school districts in Texas.  Everything is going to get cut.   These cuts will fall hardest on capital expenditures like technology and construction projects.

Thankfully the Federal Reserve has the foresight to realize we are up the creek without a fiscal paddle and they plan to print money to help shore-up the gap.  They need to print 10 times more than the $600 billion they started with.  My thinking is this is just the ante and the Fed will push all in before this is over.  The unknown question is will liquidity trump falling demand in regards to asset prices.  While the initial reaction was to bump assets prices up, the Cisco news clearly thumped it back.

Meanwhile, the inept Obama economic team continues to push mumbo jumbo proposals to restore the economy.  The President’s new head of the Council of Economic Advisors Dr. Goolsbee believes the U.S. can grow exports from $1.5 billion to $3 billion by 2014.  By 2014, is he out of his mind!  Does he not see European austerity mania and Asian protectionism as insurmountable obstacles?  Did he not see the Dream Liner fire from the Whitehouse cocoon plaguing our largest exporter Boeing?  The President is in Asia telling everyone they cannot count on U.S. consumers borrowing money to spend.  This means he believes in the same liquidationsist Austerian School of economics practiced by Herbert Hoover and others that led to abject failure in the past.  Those that fail to learn from history are doomed to repeat the same mistakes.  Sadly, a confused American populace believes the same thing because the case for Keynsean spending is being defended by an inept Whitehouse that doesn’t even believe it themselves.  Somewhere in America a champion needs to rise up and preach a different economic gospel than the one the Whitehouse is force-feeding us.