Public sector overgrown!
Major challenge facing US and UK
Via Fabius Maximus
This graph showing the growth in government employees in the USA just about sums up the size of the vast challenge facing the UK and the US in terms of “rolling back the frontiers of the State”.
Some things in economics are really quite simple and very clear, you need in your country a large and healthy private sector, not only does it produce goods and services that we we wish to buy or use, it also produces profits. From those profits the government collects taxes, and from those taxes the government pays for everything in the public sector, welfare benefits, schools, hospitals, defence, town halls and councils, roads and transport, and the growing army of people employed to administer it’s schemes.
Put simply, without a private sector providing taxes, there would be no public sector.
Who knows if there is a graph available which shows the same comparison for the UK?
When we libertarian Conservatives call for smaller government, this is the major theme in which we are interested. The private sector produces the wealth and produces the tax revenues, the public sector consumes and eats away those revenues – get it!
Now that we are in a deep recession the private sector is going to contract even more, thus less tax for the government to spend (I’m sure Gordon Brown and Barack Obama understand this part), trouble is, unless the Labour government does it’s bit and reduces it’s spending and the size of the public sector, there won’t be enough cash to meet the bills (I’m not sure that Gordon Brown understands this part). A normal family in this situation would do what it can to reduce it’s spending, do a few “guvvy jobs” to get some extra cash in, take on extra part time work if the can, all to balance the books and feed the kids. I’m pretty certain now that the the monocular son of the manse does not understand this, why? Because he goes out and borrows and borrows and borrows, putting us all in an even bigger hole.
The simple lesson for America and the US during this recession is to address the size of the public sector, redress the balance, reduce your expenditure, reduce taxation and allow the private sector to reconstruct. The only “spending to get us out of a recession” should be that done by private individuals and small companies once their confidence has returned in a new low tax economy.
To allow governments and public sectors to continue to expand is economic madness which will lead to the virtual bankruptcy of government.
Make no mistake, there are lessons here for Cameron and “Boy George” Osborne too!