With Government, Less Is More

Wyoming has more state and local government employees per 1,000 private-sector employees than any other state. Since big government leads to low growth, it is fair to assume that with a smaller government our state GDP would be higher and we would all prosper. We would be able to find better-paying jobs, our state would see more business investments and more job creation.

But just how much prosperity are we losing as a result of our big government? The complete answer to would require months of programming and data processing work, more than I have access to. However, we can get a general idea by doing some static estimates.

A good start is to decide how much less government we want. (We conveniently ignore the challenges associated with dismantling government spending programs.) In 2012 our state's government employment ratio was 299, with 217,000 private-sector employees and 64,800 state and local government employees.

Let us assume that we could wave a magic economic wand and our government employment ratio fell to 175, roughly the national average. This means a reduction of state and local government payrolls to 38,000 people.

Imagine that the difference, 26,800 employees, got private jobs instead. What would the economic benefit be to Wyoming?

First, the payroll reduction would allow massive tax cuts. Wyoming taxpayers would be allowed to keep roughly $1.5 billion more in taxes each year (based only on reduced employee compensation). Such a big injection of spending power into the Wyoming economy cannot even be captured by a normal macroeconomic model.

Off-the-chart growth, in other words.

Secondly, we can get an idea of the gains by looking at how much economic more value a private sector employee produces. In 2012 an average non-minerals private employee in Wyoming produced output worth $116,434. The same number for a state or local government worker was $66,235. With the higher per-employee output in the private non-minerals sector, the 26,800 workers would add a bit over $1.3 billion to the Wyoming economy.

And this is, again, a totally static analysis that disregards multiplier and accelerator effects. If we include them, we can expect the tax cut alone to probably generate $4.5 billion in more economic activity over a period of 2-3 years. That means tens of thousands more private-sector jobs in our state, more entrepreneurs, more business investments, more prosperous families.

Plain and simple, a better future for all of us.