Simple Math: Economics 101 – Why Government Sucks

Gary Nolan (and THE Scrappy Doo)
Gary Nolan (and THE Scrappy Doo)

Math Problem #1

Let’s imagine there was a country with 50 citizens.

Then let’s imagine they all made a product that generated them $2.5 million in income. For purposes of this argument, we’ll say $50,000 a year for each of them.

Then let’s imagine they decided to elect one person of the group to be their “government” because they felt like they needed someone to handle things a government generally does. This means that they can now only make $2,450,000 worth of goods, because the 50th person isn’t producing any longer.

At that point, the 49 people, making $50k each still, would have to sacrifice about $1000 each to pay their government employee who is no longer generating product themselves because he/she is the government now. The result would be that they would all only make $49,000 each instead of $50k, including the government worker.

Now, let’s imagine that you kept adding government functions and thus needed more people to administrate them until you got to a 50/50 ratio of private sector/government workers. The 25 remaining private sector workers that started out making $50K would have to contribute $25K each so that their 25 government counterparts could make $25k each as well.

Notice that in each scenario, as more workers were moved to the government, the average income for everyone went down while the amount of goods they produced went down as well? The fact that government employees no longer generate a marketable good is often lost on people. They are a necessary expense, but entirely an expense, nonetheless.

Here’s where the math gets interesting though. The drop from 50:0 private sector/government workers to 49:1 resulted in a mere 2% loss for everyone. However, the drop from 25:25 to 24:26 ($25,000 to $24,000) would result in a 4% loss for everyone, and if we were to go from 10:40 to 9:41 ($10,000 to $9,000) it’s a difference of 10%, and the 2:48 to 1:49 ($2000 to $1000) is a difference of 50%!

What does this mean you ask? It means that as we add government employees, the losses are not linear, they are exponential, as it relates to the earner. The addition of each government employee hurts at a higher percentage than the addition of the one before it, as opposed to just the same hit each time.

This is a simplified equation to make it easily understandable, but the beautiful thing about math is that it doesn’t care whether one likes it or not. It simply is what it is.

While it is easy to want the government to solve all of society’s problems, individual problems are the responsibility of the individual to fix—not mine, not their neighbor’s, and not their government’s. When the government grows, we all hurt.

Math Problem #2

People assume that government workers are taxpayers. While it is true that they return some of their income in the form of taxes, from a mathematical standpoint this is false.

Again let’s assume they make a $50k salary, and then let’s assume they pay $15k in taxes. That is a net cost to the actual taxpayers of $35k, right? Wrong actually, but I’ll get to that in a minute. So while they are paying taxes, it’s still a debit, not a credit. The term payer gives the impression they’re contributing, but from a mathematical standpoint, government workers are takers, not contributors, and when they “pay” taxes, they are effectively just reducing the amount they take.

I know I said that that’s a cost of $35k, but like a stereotypical politician, I lied to you. Because if that same person were in the private sector making $50k and paying $15k in taxes, that would be a $15k credit to the tax pool. So it’s either a $35k loss if they work for the government or a $15k credit if they’re in the private sector. This means that the loss is the entire $50k. So yes, they do “Pay” taxes, but be assured their complete $50k salary is the cost to us taxpayers, not just the untaxed amount of $35k.

Summation:

After reading this, it may seem that I am anti-government. I am not anti-government or even against government workers. Government serves an important role as it is the only thing separating us from anarchy.

However, one should think of government workers like food. It is necessary for us to have government, a proper diet and proper portions are required for good health. But while that stimulus slider, regulation cookies, and entitlement cake may look good and even taste good, they are surely the way to diabetic shock and an early death if not done in moderation.

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