People rightly concerned about the size and power of government typically focus their gaze on Washington, D.C. State and local government overreach is generally thought of as less of a problem than federal overreach. But, what if state and local government was no longer acting solely in the interest of their constituents, but rather, was instead acting on behalf of a distant federal government?
The U.S. has racked up a national debt of $17 trillion. But, cumulative federal payments to states and local government in the past 50 years accounts for about two-thirds of this debt. Of course, the federal assistance isn’t really free — it comes with controls on state and local government.
The federal government, to get more power, uses borrowed money to deputize state governments. Health care, education and the environment are no longer local decisions.
Across the nation, the federal government provides about 35 percent of the average state budget. The largest portion of this aid was in the form of federal matching funds for Medicaid.
Medicaid is a federal program with the states paying about half of the program’s costs and the vast majority of its administrative overhead. But, in exchange for its assistance with largely borrowed money, the federal government sets the rules, leaving the states with little room to improve the program through innovation.
Texas employs about 56,555 full-time equivalent workers across five agencies to administer its public health responsibilities under the watchful eye of the federal government. To put it into perspective, this workforce is more than 4 1/2 times the size of the Texas Department of Transportation.
How many government workers are there in the U.S.? About 11 million, excluding those in education.
That’s a lot of people. But, the actual power of these workers to control our lives has grown far more than many people understand due to the tremendous improvements in productivity we’ve seen in the past half-century.
We rightly celebrate increased productivity as it leads to a more prosperous America. Today’s workers can produce more than $3 in real goods and services for every $1 produced in 1960.
But, few people consider the effect of productivity on the bureaucracy. A bureaucrat in 1960 had little access to computers, copying machines were very slow, and the fax wasn’t even invented. Writing and enforcing rules was hard, labor-intensive work.
However, the per capita ranks of federal regulators are about 2 ½ times more powerful today than in 1960 when accounting for productivity. Similarly, the more numerous ranks of state and local workers are some five times more powerful per person 53 years later.
More productive bureaucrats make for a more controlling government.
In spite of the tightening federal straightjacket on the states, there are meaningful differences between them.
California’s tax and regulatory burden is among the highest in the nation, with red tape compliance costs for small businesses amounting to about $134,000 per year alone in the Golden State. Texas, on the other hand, is noted nationally for its welcoming climate for people who create jobs.
This led almost 2 million Californians to vote with their feet from 2000 to 2010 and leave the state, with the largest number of them moving to Texas.
One such former Californian was profiled last August in these pages: Don Fornes and his firm, Software Advice, formerly of San Francisco.
Because states are still free to experiment and offer meaningful differences in tax and regulatory policy, Fornes found Texas compelling. In 2009, he moved his 4-year-old firm from California to Texas, noting, “There’s no doubt that Silicon Valley is the epicenter of technological innovation. But for us — a small, bootstrapped company that needed to grow, hire well and make every dollar count — moving to Austin was absolutely the right decision.” When he moved, Software Advice had five employees; today, it has more than 70.
When Fornes packed up and moved to the Lone Star State, California got a little poorer and Texas got a little richer.
Bureaucratic power has grown to unprecedented levels in America, but Texas shows that it is possible to limit government and, with it, foster general prosperity.
Wohlgemuth is the executive director and director for the Center for Health Care Policy with the Texas Public Policy Foundation.firstname.lastname@example.org