One of the most amusing — and fallacious — aspects of the government-shutdown debate is when statists argue that a layoff of public-sector personnel would spell economic disaster for America. Laying off all those people, statists say, would add to the ranks of the unemployed, thereby increasing welfare payments. It would also, they say, be a death knell to countless businesses that would no longer receive the business of all those laid-off workers.
Actually, from an economic standpoint, permanently laying off thousands of welfare-state and warfare-state federal personnel would be the greatest thing that could ever happen to our country.
Imagine a society in which there are one million citizens, 90 percent of whom work for the government. That means that the 100,000 people in the private sector must produce the wealth that sustains the 900,000 people who are working for the government.
Why is this true? Because the government sector is unlike the private sector. The government sector is the parasitic sector. It gets the money to sustain its payroll and operational expenses by taxing the private sector.
The private sector is the productive sector. It produces the wealth in a society. It is the key to economic prosperity and rising standards of living for the people in that society. The more wealth that the private sector produces, the more savings there are. The more savings, the more capital. The more capital, the more productive people are. The more productivity, the more prosperity and the higher the standard of living for people in that society.
Thus, it stands to reason that the more wealth that the government confiscates from the private sector, the worse off people are. People in a society where the government is confiscating only 2 percent of wealth are going to be much better off economically than those in a society in which the government is confiscating 98 percent of the wealth.
If the federal government were to permanently lay off thousands of welfare-warfare state workers, statists would point to all those unemployed people who are no longer shopping at the mall and argue that the layoffs are responsible for a recession.
Where the statists go wrong is in focusing only on what is seen, rather than on what is unseen.
Laying off all those people in the parasitic sector means that it is no longer necessary to confiscate the wealth to sustain their salaries and operational expenses. That means more savings in the private sector and, therefore, higher standards of living for people in that society.
It also means that the people who previously were in the parasitic sector will now be in the productive sector, getting jobs that will be opening up owing to all that wealth that is now being retained in the private sector.
So, laying off all those government people has a doubly positive effect. First, it increases the savings and productivity of those in the private sector. Second, it converts federal workers from parasitic workers into productive workers, thereby adding to savings and productivity.
The problem is that as the government sector expands in a society, it creates the illusion that the parasitic sector, owing to its enormous size and reach, must be kept intact and even expanded to maintain economic prosperity.
But that’s the worse thing a society can do because it will only move society further in the wrong direction–in the direction of impoverishment and bankruptcy.
The best thing people can do is permanently lay off all those parasitic workers (and bring an end to their welfare-warfare functions), thereby restoring the right of people in the private sector to keep their wealth and thereby raising everyone’s standard of living in that society.