Economic snapshot | Budget Taxes and Public Investment

Private sources of spending cannot sustain job growth

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By Josh Bivens

A growing chorus of policy makers maintains that the U.S. economy needs no more help from the public sector in creating jobs. Some have even argued that the remaining public spending authorized by the American Recovery and Reinvestment Act (ARRA) should be cancelled. That would be a recipe for prolonging the deep jobs crisis that is sure to persist for years to come.  The recession that began in 2008 saw the longest consecutive stretch of negative quarterly growth rates (four) since such data began being kept in 1947. The figure shows that without the public spending made under the Recovery Act last year and the Economic Stimulus Act of 2008, the U.S economy would have actually seen six straight quarters of contraction followed by another quarter of zero growth.

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The figure shows the actual quarterly growth rates over this period as well as the growth rates that would have prevailed absent the economic recovery packages passed in 2008 and 2009. It demonstrates that private sector sources of spending have not produced positive growth in gross domestic product on their own since 2007. Given this, it would be a reckless gamble to turn off public sector spending, which is the only reliable source of spending and jobs creation that we currently have.