Vampire Government: How the Left is Sucking the Life out of the Private Economy

By Steve McCann

The current financial debacle in Europe and the near-bankrupt status of the United Sates have been brought about by an obsessive loyalty to statist doctrine and an inability to admit failure -- traits common to the left on both sides of the Atlantic.  The current dilemma is the end-product of decades of uncontrolled spending and economic policies promoted not to benefit the people in the long term, but to maintain the power base of the dominant governing class.  The path to insolvency taken by the countries of Europe and the United States has been on a parallel track.

Facts and reality matter little to the insufferable American left and are generally ignored if they do not support the left's contentions.  At that point, "creative" interpretation or outright denial takes over.  Economic statistics and discussions can often cause the eye of the average reader to glaze over or the listener to become confused by the terminology and incomprehensible numbers involved.  The so-called progressives rely on their ability to obfuscate and to mobilize greed and envy in order to justify and maintain their deceptions.

However, the average person can and does understand that the standard of living has deteriorated over the past 15-plus years, well-paying jobs are impossible to find, and the country is in dire financial shape.  But how and why did this come to pass?  The fault lies at the feet of solely the left and its control of the Democratic Party, as well as its enablers in the Republican Party.  The nation's Gross Domestic Product has been so ravaged by government's demands that it cannot sustain long-term economic growth and a concurrent increase in the standard of living for all Americans.

The U.S. government began keeping comprehensive income statistics in 1947.  Among the most vital of these measurements is the "the median household income."  This is the income point which divides the income distribution into two equal groups -- half having income above that amount and half having income below that amount.  (Note: all financial statistics in this article are inflation-adjusted to 2011 dollars.)

In 1947, the median household income was $29,769.00; 25 years later, in 1972, it had substantially increased to $45,196.00 (+52%, or 2.1% per year).  Further, all income groups saw a rise led by the lowest fifth of 117%.

However, in 2010, the median household income was only $49,445.00, as compared to $45,196.00 in 1972.  This represents an increase of just 9.4% over 38 years, or 0.2% per year.

In the mid-1970s, the era of big government and accelerated social spending to fulfill unsustainable promises had begun in earnest.  From 1947 to 1972, total government (federal, state, and local) spending averaged 26.7% of the nation's Gross Domestic Product.  

In 2011, it has hit nearly 41%.  Considering the present course of the GDP and with programs such as ObamaCare, spending will exceed 46% of GDP by 2016.  For comparison, some nations recently in the news: Greece is at 51% of its GDP, Spain 49%, Italy 51%, and Portugal 50.2%.

The following chart brings the numbers into focus (source).  (In 1947, the population of the country was 148 million.  Today, it's 312 million -- an increase of 111%.)

	1947	1972	2011	Growth 1947-2011
Gross Domestic Product	$ 2,700 billion	$ 7,520 billion	$ 15,100 billion	459%
Government Spending-Total	560 "	2,200 "	6,100 "	989%
Spending as % of GDP	20.7%	29.3%	40.5%
Government Social Spending*	$ 136 billion	$ 1,070 billion	$ 3,670 billion	2,598%
Social Spending as % of Total	24.3%	48.6%	60.2%

(*Pensions, Health Care, Education, and Welfare)

While the GDP has increased by a factor of 5.5, spending has increased by 10.5, or nearly double the GDP growth rate.  This means that there is much less money available in the economy for job-creation, business-expansion and wealth-formation.  If in 2011 total government spending had been at 33% of GDP, an additional $1,132 billion, or $1.13 trillion, would have remained in the private economy.

It is not just the astronomical increase in government spending that has impacted incomes and the standard of living.  The American left was determined also to rein in and control the private sector -- the left's designated villain.

To that end, the regulatory regime and the tax code hav ebecome a tool to bludgeon business and transform the economy.  In 1947, the tax code was less than 9,000 pages; today, it is over 72,000 pages.  In 1960, the Code of Federal Regulations totaled 22,800 pages; today, it is over 160,000 and expanding rapidly under the Obama regime.  It is estimated that the cost of compliance relative to the tax code and other regulations (which do not include state and local) exceeds $1,750 billion ($1.75 trillion), which further drains capital for the formation of jobs and businesses.

As also happened in most countries in Western Europe, business-formation stagnated and declined, resulting in more goods and raw materials being imported.  In the United States, manufacturing saw a precipitous deterioration due primarily to government policies, taxes, and regulations.  In the period 1947-72, 28% of the labor force was employed in the manufacturing sector; today, that number has shrunk to 8.9%.  The nation has lost not only the jobs, but also the overwhelming value-added benefit of developing, manufacturing, and marketing a product.  The jobs that have been created are in the service sector, which not only pays at a lower scale, but also does not have any intrinsic uniqueness or value-added component and is very susceptible to improvements in technology and outsourcing.

Goods-producing jobs pay $5.75 more per hour than the weighted average of the hourly rate for jobs created in the service sector over the past 11 years.  While 7.7 million jobs in the goods-producing sector have been lost since 2000, there have been 7.5 million jobs created elsewhere; however, 5.6 million were in low-paying service jobs such as retail, hospitality, and health care.  This has been a major factor in the decline of income for the middle class and the widening gap between income groups.

If the country had maintained a 20% level of manufacturing employment, today, an additional 14.5 million people would be employed in that sector, and $173 billion in additional personal income would be realized as compared to employment in the service sector.  There would also be a significant boost in the overall GDP from the value of the goods produced.

Concurrent with the deliberate and successful effort to curtail manufacturing and ratchet up central government control of the economy has been the overwhelming increase in the trade imbalance with the rest of the world.  In the 25-year period from 1947 to 1972, the United States realized a trade surplus of $88 billion.  In the 25 years prior to 2011, the country has experienced a trade deficit of $10,700 billion ($10.7 trillion).  Of that amount, $3.1 trillion was for the purchase of oil and a $3.0-trillion imbalance with China.

In 2011, it is expected that the trade deficit will hit $800 billion, thereby further reducing the effective net GDP available for investment, job-creation, and personal wealth.

The left will, besides denying any responsibility for this devastation to the American economy, claim that their policies have helped the poor and downtrodden.  However, in 1965, the poverty rate in America was 15.4% (today it is 15.1%).  Not only has the income of Americans stagnated, but the disparity has widened -- not because of the so-called greed of the rich, but because there is now minimal upward income mobility compared to the past, as high-paying jobs are no longer being created.  The U.S. is not competitive in the world market, as the manufacturing sector has been forced to wither on the vine.  And America has joined the list of countries facing insolvency due to out-of-control spending and borrowing.

The solution offered by Obama and his fellow travelers on the left: not only more of the same, but an acceleration of the process, as they cannot get past their own narcissism and ignorance enough to ever admit failure.  They would rather see the United States collapse and its people in poverty and despair as long as they are safely ensconced within the ruling class along with their crony capitalist and union allies.  To that end, they are counting on manipulating the ignorance and emotions of the American people.  The future of the country depends on whether that tactic continues to be successful.