GOP argues spending cuts help private sector

Pay raises take a cut

Jeremy Hobson: In just a couple of hours we'll get the monthly jobs report from the Labor Department, which tells us how many jobs the U.S. economy created last month. And what the new unemployment rate is.

It's expected to show government job losses as the public sector cuts spending. And that's a story we'll likely see in the months to come, since big government spending cuts are expected to be part of any deal to raise the federal debt ceiling.

So what about the argument that government spending cuts help the private sector? Here's our Washington Bureau Chief John Dimsdale.


John Dimsdale: Conservative economists say government deficits are killing new jobs. How? Antony Davies at Duquesne University says entrepreneurs are afraid to invest in new products and services because they fear taxes will go up.

Antony Davies: You anticipate that quite possibly five, 10 years down the road, the government is going to turn, point to you and say, 'Ah, you're a rich person, we're going to tax you more to satisfy our deficit needs.' Then you're going to think twice about starting this new business.

But other economists say it's not the fear of taxes that's keeping employers' wallets closed.

Robert Shapiro: People aren't investing because demand is slow.

Sonecon economist Robert Shapiro says in today's sluggish economy, government spending creates jobs. Professor Davies doesn't buy it.

Davies: That song is missing its second verse.

When the bill comes due for deficit spending, he says, the economy -- and jobs -- will suffer even more.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.

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