Understanding Leviathan III: California Disease Spreads

"The problem with socialism is that eventually you run out of other people's money.”

--Attributed to Margaret Thatcher (1976)

In America, we don’t use Thatcher’s word, “socialism.” Democrats don’t openly preach socialism. But Democrats are the party of government, believe government knows best, are moving government in a democratic-socialist, Western European direction, and are systematically forcing the higher taxes that will pay for their government Leviathan.

This week, Obama announced the largest federal budget—measured as a share of Gross Domestic Product (GDP)—since Word War II: 25.4%. Even if Obama gets all the tax increases he seeks, the deficit will still represent a staggering 34% of the total $3.8 trillion budget. As the Wall Street Journal editorializes, it seems the Obama “spending boom”

is deliberate. It is an effort to put in place programs and spending commitments that will require vast new tax increases and give the political class a claim on far more private American wealth.

Obama’s new budget, combined with government expenditures at state and local level, means 43% of our GDP will go to government. Such a percentage moves us toward France (61% of GDP in government’s hands), Sweden (58%), Denmark, Belgium, and Norway (56%), the UK (50%), Germany (49%), and Canada (47%). It also moves us away from China (22%), Russia (21%), and India (20%)—all ex-socialist countries, by the way—as well as South Korea (29%), Taiwan (21%), Brazil and Hong Kong (17%), and Singapore (16%).

Which economies grow faster, the ones owned by the government, or the ones in the hands of private entrepreneurs? In 2008, France, Sweden, and Canada GDP grew 0%, Germany and the UK grew 1%, while Denmark shrank 1%. The EU as a whole grew 1%, as did the U.S., fitting right in with the well-cared-for welfare states Democrats admire.

Meanwhile where governments control less wealth--in countries outside the NATO area--the story was different. True, Taiwan grew 0% and Singapore 1% in 2008. South Korea and Hong Kong grew 2%, less than the world average of 3%. But Brazil grew 5%, Russia 6%, India 7%, and China 10%. Growth is a high priority in developing countries, which seem to understand that government Leviathans cut off growth, because they “run out of other people’s money.” Could the evidence be clearer?

Yet America continues following the California path to Big Government. As Steven Greenhut writes, there was a time when government work offered lower salaries than private sector jobs, but more security and better benefits. These days, however, government workers fare better than private-sector workers in almost every area—pay, benefits, time off, and job security. According to data from the U.S. Bureau of Labor Statistics, “the average federal worker made $59,864 in 2005, compared with the average salary of $40,505 in the private sector.” Across comparable jobs, the federal government paid higher salaries than the private sector three times out of four.

And now the Obama administration is on a hiring binge, with executive branch employment slated to grow by 2% in 2010 and with the average federal salary going from $72,800 in 2008 to $75,419 in 2010. Beyond that, public pensions have ballooned during the last decade to where more than 14 million public servants and 6 million retirees are owed $2.37 trillion by more than 2,000 different states, cities and agencies, with state and local pension payouts up 50% in five years.

As the U.S. population rose 9% from 1994 to 2004, state and local government employment grew by 13%, public safety workers by 21%, teachers by 22%, judicial and legal employees increased by 28%. Since 1946, state and local government employment has increased from 3.3 million to 19.8 million—a 492% increase as the country’s population increased by 115%. The United States had 2.3 state and local government employees per 100 citizens in 1946 and has 6.5 state and local government employees per 100 citizens now. In 1947, 78% of the national income went to the private sector, 22% to government. Now it’s 57% to 43%. Trend lines are ominous.

Bigger government means more government employees. Those employees are a permanent lobby for government growth. The nation may have reached critical mass; the number of government employees so high it’s politically impossible to roll back the bureaucracy, rein in the costs, and restore lost freedoms.

People who are supposed to serve the public have become a privileged elite that exploits political power for financial gain and special perks. Because of its political power, this interest group has rigged the game so there are few meaningful checks on its demands. Government employees, even when they are incompetent or abusive, can be fired only for the most grievous offenses after a long process.

It’s a two-tier system in which the rulers are making steady gains at the expense of the ruled. The predictable results: higher taxes, poorer public services, unsustainable levels of debt, and massive roadblocks to reforming even the worst performing agencies and school systems.