Donald Marron and Eric Toder have done an excellent job of drawing attention to spending-like tax expenditures, and how they serve to obscure what we might call the true size of government. In a brilliant essay in the Spring issue of National Affairs (which is behind a paywall, but you’d do well to subscribe), John DiIulio Jr. takes a somewhat different approach that is no less illuminating:
One key reason why we are unwilling to seriously reduce the size of our government is that its scope and reach are even bigger than the daunting spending ﬁ gures suggest. For many people, big government is personal: Millions of Americans either make their living from government or have family members or friends who do. In addition to the 3.2 million personnel who work for the U.S. Department of Defense (the world’s largest employer, followed the Chinese Army and Wal-Mart), American government now employs more than 20 million full-time or part-time civil servants, only about a tenth of whom are full-time federal bureaucrats (indeed, all of the real post-1960 growth in government employment has been at the state and local level).
The various public-employee workforce reduction plans launched by state and local governments since the recession started have so far resulted in only tiny actual cuts. The proposal made by House Republicans in 2011 to eliminate 200,000 federal civil service jobs, meanwhile, exempts “critical” and “security” personnel. As several analysts have noted, even if it were approved, it would only end up cutting about 70,000 federal jobs over a period of many years.
Beyond those employed directly by the state are the workers of businesses and non-proﬁ t organizations paid or subsidized by one or more levels of government to help administer programs in defense, homeland security, health care, consumer-product safety, environmental protection, and so on. Indeed, big government in America involves far more than government: It involves Big Inter-Government (BIG) plus BIG’s Private Administrative Proxies (PAP) and their non-government but taxpaid employees. Let’s call it BIG PAP for short.
DiIulio goes on to describe the scale of BIG PAP, ranging from the military industrial complex (the Lockheed Martin Corporation has had as much as $35 billion worth of military contracts in a single year), homeland security (DHS has 200,000 private contract employees and 188,000 federal workers), Medicaid is directly responsible for the employment of millions of people working for ostensibly private for-profit and non-profit medical providers, etc. DiIulio’s discussion of the non-profit sector is particularly interesting, and it sheds light on a number of recent controversies:
In 2009, the non-profit organizations recognized as “public charities” by the U.S. Internal Revenue Service reported about $1.4 trillion in spending while holding $4 trillion in total assets (for comparison, the total assets of state and local governments were about $4.6 trillion). In total, the nonprofit sector employed about 13.5 million people (roughly a tenth of the American workforce) and accounted for about 5.5% of GDP.
About three-quarters of non-profit organizations, including most faith-based ones, spend under a half a million dollars a year and receive little or no government grant or contract money. But the quarter of the sector’s organizations that boast its biggest annual budgets are highly dependent on direct government funding, meaning that one-third of all non-profit dollars are from government, paid through grants or contracts. For instance, in 2009, Catholic Charities USA alone spent $4.2 billion — and about two-thirds of that money came from government grants and contracts.
Over the past quarter-century, government grants to non-profit organizations have nearly tripled (in inﬂ ation-adjusted dollars). And just as businesses lobby to keep government contracts flowing, non-profit organizations lobby to preserve government grants and to block measures to limit itemized deductions in the federal tax code. [Emphasis added]
That Catholic Charities USA has become part of the political fray is hardly surprising given the source of much of its funding. Many of our intermediate institutions have grown so dependent on the state as to become duly deputized extensions of its power. And of course this happened because many of these institutions initially welcomed the assistance, thinking that it would strengthen their independent efforts. But that’s not quite how it turned out. It’s interesting to read DiIulio’s essay alongside a book like Robert Nisbet’s The Quest for Community.
But DiIulio hasn’t written an anti-BIG PAP polemic. Rather, he offers a sobering reminder that the project of reversing the expansion of central state authority is far more difficult than is commonly understood. BIG PAP is here to stay. At this point, we are obligated to make its workings more transparent and accountable. One area where I part company with most of my fellow conservatives is that I place a much heavier emphasis on containing the scope of government than containing its supposed size, as our measurements of its size are highly misleading and efforts to limit its explicit size often lead to an expansion of its scope, e.g., expansion of the use of regulation and private administrative proxies. This is one reason why I consider regulation a more pressing issue than taxes.