President Obama recently proposed $50 billion in spending on infrastructure projects. The purported goals of the initiative are to improve America’s bridges and roads and create thousands of new jobs for Americans at the same time. Sound great, right? Unfortunately, when evaluating proposals that claim to “create jobs,” it’s important to realize that not all jobs are created equal. In particular, public sector jobs, which have to be supported with tax dollars, can often be counterproductive in terms of expanding the economy.
When government hires a worker, it has to come up with the money to pay that worker. That means that the government either has to raise taxes or borrow money—in either case, it's taking money out of the private sector and putting it in the government’s control. Some government jobs are necessary to provide the infrastructure and security we need so that the private sector can survive and expand. For example, if we had no military and had to worry about being invaded by a hostile enemy, that would be detrimental for the economy. Few would want to invest their money in creating companies or in developing property if there was a real threat that our government would be overthrown. Similarly, the private sector needs a functioning court system so that parties entering into a legal contract can be confident that the terms will be honored or the offending party will face punishment.
Government jobs like these clearly add to the public good and enable the private sector to function. They are necessary and would pass any cost-benefit analysis. Yet too many government jobs don't pass this test and aren't facilitating the functioning of the private sector. In fact, too often these public employees are actively impeding the private sector by issuing rules and regulations that make it more difficult for the market to function. As of November 2008, the Department of Agriculture boasted 82,000 employees. The Department of Energy, 50,000. The Department of Housing and Urban Development, 9,000. And the Environmental Protection Agency, 18,000. Most Americans instinctively know that many, if not most, of these jobs aren't adding to the public good. They are a burden on the private sector.
And, research shows they are often a considerable burden.