To flesh out what I was talking about yesterday a bit and to make clearer what it is that I’d actually like to see happen let’s take a quick look at the general contours of the economy as presented in the Economic Census for 2007 from the Census Department (the 2012 Economic Census isn’t available yet):
You can click on the image for a larger version. The first thing that you might notice is that the total down at the bottom of the second column doesn’t equal the GDP figure that’s usually quoted. That’s because of the way GDP is calculated: imports are subtracted. In preparing this table I haven’t attempted to break out the production less imports by sector. That’s beyond the scope of a blog post and, besides, it’s what God created economists for.
The personal consumption expenditures (PCE) that you’ve probably seen cited as being about 70% of the economy are comprised of retail sales and the last six items in the table, e.g. education, healthcare, etc.
The short version of what has changed since 2007 is that construction is down, retail is down, and healthcare and education are up.
Let’s go back to what I think should happen. I think that finance should contract, healthcare and education should become more productive (i.e. produce the same or greater services at lower cost), retail sales should stay the same or contract. Agriculture, manufacturing, mining and extraction, and energy production need to expand.
How do we accomplish those things? The structures of healthcare and education need to change. We can’t get to where we need to go with the current structures in place. We should stop subsidizing finance and retail and penalizing agriculture, manufacturing, etc. The emphasis in foreign policy should be in persuading large exporting countries to abandon their import subsidies, quotas, and so on. That would be a start.
I think that there’s plenty of potential for future job growth but not as long as continue propping up sectors where there’s really no room for expansion or expansion comes at the cost of more jobs from other sectors.