Sunday, August 14, 2011

The "smaller government" argument deconstructed

One of the most popular catch-phrases in politics these days is "smaller government". People from every party acknowledge the expensive and often useless bloat in the American government. The fix appears to be simple, reduce the size of government which will in turn reduce spending and, as many predict, lead to a stronger economy.

However, like in the case of most political catch-phrases, looking at the details behind the simple idea exposes the difficulty of implementing this apparently simple plan.

"Government" is people, folks like you and me, sitting at desks, at their computers, doing basic office work. Reducing the size of government inevitably means closing departments and agencies and turning their employees into more unemployed workers. 

According to the July employment report from the Department of Labor, "The number of unemployed persons (13.9 million) and the unemployment rate (9.1 percent) changed little in July. Since April, the unemployment rate has shown little definitive movement. The labor force, at 153.2 million, was little changed in July. Job gains occurred in health care, retail trade, manufacturing, and mining. [B]Government employment continued to trend down[/B]." (emphasis added)

We already have at least 13.9 million people without a job, and government employment is already slowing. Admittedly many of those government job reductions are taking place at the local and state level. "Government employment continued to trend down over the month (-37,000). Employment in state government decreased by 23,000, almost entirely due to a partial shutdown of the Minnesota state government. Employment in local government continued to wane over the month."

Evidently the "job creators", those who have benefited most from tax exemptions and bail-outs, are failing to fulfill their roles as providers of increased employment. New industries are not being established, new opportunities are not being provided for the unemployed. What we have seen is an increase in profits to shareholders, money which could theoretically benefit the economy if it was spent on commodities produced in the U.S. or paid to employees. Looking at our economic state it appears neither of these are occurring. Instead big oil subsidies (amounting to about $4.4 billion), for example, produced first-quarter profits totaling more than $35 billion on the back of sky-high crude prices. How and where is this money finding its way back into the economy?

So it seems the country wants to eliminate jobs and at the same time not require those who have benefited most from low taxation and subsidies to create new jobs or industries. This lack of accountability coupled with a lack of foresight bodes ill for the future of our country. I have yet to hear any politician present a plan that acknowledges the fact that decreasing the size of government will result in higher unemployment and provide a means to deal with that.
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