While Economy Lags, Government Continues to Grow

Published September 10, 2008

Unemployment climbs, family wealth falls, and government–at all levels–continues to grow.

The U.S. Department of Labor this month reported the nation’s jobless rate jumped to 6.1 percent in August, the highest since September 2003.

Construction firms cut 8,000 jobs in August, the 14th consecutive monthly decline, a fall driven largely by tighter credit in the housing market, where family wealth is declining because of falling home values. Sharp drops in new auto sales led to a decline of 61,000 factory jobs in August. Most industries, in fact, have seen employment declines. So far this year private-sector employers have cut more than 600,000 jobs, according to the Labor Department.

Meanwhile, government hiring rolls merrily along, despite state and federal budget deficits totaling hundreds of billions of dollars. The Labor Department tells us local, state, and federal governments have added workers for 13 months straight. Over the past year government payrolls have grown by almost 340,000 workers.

Businesses across the country have cut costs to keep expenses in line with revenues. Hard-pressed workers are doing the same, as are the recently unemployed. But government apparently cares little about businesses and individuals struggling to stay afloat while under increasing burdens to pay government’s bills.

Not only are governments hiring more people, they are paying them more lavishly. The U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) recently reported the 1.8 million federal civilian workers earned an average wage of $77,143 in 2007, 61 percent more than the $48,035 average in the private sector.

When benefits such as pensions and health insurance are included, the difference is astonishing. Total compensation (wages and benefits) for federal workers averaged $116,450 in 2007, more than double the $57,615 private-sector average.

At the state and local levels, government pay is often comparable with private-sector pay. But when benefits are thrown in, local and state government workers last year received total compensation averaging 11 percent more than private-sector workers, according to BEA.

Unfortunately, there’s no sign of any let-up from the government officials who supposedly represent us. The BEA report notes this year’s second-quarter state and local government spending jumped 7.8 percent compared to 2007, even though revenues grew just 2.5 percent. States reported $48 billion in budget deficits for the fiscal year that began July 1.

And on September 9 the Congressional Budget office reported federal spending this decade has surged 57 percent. The report said the spending binge is “on an unsustainable path.”

For the federal fiscal year that ends this month, federal agencies have hiked spending 8.1 percent, even though revenues have declined 0.8 percent. The federal government is expected to end this fiscal year with a budget deficit of $407 billion. The projected deficit for the coming budget year is $438 billion.

Those hundreds of billions of dollars of deficits being reported by the state and federal governments are more money taxpayers will have to pay, with interest, as government leaders push the burden for some of today’s outrageous spending onto tomorrow’s taxpayers.

No family or business could long survive while being so free with its spending. Unless we rein in our governments, millions more families and businesses are going to end up struggling even harder to pay for government’s profligacy.

Steve Stanek ([email protected]) is a research fellow at The Heartland Institute in Chicago.