The dynamics of government are shifting, and it seems that after an extended period of growth, the expansive role of government may finally be reversing. This is promising news, as a streamlined government in relation to the economy could benefit everyone involved.
If the shutdown persists, we will witness necessary adjustments and restructuring. Federal employees may face job losses and will need to transition to the private sector. We acknowledge that this will not be an easy or painless process.
However, we are optimistic that many of these federal workers will soon discover more fulfilling and meaningful opportunities. Many possess skills, intelligence, and initiative, and may have simply found themselves in an unfavorable position. Who could have anticipated the government’s significant overreach following events like 9/11 and the 2008 financial crisis? Presently, they might find themselves with a chance to exit with their dignity intact.
Take, for example, Lisa Braswell, who was furloughed last Tuesday from her post as a management analyst at the National Institutes of Health. According to CNBC, “she’s giving herself two weeks before she ‘pulls the panic alarm.'”
In the meantime, “Braswell has listed 28 items on eBay, mostly high-end evening gowns, valued between $15,000 and $20,000, to declutter her closet.” While we aren’t entirely sure what she means by “pull the panic alarm,” it seems she may be on the right track with her new sales endeavor. While eBay may not be her ultimate solution, identifying marketable goods and selling them for a profit is certainly a commendable start.
Economic Misconceptions Surface
This situation requires a shift in perspective for many. Curiously, the government shutdown has prompted some economists to make remarkably absurd statements. It’s almost as if, alongside the government, their reasoning has also become compromised. Consider this viewpoint:
“Regarding the broader economy,” Rick Newman remarked, “a lost job is a lost job — whether it’s a government bureaucrat, a unionized assembly worker, or a technology innovator. Government employees spend their income similarly to everyone else, and fewer individuals with disposable income translates to decreased consumer activity, impacting car sales, home improvement, online shopping, and dining out.”
Has Newman overlooked the basics? Henry Hazlitt debunked this economic fallacy more than 65 years ago in his renowned treatise Economics In One Lesson, particularly in the chapter titled “Disbanding Troops and Bureaucrats,” where he dismantles the idea that government employees are crucial for economic activity.
Hazlitt clarifies, “The fallacy arises from focusing solely on the effects on the terminated bureaucrat and the shops dependent on them. It is often forgotten that if these bureaucrats are let go, taxpayers will retain the funds previously allocated for their support. Consequently, the purchasing power of taxpayers increases by at least as much as the income and purchasing power of the former bureaucrats declines. If specific retailers lose business due to bureaucrats being discharged, other retailers elsewhere will benefit comparably.”
This illustrates how it all functions: smaller government corresponds to lower taxes. Lower taxes enable taxpayers to keep more of their earnings, which they can then inject back into the economy, leading to the creation of new jobs to meet this increased demand.
Hazlitt concludes that, “When the only justification for retaining any group of officials is to maintain their purchasing power, it signals that it’s time to dispense with them.”
Understanding the American Government’s Framework
Now seems to be an opportune moment to reduce federal payrolls. Unfortunately, the current shutdown resembles more of a performance than a genuine disruption. In reality, 83 percent of federal government operations, in terms of expenditure, remain unaffected. Nevertheless, we welcome a government that’s 17 percent smaller compared to just a week ago.
We always speculated that the bull market in government would conclude with a significant crash, succumbing to the weight of its own inefficiencies. We never anticipated that members of the House would have the resolve to reverse this trend through policy.
Ultimately, this exemplifies how American governance is intended to function. The Constitution empowers the House of Representatives with control over fiscal matters, making it their duty, as representatives of the people, to enforce necessary checks and balances. Conversely, it is negligent for the House to serve merely as a rubber stamp for the President’s directives.
If contentious issues like Obamacare and the debt ceiling do not warrant standing firm and facing criticism head-on, we struggle to identify what would. This initiative should have been undertaken long ago. Regardless of personal opinions about Boehner or the Republican factions within the House, those who advocate for limited government should appreciate their current resolve while it endures.
On the contrary, the President’s behavior can only be described as absurd, and the deterioration of decorum escalates from there.
“They’ve shut down the government over an ideological crusade to deny affordable health insurance to millions of Americans,” Obama claimed. “In other words, they demanded a ransom just for doing their jobs.”
Exactly, Mr. President. That is precisely how American governance is designed to operate.
Sincerely,
MN Gordon
for Economic Prism
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