Mike PattonMike Patton Contributor I provide analysis on the economy, investing and financial planning. Opinions expressed by Forbes Contributors are their own. Follow Mike Patton Mike Patton Advisor Network 1/24/2013 @ 2:05PM 62,359 views The Growth Of Government: 1980 To 2012 Comment Now Follow Comments In my previous article, we discussed one cause for the demise of the middle class which is higher taxes. In general, higher taxes have a depressing effect on a population and its economy. Higher taxes are sometimes a result of government expansion, which poses an headwind for the private sector and impedes its growth. In this article, we’ll examine the total number of government employees (GE) as a percentage of the population (P). We’ll call this the GE/P Ratio. A higher ratio indicates a higher percentage of government employees relative to the total population. We’ll examine this ratio at the end of the last five presidential terms, including Obama’s first. I should note that the numbers are in millions and the number of government employees includes federal, state, local, etc. Although I am using the end of presidential terms as the periods measured, this is not meant to imply that any president is solely responsible for this growth. Introducing the GE/P Ratio The following table shows the number of government employees, total population and the GE/P Ratio. It essentially takes a snapshot at the end of each presidents term and compares it to the point when they took office. End of Term Date # Government Employees (GE) Population (P) GE/P Ratio Obama Dec. 2012 21,925 315,255 6.9% GW Bush Dec. 2008 22,555 306,004 7.4% Clinton Dec. 2000 20,804 283,696 7.3% GHW Bush Dec. 1992 18,878 258,413 7.3% Reagan Dec. 1988 17,736 246,056 7.2% Notice how the GE/P Ratio held steady for Obama’s predecessors, hovering around 7.3%. However, by the end of Obama’s first term, the ratio fell to 6.9%, a decrease of 7% from the end of the Bush era. To glean the full picture, we’ll need to look at the percentage increase for the population and for the number of government employees. If the population increases by a rate similar to the increase in government employment, that would be expected. From 1980 to 2008, the percentage increase in total government employees at the end of each of their terms (compared to when they took office), was between 6.4% and 10.2%. This is relatively close to the percentage increase in the population over the same period (5.0% to 9.8%). However, during Obama’s first term, the population increased by 3.0% while the number of government employees fell by 7%. This is the reason for the decline in the GE/P Ratio shown above. End of Term Date % Increase in GE % Increase in P GE/P Ratio Obama Dec. 2012 -2.8% 3.0% 6.9% GW Bush Dec. 2008 8.4% 7.9% 7.4% Clinton Dec. 2000 10.2% 9.8% 7.3% GHW Bush Dec. 1992 6.4% 5.0% 7.3% Reagan Dec. 1988 8.3% 7.6% 7.2% This decline is largely a result of the financial crisis. With revenue in shorter supply, state governments which have a mandate to balance their budgets, cut staff. Conclusion Although we may have a temporary reprieve from overall government growth, on the road to a larger government lies many perils. Although the size of government has declined slightly in the past four years, the debt has exploded and higher taxes are likely on the horizon. It is during periods of government expansion that freedoms are commonly surrendered. When Paul Revere took his midnight ride shouting, “The British are coming,” the colonists were facing a mortal threat from an army intent on taking their land and freedom. Today, the threat is no less real, but is not of the type which threatens our life, just our liberty and the pursuit of happiness. Think about it.
Posted on: Thu, 14 Aug 2014 01:18:07 +0000
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