Positive Economic Impacts of Furloughing (Firing?) US Government Employees

About 18.5% of the estimated total of 4.4 million federal government employees, including all military & postal service employees, are affected by shutdown-induced furloughs. The average federal employee’s annual income is $74,436 or just over 24% more than the average income of earned by full-time employees. (Federal employees also receive benefits worth about $40,000 each year.)

In turn, the average saving from the budget for each furloughed federal government employee is about $300 per workday. So that with about 816,000 employees on furlough the total saving per day from the furlough is about $244,800,000.

This is good news unless you believe the Keynesian trope that consumption drives economic growth. Of course, this illusion is reinforced by the calculation of GDP that purportedly shows that private spending accounts for more than 2/3s of all economic activity.

What should be an obvious mistake in interpreting GDP as an indication of real economic improvement is that consumption based on newly-issued paper money & artificially-cheap credit is illusory & unsustainable.

From the other side of the ledger concerning salaries paid to public-sector employees, most are not productive since they do not produce additional goods or services for sale in the market economy. Indeed, many government employees are “parasitic” in the sense that they draw from the pool of taxes taken involuntarily from productive private-sector workers.

Since public-sector employees do not produce goods or services for sale in the market, whatever they spend merely returning funds to the private economy that were forcibly taken by tax authorities.

Imaging that lower incomes of government employees reduces economic output requires a leap of faith that their spending somehow has a magical multiplier effect not present if the funds were spent by private actors. In fact, the argument might be the contrary since funding government is usually associated with dead-weight losses that are being reduced.

In all events, the designation of non-essential government personnel reveals that their activities does not contribute sufficiently to the public weal. In turn, that seems to be an argument that these jobs should be cancelled so that the funds used to pay for them can be released to the productive, private sector of the economy.

Now for the bad news, it appears that the Congress will pass legislation to pay all salaries of the furloughed workers FOR NOT WORKING!

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About christopher

Content of "Natural Order" attempts to reflect the commitment of Universidad Francisco Marroquin to support the development of a society of free & responsible individuals. The principal commentator for this blog is Christopher Lingle.

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