The Bloat Problem with Local Government

Nov 3, 2022 | Macro Insights, No Bull Economics

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Everyone knows that the government has grown bloated over the years, with 22MM in total government employees representing 17% of the private employee total. Admittedly, this percentage is down from a 24% high in the mid-seventies.

What we found so surprising is that the growth in total government employees did not come from Federal staffing, but rather mostly from local governments which increased their payrolls +400% from 3.5MM in 1955 to 14MM currently. During that same period, state government employment grew +353% while the US population has grown just ~+90%.

Government Employees Graph
Government Employees Graph

It is important to understand that the growth in local government & state employment has been funded by Federal grants. As evidenced by the chart below, Federal grants to state & local governments grew exponentially from under $1 billion in 1947 to $1.1 trillion in 2021. This has allowed the EPA to shift most of its employment to state government employees, for instance.

So how to deflate government bloat? Voters must ask their state & local elected officials to start to show restraint in terms of accepting Federal grants. Money doesn’t grow on trees & local voters must recognize that they incur a cost to accepting “free” Federal grants in terms of both inflation and their ability to govern independently.   

Fed Gov Transfer Payments Graph
Fed Gov Transfer Payments Graph

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