Too Much Bureaucracy: The Real Fiscal Cliff

Do you feel a change in the economy? Are you worried about your job security?  Major businesses like Medtronic and General Mills together laid off nearly 2,000 works to adapt to the current slowdown.[1] [2]  With so many unknowns today, wouldn’t it be nice to know why we’re slowing down?  The answer lies in following the Washington money trail.

At the time of this post the U.S. National Debt is $16.1 trillion with $1.1 trillion of our annual spending going on the government’s credit card (deficit spending).[3]

This deficit spending and massive debt puts our country in danger of going off a “fiscal cliff” when a number of tax cuts expire and government spending cuts go into effect at the end of 2012.  What’s worse is that many people don’t have enough skin in the game to fight to make sure we don’t fall off the fiscal cliff. Only 53.6% of our nation pays income taxes.[4]  What percentage of people who don’t pay taxes are concerned with our Nation’s fiscal problems?

Besides this troubling government overspending, many people are also concerned with the size of our government’s Bureaucracy.  The Executive Branch, led by President Obama, is made up of 15 cabinet positions, 32 Czars, and 479 Federal agencies.[5]  Add state agencies and the number grows to over 2,000. That’s huge, and growing!  What are the impacts of such an enormous Bureaucracy?

Difference Between Public Sector and Bureaucrats

Let’s start by distinguishing between the Public Sector and Bureaucrats.  The Public Sector consists of needed Government jobs for a working economy and our defense. These jobs might include the FBI, police, fire departments, courts, street lighting, enforcing property rights, military, and a few others.

Bureaucrats make up the largest percentage of our Government. A Bureaucrat is an employee of a government agency whose job it is to follow procedures and regulations.  They are rule creators and enforcers—-that’s it.  They don’t produce food, clothing, homes, technology, cars, or anything of real value.  They are “non-producing.”

Bureaucrats’ salaries and benefits are paid for by United States taxes collected from the private sector where food, clothing, homes, technology, etc., are produced.  Therefore, their survival is tied to collecting money from the taxpayers.

Bureaucrats Driven Towards Inefficiency

Besides not having to produce anything, what incentives are in place for a Bureaucrat?  Does a Bureaucrat want a larger salary, more benefits and job security?  Yes!  Who wouldn’t want that?

How do Bureaucrats go about getting more pay, more benefits, and greater job security?

• They lobby to obtain more benefits and public pensions.
• They create more rules and regulations to justify their existence. This adds people to government payrolls, but doesn’t add anything to production.
• Their budgets decrease if they don’t spend them, so they are driven to spend every dime that comes into their department.  (So much for being driven towards lowering costs.)
• If costs are higher, there are no consequences to their job security – the government will just raise more taxes or print money.
• If they trim costs by being more efficient they work themselves out of a job, so efficiency suffers.

In other words, bureaucrats are actually rewarded by spending more private sector dollars than they collect via taxes!  This explains at least one reason government spending has grown 40 times its size since 1960,[6] while the United States population hasn’t even doubled during that time period.[7] [8]

The larger Bureaucracy grows the smaller the private sector becomes.

The Private Sector Difference

The Private Sector is driven towards productivity and efficiency; creating more with less actually rewards the Private Sector.  If the Private Sector generates more income with less cost there is more profit left over for the shareholders. Intelligent business owners reward employees who trim costs as it is in their best interest to retain key employees.

In addition to producing goods and services, the Private Sector responds quickly to the demands of millions of consumers. In other words Private Sector money produces things of value and Bureaucratic money is non-producing and inefficient.

The 64,000-Dollar Question

What would give you an edge in a global economy?  Having the highest or the lowest possible amount of money going towards production?  Obviously, you want more money going towards production with the smallest amount possible going towards inefficient “non-production.”

This is why it is vital that we turn our economic ship around.  Eventually, with an ever-expanding Bureaucracy, the whole economy will be inefficient, “non-producing” money. There will be more people in the cart than are pulling it.

Eventually you reach a tipping point where you increase the non-producing part of the economy so much that it drags down the producing part to a point of no return.

President Obama has done nothing but increase the size of government non-production since being in office. It’s critical that we communicate to our friends the importance of putting an end to increasing government Bureaucracy and is critical if we are to save our nation.