Since the fall of 2008, the economy has struggled and unemployment has gone way up.  One interesting statistic that is frequently shown is government jobs.  Since the recession hit, the total number of government jobs has declined significantly.

Take a look at the last page of this report from the BLS.  The second to last graph clearly shows that employment in government has gone down in the last 3 or 4 years.  At the bottom, it says, “Since the end of the most recent recession in June 2009, government employment has declined by 670,000 or 3.0 percent.”

Here is the major problem.  These statistics are referring to overall government employment.  They are combining federal, state, and local.  If you look at the last chart, the total government employment went down from the previous month.  But the top bar shows that federal employment went up.

Back in May, Mitt Romney made a statement that we have 145,000 more government workers under Obama.  He has been criticized by some for this comment.  Some of his critics say that the total number of government workers has declined.  But Romney was technically near correct if he was just referring to federal government workers.  And in reality, that is what the president would have more control over, as opposed to state and local workers.

So while the federal government continues to expand (although perhaps more slowly than in the past), state and local governments have cut back drastically.  What is the reason for this disparity?

There is one main reason and that is the Federal Reserve (“the Fed”).  Since the recession hit, tax collections for governments at all levels have gone down.  This leaves them with a few choices.  They can raise tax rates, but even this may not lead to higher tax collections.  While this has been done by some state and local governments, it also hasn’t worked for many.  People don’t like tax increases, particularly when they are already struggling.  Another choice is for governments to cut spending, which has happened at the state and local levels, at least generally speaking.

The last main choice is to fill the gap by issuing debt.  But this is a problem for state and local governments.  They are limited in how much debt they can run up, whereas the federal government is far less limited.  The federal government can rely on the Fed to create money out of thin air to buy government bonds.  If the Fed did not exist, then the federal government would not be able to continue spending so much money for so long.  It would have had to cut spending by now or else face bankruptcy.

This is why it is so important to end the Fed.  The federal government would be forced to act more like state and local governments.  Sure, it would still do much damage and infringe on our liberties in many ways.  But its resources would at least be somewhat limited to its power of taxation.  It would not be able to run massive deficits and continue spending like we are in a boom.

State and local governments have had a real correction.  It hasn’t happened yet in Washington DC.  It has been prolonged and worsened by the Fed.  End the Fed.