Uncle Sam, You Got Some ‘Splaining To Do (Lucy-nomics)
I recently noticed a post[i] that called out the fact that job growth in the federal government was outpacing[ii] that of the private sector. This is not particularly newsworthy, but does deserve some critical consideration, especially since some analysts have been touting this as positive, and using such shell games to inflate[iii] important economic indicators. Before anyone becomes too optimistic about job growth at present, we should take note that with an average federal salary[iv] of $67,691, an average private sector salary of $60,046 and an average federal income tax rate[v], [vi] of 12.7%, each new federal job requires approximately 9 jobs on average simply to bear the salary burden, let alone the fringe costs of the position or other expenses pertaining to government operations.
My wife astutely pointed out that this contrived shuffle of jobs and funds evokes an episode of I Love Lucy in which Ricky had decreased Lucy’s weekly allowance because of her habitual over-spending. Lucy in turn began to take grocery orders from her neighbors, obtained the goods under Ricky’s line of credit at the market, and collected cash payments from the neighbors to increase her available funds. We all know the outcome. The scheme collapsed and Ricky was left with a very large grocery bill.
A rudimentary look at tax and salary statistics shows that roughly 13% of jobs in the U.S. are in the government sector, including federal, state and local[vii]. On a like-for-like basis in which income tax is weighed against government salary burden, government payrolls already consume more than half of that available funding stream. To identify the specific tipping point would require a much deeper analysis, but a current federal budget deficit and a total federal debt approaching 12% and 53% of Gross Domestic Product[viii], respectively, are good tell-tales. To accelerate the consuming side of the payroll equation, both in jobs growth and pay rate (in the case of federal jobs) is to court inevitable collapse.
The Lucy episode was funny. This is serious. Spending is in vain without productivity. Even the Keynesian faith depends on short-term spending to ultimately provoke long-term productivity increases.
In the sitcom world, Lucy had separated her own interests from those of her husband, even though they were members of the same household. Similarly, our leaders at a national level have drawn an artificial line between the private and public sectors even though our society and economy are only effective and sustainable as one people: “We the People.”
[i] http://drudge.tw/92DXss
[ii] http://www.gallup.com/poll/127628/Federal-Government-Outpaces-Private-Sector-Job-Creation.aspx
[iii] http://www.businessinsider.com/trimtabs-ceo-explains-how-employment-numbers-get-inflated-video-2009-10
[iv] http://www.usatoday.com/news/nation/2010-03-04-federal-pay_N.htm
[v] http://www.taxfoundation.org/news/show/250.html
[vi] http://www.irs.gov/taxstats/indtaxstats/article/0,,id=133521,00.html
[vii] http://www.taxadmin.org/fta/rate/ind_inc.pdf
[viii] https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
