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business newsWhy Government Spending, Public Sector Jobs Are Burden to Society
Society derives certain benefits from these expenditures but beyond a certain point, government spending, public sector employees have negative effects.
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Sometime the most simple ideas spawn the most revolutionary changes. It happened with The Laffer Curve during the ‘80s. Dr. Laffer knew that there was a direct link between effective tax rates and tax revenues. His idea was presented in such a clear and compelling manner that it's a cornerstone for those who favor limited taxes and limited government.
With the Laffer Curve in mind, may I present The Cofall Curve:
The premise is equally simple and compelling. This is also timely as we feverishly debate the exponentially increasing costs of government, national debt, and deficits.
Simply, there are certain essential costs a society must bear; these costs are represented on the X-axis and are percentages of our GDP. Currently, our total federal government spending is approximately one-third of our GDP. This number exceeds 50% when you consider state, regional, and local government spending.
Certain benefits to our society are derived from these expenditures and these are represented on the Y-axis. Essential services yield benefits. Yet, at some point, expenditures become burdens. Beyond this point, each dollar of government spending has a greater than one dollar of negative effect on society. The negative effects include allocating capital to the administrative public sector and removing the capital from the productive private sector.
For example, private-sector jobs and public-sector jobs aren't the same. There are essential government jobs without which our economy and our quality of life would suffer: soldiers, food inspectors, intelligence gatherers, law enforcement, fire and rescue, some legislators, and other value-added public-sector employees.
However, past a certain point, the benefit of these employees is overshadowed by the cost to and burden on a society. Bureaucrats, paper pushers, administrators, regulators, layers of middle management, employees doing the jobs that the private sector can do more efficiently, some legislators... these are all examples of costs, not benefits, to society.
Take, for a moment, the very simple fact that it takes the taxes paid by three to seven private-sector jobs to pay the cost of just one public-sector employee. Let’s say the average private-sector employee cost is $50K, including taxes and benefits. That employee pays about $10K in federal income tax. The average public sector employee cost is $70K, including benefits. This means that it takes seven private-sector jobs to pay for the cost of just one government employee. For the moment, we'll ignore excess state and local taxation and employment, though this curve works at all levels.
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