The debilitating effects of a growing public sector are seen in the chart below found at Financial Armageddon.
A growing public sector means a shrinking productive sector and that is the bane of all social welfare states. You cannot continue to impose taxes, regulations and rules on productive citizens and expect them to support ever-increasing numbers of non-producing citizens. In order for that to happen they must continue to work harder and longer just to maintain the same after-tax income being diminished each year by higher taxes.
Some economic actors merely give up. Others find work arounds to “beat the system.” Generally the only way to beat the system is to abandon the system. Talent, capital and jobs eventually leave the country to areas where they are better rewarded. As Maragret Thatcher colorfully stated:
The trouble with Socialism is, sooner or later you run out of other people’s money.
We are near that point and the effects on our economy are obvious.
The Big Shrink
An interactive feature at The Atlantic, “This Is What America’s Manufacturing Story Looks Like,” shows just how much things have changed in what used to be the world’s industrial powerhouse.
We’re number…5! We’re number…5!
Another reason to buy stocks? [Editor's note: lol].