About one of every 5 people in the UK work directly for the government. If you consider pensioners, people working for private firms which only do business with the government, and only consider people who are actually working, the number is much higher – perhaps as high as one in three.
I don’t know what the numbers are in the USA, but I doubt that we are far behind. And, how much of our economy is based on paper shuffling? (see my previous post here) It seems to me that we need to have an economy based on production of products in order to support ourselves.
I try to look at it from a point of view of my own businesses. I hire someone to mow the lawn. I can’t sell the lawn, and I don’t get any monetary benefit from having the lawn mowed, so the money is gone, not invested. And the kid who mows the lawn is going to use the money to watch a movie, or buy a pizza, most likely. That won’t get invested, either.
So to pay for this (and the other myriad of “services” that do not generate wealth), I have to do something to add value. I need to take things that are worth one amount, and do something with them to make them worth more to others. In this process I will have to hire people whose time I will pay for, which goes into the finished product, to increase the value. Ultimately when I sell the product, I will make some money, and I will invest a portion of that back into making better products, and spend the rest on mowing the lawn and things like that. So the economy goes…
What happens when my job is to work for the government, enforcing some regulation, or tapping someone’s phone, or drafting legislation, or otherwise spending time in support of the machine which produces nothing? When the numbers are smaller, probably nothing too much happens that is bad. When it is a third of the workforce, it is really bad; the government must raise taxes and borrow more money to pay for things since it doesn’t produce anything.
The more this happens, the more it stifles small business. Big businesses like Google pay very little in tax, and no matter what the government does, they will never pay tax. They will find some other venue in which to do business, and avoid taxation. It is the smart business thing to do. The more small business is impaired, the lower the tax take will be, and the higher the tax rates, and the more borrowing. It is a death spiral, created by overgrown government and excessive taxation.
I don’t know the answer, except that somehow the size of government (and its power) must be severely and strictly limited.