In defence of the Republicans. Well, up to a point.

I know where they’re coming from. Small government is good; big government is bad. I’m totally signed-up to that, and compared with most of the free world, America has one of the smallest governments in terms of how much of the nation’s wealth they tax and spend. At around 27% it compares very well with ours at around 41% in the UK and especially well with an eye-watering 55% in Sweden. At American levels, we in the UK would not have to pay any income tax, and no fuel duty, and no tax on beer, wine and spirits. Joy!

But this isn’t the complete picture. The problem is masked by the size of the American workforce and how productive they are. Here are some figures assembled from different sources, CIA World Fact Book [cols 1,2 & 4 below], Wikipedia Tax Freedom Day data [col 3 below], Adam Smith Institute [tax levels, above].

America has a workforce of almost 155 million people, generating a national income of $15 trillion. The US government spends 27% of it, which works out to be a little under $13,000 per man woman and child of 313 million in the country. I’ve counted the whole population because expenditure covers their needs such as health and education etc whereas the income is generated only by the workforce.

For reference, here’s what the table looks like:

workforce

>

GDP

x

gov’t share

/

population

=

government expenditure per person

USA

154.9m

T$14.66

27%

313.2m

$12,590 pp

UK

31.4m

T$2.17

41%

62.7m

$14,175 pp

Sweden

4.9m

T$0.35

55%

9.1m

$21,155 pp

The comparable story for the UK would be that our workforce, which is about one fifth of America’s in size, generates only about 70% as much national income per worker as their American counterparts. Our government spends a much higher proportion of this smaller amount and this works out to be a little over $14,000 per head of population.

The difference between how much the American government spends and how much the UK government spends is almost $1,600 per head of population. This doesn’t seem to square with the dramatic difference between government expenditure as a proportion of national income and the respective dates for Tax Freedom Day. The reason is as I have already stated, that the American worker is far more productive. His or her productivity makes the American government look practically parsimonious, whereas in reality it’s very nearly as profligate as ours.

So I believe the Republicans have a point when they complain about the level of US government expenditure. It is unacceptably high. High productivity shouldn’t be an excuse for the government to spend more. It is money they haven’t earned.

Where I disagree with the Republican leadership is their approach to dealing with the problem. They want more of the burden to fall on low-income families; they want to protect some tax concessions for the super-rich; and they want to maintain taxes on jobs. And they are using the debt-ceiling crisis as a lever to further their agenda, at whatever cost to the country. Maybe it’s all a big bluff, we will know in a few days time. In the meantime, President Obama has offered some huge concessions on his side that have alarmed and dismayed many of his own supporters, going further in cuts to Medicare and Medicaid than even some Republicans feel comfortable with.

The fact there is a debt ceiling at all and the fact America is in this crisis is a self inflicted injury. But it seems that having shot America in the foot, the Republican leadership want to finish the job and kill the patient.

Their conduct is indefensible.

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