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Texas Jobless Rate Ticks Up; Are Government Spending Cuts to Blame?



September 19, 2011

AUSTIN, Texas - Texas lost 1300 jobs overall in August. Some 8100 new private-sector jobs could not make up for the loss of 9400 government jobs, and the unemployment rate ticked up to 8.5 percent. The pattern is predictable, according to economists who don't believe the government should emphasize spending cuts during tough times.

Job losses are inevitable when the federal government downsizes, according to economist and University of Texas government professor James Galbraith. He says that, if current austerity arguments win out, the ripple effects will be felt across the state.

"As the federal government cuts back, the economy will slow, people will lose their jobs, both civil servants - school teachers and so forth at the state level - and people in the private sector whose livelihoods depend, in part, upon the spending by public servants."

A total of $24 billion in federal stimulus funds helped ease unemployment in Texas over the last two years. A quarter of that money was used to help balance the state budget. As those funds dried up, lawmakers resorted to cutting programs, along with thousands of state government positions.

Local governments wind up bearing much of the brunt of spending cuts, and they try to save money primarily on public education, according to chief economist Chad Stone of the Center on Budget and Policy Priorities in Washington, who disagrees with those in Congress who say cutting the deficit now would spark job growth.

"The argument for immediate sharp cuts in government spending as a means to boost the economy doesn't really square. It translates into less demand in the economy, less spending and fewer jobs."

The president of the Economic Policy Institute in the national capital, Larry Mishel, says that with profits nearly one-third higher than they were before the recession, the private sector has plenty of cash on hand to start hiring again. He says the problem is that companies don't want to invest unless they're confident there will be enough consumers able to spend.

"Consumers are not going to be fueling a lot of consumption growth because they are beleaguered by heavy debt, and the loss of wealth from the financial crisis, and high unemployment. And that's why the government has to step in."

Nationally, 17,000 jobs were created last month by private businesses, but those gains were offset by 17,000 public-employee layoffs. Twenty-six states saw their overall unemployment rates go up in August, 12 states saw declines, while 12 states remained steady.

Peter Malof, Public News Service - TX
 

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