In the end, it will be the private sector, not the public sector, that quells all this anxiety and creates the opportunities so many desire. A huge segment of our population however, finds itself outside the private sphere. Those who depend on transfer payments through tax policy, those who work for the various state, local, and federal governments, farmers, trial lawyers, social workers, teachers, and yes, journalists are people for whom PROSPERITY from private sector GDP growth is SOMETHING WHICH HAPPENS TO EVERYBODY ELSE.
They live in neighborhoods where they have to watch helplessly as their less risk-averse neighbors, be they realtors, retailers, construction workers or salespeople, benefit in their view DISPROPORTIONATELY from increased economic activity. For those in government-dependent jobs, and there are more of them than we might think, the "rising tide" does not raise all boats at all, just the ones which happen to BE IN THE WATER. This is why news of economic growth is greeted not with an indifferent sigh, but with the scowl of envy, and many times the call for the government to do something about the "growing gap" between those within and without the private sector.
We should not therefore be surprised or mystified when positive economic news is presented as bad news. For so many, it is.
A huge segment of our population however, finds itself outside the private sphere. Those who depend on transfer payments through tax policy, those who work for the various state, local, and federal governments, farmers, trial lawyers, social workers, teachers, and yes, journalists are people for whom PROSPERITY from private sector GDP growth is SOMETHING WHICH HAPPENS TO EVERYBODY ELSE.
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FEDERAL GOVERNMENT SPENDING - Full Report
(updated May 2005)
by Michael Hodges
- a chapter of the Grandfather Economic Reports |
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FEDERAL SPENDING GROWTH IN PERSPECTIVE
 Today's economy is Eight (8) TIMES more federal government-spending-dependent, compared to prior generations.
The left chart shows total federal spending ($2.3 trillion) as a share of the total economy (measured by national income) - growing from 3% of the economic pie prior to the New Deal (1929), to 26% of today's economy. As stated before: had we reduced total government by an amount equivalent to the actual defense spending ratio reductions following World War II, today's federal spending ratio would have been about where it was just prior to WW II (13%) - - instead of the 26% ratio in the chart. We chose, instead, to eat up all defense reductions PLUS much more via massive social spending - - much of same financed by debt. Rather than return those savings to the private sector, where they could be properly and efficiently invested for the future of all generations, all was consumed (plus added debt) - - forever lost to future generations. Who was it that said we are a nation of small government with a predominant free-private sector? Well, we used to be - - but, no longer. Does this impact the future economics and freedom of our younger generation. You bet. |
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Summarizing: the federal share of the economic pie increased nearly 1,000%.  To help place this in an even bigger picture, the left-hand chart demonstrates how combined federal AND state & local government spending has consumed more and more of the total economic pie over time.
The total economic pie is broken down into 3 sectors: the Private Sector (blue), the Federal Government Sector (red), and State & Local Government Sector (yellow). WHAT HAPPENS TO THE BLUE SLICE OF THE PIE BELOW - did it get bigger or smaller, from left to right? In the first chart the federal portion was 3% of the economy, 13% in the 2nd chart and 26% in the 3rd chart. This means: over this period of time, 22% of the economy was transferred to the federal government sector from the private sector - - because government spending increased eight times faster than growth of the entire economy. |
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