The Era Of Big Government Ended In The Mid-1970s

I love what Karl Smith’s been doing with the FRED Excel plug-in. Here’s a chart showing the ratio of government workers to private sector workers in the United States:

By this metric, the era of big government came to an end long before Bill Clinton appeared on the scene. In parallel to this, however, we’ve seen the rise of a para-government. That’s not just the laughably inefficient world of formal government contracting it’s also the health care sector where the government is directly or indirectly paying the bills without actually providing the services. I have this outline of a general theory that this is the worst case scenario for economic efficiency. You can have market provision where appropriate or you can have public sector provision, but then there’s this kind of dead zone where the public sector commits to paying for things without directly providing them. Then you get, if anything, an exacerbated form of the political economy problems with public sector provision (since there’s less scrutiny from conservatives) plus a new set of problems due to the profit-seeking ethic.