The "Shadow" Government of USA

Leviathan

By Iain Murray

How many Americans work in government? That’s a difficult question to answer. Officially, as of 2009, the federal government employed 2.8 million individuals out of a total U.S. workforce of 236 million — just over 1 percent of the workforce. But it’s not quite as simple as that. Add in uniformed military personnel, and the figure goes up to just under 4.4 million. There are also 66,000 people who work in the legislative branch and for federal courts. That makes the figure around 2 percent of the workforce.

Yet even that doesn’t tell the full story. A lot of government work is done by contractors or grantees — from arms manufacturers to local charities, from environmental-advocacy groups to university researchers. A lot of the work they do is funded nearly entirely by taxpayers, so they should count as part of the federal government. Unfortunately, we can’t ask the Office of Personnel Management (OPM) how many government contractors and grantees there are. They don’t keep such records.

Instead, we can ask Prof. Paul Light of New York University, who has estimated the size of these shadowy branches of government. As he points out, while there are many good reasons for the government to use contractors (should the feds really be in the business of making dentures for veterans, as they were until the 1950s?), the use of contracts and grants also hides the true size of government:

[The federal government] uses contracts, grants, and mandates to state and local governments to hide its true size, thereby creating the illusion that it is smaller than it actually is, and give its departments and agencies much greater flexibility in hiring labor, thereby creating the illusion that the civil-service system is somehow working effectively.

OPM’s failure to keep records of the number of quasi-governmental employees indicates a lack of accountability, as Professor Light says:

Contractors and grantees do not keep count of their employees, in part because doing so would allow the federal government . . . to estimate actual labor costs.

Nevertheless, Professor Light was able to come up with some useful estimates by using the federal government’s procurement database. When he added up all the numbers, he found that the true size of the federal government was about 11 million: 1.8 million civil servants, 870,000 postal workers, 1.4 million military personnel, 4.4 million contractors, and 2.5 million grantees.

However, this turned out to be a low-water mark. Over the next few years, even before 9/11, the true size of government increased significantly, almost all in the “shadow” sector. By 2005, the federal government employed 14.6 million people: 1.9 million civil servants, 770,000 postal workers, 1.44 million uniformed service personnel, 7.6 million contractors, and 2.9 million grantees. This amounted to a ratio of five and a half “shadow” government employees for every civil servant on the federal payroll. Since 1999, the government had grown by over 4.5 million employees.

Professor Light’s figures are from 2006, but there can be little doubt that the size of the federal government has increased still further since. There are those new contractors and grantees working on “stimulus” projects to add. Then there are the employees of bailed-out and partially nationalized firms: General Motors (still owned in large part by the government despite the sale of stock in November 2010), AIG, and a large number of banks. GM alone employs 300,000 people. In addition, government has increased its mandates and general spending.

All of which suggests a significant expansion in “shadow” government employment since 2005. Even if it grew at the same rate as it did between 1999 and 2005 (a conservative assumption), that would suggest a further 4.7 million employees dependent on taxpayer funding since 2005, bringing the total true size of the federal government to just under 20 million employees.

Yet the federal government isn’t all. Despite its huge budgets, state and local governments dwarf Washington in direct employment. According to the U.S. Census Bureau, there are 3.8 million full-time and 1.5 million part-time employees on state payrolls. Local governments add a further 11 million full-time and 3.2 million part-time personnel. This means that state and local governments combined employ 19.5 million Americans.

When we add up the true size of the federal workforce — civil servants, postal workers, military personnel, contractors, grantees, and bailed-out businesses — and add in state- and local-government employees — civil servants, teachers, firefighters, and police officers — we reach the astonishing figure of nearly 40 million Americans employed in some way by government. That means that about 17 percent of the American labor pool — one in every six workers — owes its living to the taxpayer.