Private Pay Shrinks to Historic Lows
By Randall Holcombe • Tuesday May 25, 2010 8:29 AM PDT • 3 Comments
That’s the headline in this USA Today article. Some excerpts:
“Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of this year... At the same time, government-provided benefits — from Social Security, unemployment insurance, food stamps and other programs — rose to a record high... The result is a major shift in the source of personal income from private wages to government programs. ... The trend is not sustainable, says University of Michigan economist Donald Grimes. Reason: The federal government depends on private wages to generate income taxes to pay for its ever-more-expensive programs. Government-generated income is taxed at lower rates or not at all...”
Will we, collectively, come to the same realization Professor Grimes has, or will we keep moving toward the situation Greece finds itself in now? Perhaps we’ll get some indication in November.
Tags: Budget and Tax Policy, Economics, The State, Welfare 
What this article does not make clear is whether or not the “private” pay cheques include workers for the government (federal, state, or local), private contractors who provide government “services”, members of the military-industrial complex, and others who might “earn” a pay cheque which ultimately comes out of taxpayers pockets. It confusingly distinguished between those who get a pay cheque and those who get government transfer payments of some kind. A better analysis of the problem would come if the distinction was between “net tax consumers” (those who received more from the government or the taxpayers than they did from profits earned from voluntary exchanges in the market) and “net tax payers” (those who paid more to the government in taxes than they received in government benefits). I can imagine a time soon when there will be more “net tax consumers” than “net tax payers” and this will make voting for freedom a nearly impossible thing to achieve given the huge vested interests at stake.
David Hart | May 25, 2010 | Reply
Mr. Hart has it right. The entire city of San Antonio seems to be on the government payroll, for example.
richard | May 26, 2010 | Reply
The article does say “Paychecks from private business” which I was taking at face value. But you both make the good point that government workers are paid with tax dollars too. We can see the effect in Greece, where government workers are protesting against any proposed cuts in the incomes they are paid by their bankrupt government.
Randall Holcombe | May 26, 2010 | Reply