Big government is producing high unemployment and stagnant wages.

Marketwatch reports Salaries and wages are rising, but not by much. Even that subdued headline is upbeat when you read some of the details:

Want some more bad news? Average wages today are lower than a decade ago when adjusted for inflation, according to an analysis earlier this year by the Economic Policy Institute.

For high school graduates, median inflation-adjusted wages were $626 per week in 2009, compared with $629 in 2000. If you assume a worker gets paid for a full year that totals $32,552 in 2009, down from $32,708 in 2000.

For college graduates, weekly wages were $1,025 in 2009, compared with $1,030 in 2000, according to EPI. Over one year, that works out to $53,300 last year, down from $53,560 in 2000.

Additionally, the official unemployment rate was just 4.0% back in 2000. Today, it stands at 9.5%. So not only are working Americans earning less, many more are unemployed and earning nothing.

The American dream is dying. But why? I again return to this chart, first posted here.

As is clearly evident in that chart, the government’s intrusion in our economy is at historically high levels. In this recent recession, government spending has hit all new unforeseen levels. But even prior to that, the 90s and 2000s, a period under both Republican and Democratic Presidents and Congresses, saw government spending excluding defense bouncing around the 30% level. Even that much-lauded decline in government spending under President Bill Clinton and the Republican Congress, only saw non-defense government spending decline from 31.87% in 1991 to 28.95% in 2000, a 2.92% decline. By comparison, non-defense government spending rose a 4.86% in 2009 alone. A supposedly major accomplishment that took ten years to achieve was obliterated in less than a year.

While non-defense government spending at 28.95% may look appealing now that the figure is about nine percentage point higher, non-defense government spending had never exceeded that level prior to 1982. While many talk about the small government days of Bill Clinton and the Republican Revolution of 1994, remember that FDR, LBJ, and Jimmy Carter all spent less excluding defense (which is wildly volatile depending largely on external affairs) than the U.S.’s recent best.

Our experiment with government intervention in society is failing. Government control over a third of the economy has produced high unemployment and stagnant wages. For decades, the United States enjoyed small government and prospered as a results. It is no coincidence that our recent weakness is the result of an overly large and burdensome government.

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3 responses to “Big government is producing high unemployment and stagnant wages.

  1. A corollary to your post is be that big government is producing stagnant wages in the private sector… Public sector wages have risen significantly faster than inflation for the last ten years, and are now materially higher than wages for equivalent work/qualifications/experience in the private sector. In addition, public sector benefits are significantly richer than private sector benefits. So, basically, higher unemployment is one cost of transferring jobs from the private to the public sector and paying higher wages for those jobs. Worse, the shrinking private sector workforce is effectively paying for these additional public sector jobs and their inflated wages and benefits, because tax on government-paid wages just recycles money already in the government’s possession, whereas tax on private sector wages is net new money into the Treasury…

  2. Excellent article now check out:
    British politics, the coalition government: rubbish economics
    http://bit.ly/9qiTTq

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