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Reduce Government Payroll - NOW!

Personal Freedom and Prosperity 108: Freedom in Decline

As government expands, liberty contracts. —President Ronald Reagan

Unfortunately, in the 20th and 21st centuries the United States government has greatly increased its spending and government debt, which, in turn, greatly increased taxes and decreased the power and opportunity of all Americans. Harmfully, freedom and the economic benefit of a free society are in decline and peril.

Reduce Government Payroll – Now!

According to a number of different sources, it appears House Republicans will periodically increase our debt ceiling, and each time the ceiling increases, Republicans will extract a policy to reduce our debt. 

The first  “deal” is to force Senate Democrats to propose and pass a budget.  Every political observer knows our Senate has not presented a budget in three years, which violates their duly promulgated law.  As any family or business knows, this is incompetent and reprehensible fiscal governance.  Beneficially, it appears this “budget deal” will force a debate on debt, taxes and good governance, which is not only necessary but good for America.

it seems, Republicans are earnest in presenting a plan to balance the budget within at the end of 10 years without raising taxes.  This is critically needed.  Needless-to-say, there will be tremendous resistance from interest groups, lobbyists, and, of course, pompous politicians.  Be prepared for the hyperbole, deceptions and crass power-politics. 

However, a very big and expensive component of government cost is labor.  Easy to reduce and politically manageable because of very strong public support, we need to reduce the number of governmental workers – humanely!

The key is humanely.  Each year thousands of people retire or choose to leave government employment.   Rather than hire more government employees, we hire 10% of the number of people who voluntarily exited the system.  Two great benefits would come of this plan; government would become much more efficient, which is critically needed, and the cost of government would be greatly reduced, which is urgently needed. 

Across the board, the largest cost to most enterprises is labor – total payroll.  Of course, government has gigantic bureaucracies with hundreds of thousands people transferring and expending tax dollars.  Harmfully and inherently, government as we know it has no natural or automatic mechanism to be efficient or cost effective.   The fiscal debt crisis created by years of incompetent government is an excellent opportunity for us to force efficiency and promote cost reductions.  Any stuggling business would cut their labor force to improve their bottom-line, why can't our government?

In order to best reduce our government employees, we may consider the following guidelines.  (Please feel free to weigh-in on your thoughts and concerns).

  • Government is free to assign employees to agencies and projects.
  • Total annual government payroll reduction is the money saved from the voluntary attrition, plus the 10% of actual total payroll of new hires.
  • The total dollar outlays on government contracts must be reduced in ratio of restricted spending as presented immediately above.
  • Military is not part of the reduced spending
    • Increases can occur
    • Decreases can occur

Reducing payroll is essential to reducing our debt.  Leading economists,  Harvard scholars and the American Enterprise Institute have studied various governments and how they have successfully reduced their country's debt.  The two most important components are reform transfer payments – that is Social Security, Medicare and Medicaid - and substantially reduce government payroll.  [Read:  The Right Way to Balance the Budget]

Utilizing the ground-breaking work of Alberto Alesina and Silvia Ardagna of Harvard, Andrew Biggs, Kevin Hassett and Matt Jensen of the American Enterprise Institution (AEI) studied many governments’ attempts to reduce debt and concluded that major spending cuts were indispensable to solving the problem:

The data also clearly indicates that successful attempts to balance budgets rely almost entirely on reduced government expenditures, while unsuccessful ones rely heavily on tax increases.

The AEI study found reducing transfers/entitlements and government wages was also essential:

A 1996 International Monetary Fund study concluded that "fiscal consolidation that concentrates on the expenditure side, and especially on transfers and government wages, is more likely to succeed in reducing the public debt ratio than tax-based consolidation."

The research is strong to cut entitlements/transfer payments and wages.  Surely, our political elites will resist.  Alas, they are the same political class that created our debt and its danger. 

Currently, President Obama and other Democrats refuse to make any alterations to our entitlement programs; Social Security, Medicare, Medicaid and welfare-related programs.  Likewise, Republicans meekly suggest small adjustments.  With Social Security, Medicare and Medicaid off the negotiating table, it is of the utmost importance for us to reduce our federal payroll.