Is government getting bigger? According to the Brookings Institution, a respected nonpartisan research and analysis organization, total government employment has shrunk during and since the Great Recession. From data reported by the U.S. Bureau of Labor Statistics for the period 1980 to 2012, the ratio of total public-sector employment as a percentage of the country’s population decreased to 9 percent, the lowest level for 30 years.
If U.S. public-sector employment had stayed at the same ratio it was in 2007, there would be 1.7 million additional jobs preserved in the economy. Unemployment would be about 7.1 percent, all other factors being equal, instead of the currently stubborn 8.1 percent. Private employment has risen to where it was in January of 2009, just before the massive layoffs that accompanied so many industry contractions, while federal, state and local employment has shrunk by about a half million jobs.
If public-sector employment is a measure of how “big” government is, the last four years of employment trends show government getting smaller while private enterprise employment is getting bigger. This trending doesn’t count the private companies that contract with various governmental entities. However, with a reducing federal financial load from the withdrawal from Iraq and the winding down of frontline operations in Afghanistan, defense spending is down and the administration is suggesting further cuts. In general, services of various government entities is being reduced, and unfortunately much of that is in education.
Certain proposals being bandied about in our nation’s Capitol include allocating funding to the states so that they can keep their teachers and police, the hardest hit areas for public-sector employment, while reducing other government services or activities. But we still need to cut more costs out to balance our budget. The largest components of our federal cost structure are Social Security and Medicare. These programs, along with a few miscellaneous social service activities, make up 62 percent of the current federal expenditures. These mandatory budget line items have cost escalations far surpassing other budget items, largely because the expense rate follows the country’s demographics. The older our general population gets, on average, the higher the outlays necessary for health care and income support. Cutting defense spending only affects 19 percent of the federal budget. If we cut defense fully in half, we’d save less than 10 percent of our nation’s total annual expenses.
Whoever goes to the Oval Office to work next January, they and Congress will be faced with the same challenges. We have to continue to cut government spending, but at a rate that is exceeded by private enterprise growth in employment. Otherwise, we lose the tax revenue on the lost jobs, and we increase social support expenses for things like unemployment insurance and health care programs. We also experience the negative economic impact of lost consumption. Our deficit indeed needs to come down, but not too fast. To do it right, we’ll have to take several years of disciplined fiscal leadership with bipartisan support. I can dream, can’t I?
The other major challenge is how to reduce the rising costs related to Social Security and Medicare. Some president, with some Congress, will have to eventually make the decision to extend eligibility triggers, reduce the rate of financial support or eliminate programs. We simply cannot save enough in other areas to make any meaningful difference. One argument for electing Barack Obama again is that he will not be able to run for a third time. Signing laws that actually make a difference in reducing our deficit and our national debt would not be political suicide, because he wouldn’t be worried about re-election.
I think we are two years into a seven-year recovery period from the Great Recession. It will take that long to digest the write-offs that the world needs to post against its collective balance sheet, and to methodically replace lost government jobs with a greater number in the private sector. Since about 80 percent of all new job growth comes from businesses with fewer than 500 employees, it will be the small-business segment of our economy that continues to pull the United States out of its dive. One would argue the small-business community already has. We have leveled off and could be in a shallow climb.
Whoever gets elected, I hope they recognize that pulling this behemoth of a cargo plane out of the dive it was in was a good thing, even if it used up a ton of financial fuel. Fuel we had to borrow from China, Japan, Saudi Arabia and our own citizens. We have to find updrafts to help us keep climbing, slowly toward a safer altitude. One of those updrafts is to continue to lighten our cargo, shedding government expenses and reducing government employment. Sure, that means communities need to take a bigger part of the responsibility. So what? Cancun rebuilt after Hurricane Katrina in six months, with no assistance from the federal Mexican government. Neighbors helped neighbors.
Government isn’t the solution to the need for personal accountability.
Sewitch is an entrepreneur and business psychologist. He serves as the vice president of global organization development for WD-40 Company. Sewitch can be reached at sewitch1@cox.net.
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