The “Quasi-Public”

Please take a look at this post from Mike Mandel on job growth over the last decade:

I divide the economy into two parts. On the one side are the combined public and quasi-public sectors, and on the other side is the rest of the economy. Public, of course, refers to government employees. ‘Quasi-public’, a term I just invented, includes the nominal private-sector education, healthcare, and social assistance industries. I call them ’quasi-public’ because these industries depend very heavily on government funding. For example, social assistance includes ‘child and youth services’ and ‘services for the elderly and disabled’, which are often provided under government contract.

As should surprise no one public and quasi-public employment has grown enormously over the past decade while fully private employment has dwindled. The attendant graph highlights my concerns.

The key problem here is that public and quasi-public jobs are funded by the fully private sector and by borrowing. The quasi-public sector is largely financed through payroll taxes. As fully private sector employment contracts less money will be available to fund the quasi-public sector and, in the absence of the will to change the formula by which these expenses are funded and a lack of will to reducing their funding, the only alternative is more borrowing.

2 comments… add one
  • Drew Link

    Well, as I’ve posted ad nauseum here and OTB for 2-3 years now, this is the rotation into a) public from private sector composition of the economy and b) “social spending” from defense spending as a fraction of government spending.

    Now, as Alex Knapp has told us recently, the size of government doesn’t matter, so I guess all is well. (snicker) I beg to differ.

    Two golden geese have already been partially – and soon fully – bled dry: 1) defense spending as a pct of GDP is lower than ever. Yes, it can be cut further, but its a diminishing nest egg (and social spending is coming like a freight train), and 2) the tax burden on the wealthier – and dare I say therefore more productive – sector has been growing to the point of being tapped, and certainly is less by a country mile of what required increases are for servicing expenditures.

    The poor and lower middle class became tapped – or at least politically seduced – awhile ago. So we turned to borrowing………..That goose has terminal cancer.

    Now what?

  • john personna Link

    “defense spending as a pct of GDP is lower than ever”

    I don’t believe so. The graph I see shows it below average (where the average includes WWII) but still higher than pre-9/11, of course:

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