Small Government = Big Trouble

In the arresting words of an Atlantic headline, ”We Now Have Our Smallest Government in 45 Years.” The proportion of government workers in the population is down to where it was in 1968, a decline of about 10 percent from its peak in the year 2000. Since the official end of the Great Recession alone, there are 600,000 fewer folks on government payrolls.

If you’re a fan of Arthur Laffer, whose eponymous curve was the most deceptive geometrical form since the Stars and Bars, and who still enjoys the embrace of the Wall Street Journal’s editorial page, you ought to rejoice that an immense burden has been lifted off the collective shoulders. If you think that government is a swarm of leeches crying to be chased, this should be wonderful news for the unemployed, not to mention taxpayers whose lifeblood for so many years has been drained into unproductive channels. All the capital released from the clutches of socialist payrolls may now shuttle over to the private sector to do what it does best—create jobs, right? High-five it, Live-Free-or-Diers! Start a small business and celebrate! How about a negative income tax on capital gains? We’re on our way to freedom land.

Or not. Independently, in a new report, “Prosperity Economics: Building an Economy for All,” Yale political scientist Jacob A. Hacker and law student Nate Loewentheil argue that the image of America as a land where tax cuts for the rich liberate small business to break its fetters and create jobs is a fantasy:

contrary to popular impression, the last generation of
tax cuts for the rich has not pushed more Americans
to create businesses or become self-employed. Quite
the opposite: measures of entrepreneurship have fallen
substantially, and our small business sector and rates
of self-employment are low compared with other rich
nations. What these tax cuts have mostly done is add to
the economic gains at the top. At the same time, they
have undermined key public investments and our ability to help the middle class and those aspiring to join it.

The boldface is mine, the words are Hacker’s and Loewentheil’s. Their broader purpose is to remind us that inequality retards growth; that as we have had more of the former, we have had less of the latter; that “societies that cultivate a broad distribution of the returns from increasing social wealth also flourish economically.”

Why is this a matter for the Chronicle? Because the damage to public employment is, not least, damage to education. To quote the authors again, “public policy must drive investments not just in physical and intellectual capital but in human capital, through increased funding for education and job training.” The warp in American life generated by what Timothy Noah calls The Great Divergence (between the very wealthy and the rest) is fueled, in part, by the vast disparity between the schooling available to the top few percent and the schooling available to everyone else; by cutbacks of public funds for higher education at all levels; and by the offloading of investment in higher education onto the backs of debt-laden students. So it has come to pass that

today, according to the Department of Education, a low-income student with high 8th-grade test scores has about the same (small) chance of obtaining a college degree as a high-income student with low 8th-grade test scores…a striking indicator of unequal opportunity and another reason for pursuing true universal access to college education.

I’m all with Hacker and Loewentheil on sending many more young people to college. However many inches private colleges open their gates in coming years (especially to foreign students paying full freight), access to college education mainly means access to public universities and colleges. So we circle back to the starting point: Shrinking government employment means, among other things, taking a whack at the middle-class way of life and the education that sustains it. The bulk of the damage will not be done to the families who send their children to the Ivy League. It will be done to the preschools, K-12, community colleges, and on up.

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