Friday, March 13, 2009

why bigger government fails

I want to start this post by saying I am making an economic argument and not a moral one. Whether people who work for the government in some capacity are good people, do good or important work is not the point of this exercise. I am simply looking at the economics and cost.

How many people are paying for how many people? I find it an interesting question and it was not easy to find some of the numbers I found and I had to guess at others because I simply could not find them. So there are approximations made where I could not find the data, but I think we can all agree that this is in the ballpark.

Let's start with who is getting paid by the governments of our country (all levels). This includes the military, fire, police, public teachers, etc. etc. but NOT Postal Workers(we can argue about whether Postal Workers are a drain on the economy later).

19.7 Million people are employed directly by the governments of our nation. I could not find a useful study of the number of people indirectly employed by a government (for instance a company that makes fire trucks or fighter jets). Since the federal government spends 25%-ish percent of GDP I am going to assume that there are at least 20 people in private employment for every 100 government workers who draw their entire salary from taxpayers. That gets us a total 23.64 Million people getting a paycheck from the taxpayers of America.

Next we have to look at people who are drawing a check from the government but it isn't a paycheck. Social Security is paying 2.6 Million retirees and disabled Americans not to work. There are an additional 12.5 Million people getting an unemployment check but only 2.9 Million who are long term unemployed so some of those unemployed will be a net payer of taxes for the year so I'll use the number 6 Million (rather arbitrarily, another chunk of data I could find).

Another piece of data I could not find was the number of people receiving a government pension. For the sake of argument I am going to assume that for every 4 people working in government directly there is 1 getting a pension. That is another roughly 5 million people. I did find the statistic that 3 of every 4 government retirees is eligible for Social Security so the overlap means that we add only another 1.25M government payees to our total.

So far the taxpayer is supporting 23.64M workers, 2.6M social security recipients, 6M unemployment checks, and 1.25M other retirees for a total of 33.49M payees.

Now for the other side of the equation. I am going to count married filing joint taxpayers as 1.5 taxpayers on the assumption that some are 2 income and some are 1 income. That may be somewhat low but probably not by much for actual taxpayers as opposed to tax filers.

There were 135M filings, 21.5% of which were joint and 32% of them did not pay any federal income tax. Of the non-payers 29.8% were joint returns. That leaves us with 91.8M paying filings, of which 16.1M are joint filers, so I will add another 8M to payees for a total of 99.8M payees of federal income tax.

Of the non payers (43.4M) I am going to assume that half of them actually get money back, so that is another 21.7 million people who are a net income tax loss for a new total of 55.19M payees of government.

Now, we have to do one more thing to get the picture clear. Some of those 99.8M people paying federal income taxes are actually government workers of some type (fire fighters pay taxes as does the guy who makes the trucks). They cannot, however, from an economic perspective, be considered payers into the system as they receive more money from the government, however well deserved, then they pay into it. If we assume (another data point I simply could not find) that government employees and civilian employees are non-payers at the same rate (32%) we have to take away 68% of the 23.64M government workers as tax payers for a net loss of 16M.

So what we have is 39.19M people who pay federal income taxes supporting payments (some very small) to 55.19M people. Horrified yet?

To be fair, since we are not counting Social Security taxes in our "net payee" equation I will remove as payees the people receiving Social Security payments (2.6M) and give you that number also. There are approximately 39 Million people who are a net tax plus to the government and 52M people (23M of which are full time paychecks) who are a next tax cost.

If you just consider the full time pay checks we have 39M people paying 23M people.

And the dems want to grow the number of people working for the government?

If you are not scared yet, you aren't very bright.

This is NOT sustainable. The only reason it has been sustainable up to now is that there were many social security tax payers to relatively fewer recipients and the federal government has been spending the surplus like it was income tax receipts. As the baby boomers start retiring at a more and more rapid rate the scale is going to tip.

It simply won't matter who is in Congress or the White House if we don't do 2 things.
1. Shrink the size of government (and I don't mean slow the growth, I mean SHRINK)
2. Grow the economy like mad.


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