Last month job growth rebounded to 162,000, temporarily calming fears of a “no-hire, no-fire” economy squeezed between wartime oil prices, slowing growth and, of course, the ever-popular AI eating all the jobs.
Even happier was the federal workforce number: down another 5,000 in August, bringing the total cull to 350,000 since Trump took office a year and a half ago.
So one federal worker in nine.
Unfortunately, it turns out slashing the federal workforce apparently had no effect on Leviathan itself. The federal deficit is running at a $2.2 trillion annualized pace, compared with $1.8 trillion before Trump took a chainsaw to Washington.
This is particularly depressing since we just ran the closest thing America may ever get to a controlled experiment in shrinking government.
The Perfect Storm
After the 2024 election, we had the perfect storm to shrink Leviathan.
Republicans held the White House and both houses of Congress. Donald Trump is the most government-hostile president since Reagan. And he came in hot, to take an axe to the administrative state.
Elon Musk, a force of nature fresh off firing 80 percent of Twitter, was turned loose inside Washington with a mandate to cut trillions.
All this and the fiscal trajectory didn’t budge.
Because while DOGE could slash personnel, cancel contracts and target entire agencies, it could never reach the machinery producing trillion-dollar deficits.
And now we’ve got a national debt that just hit $40 trillion on August 18, less than five months after it crossed $39 trillion.
This is more disturbing than another round-number debt milestone. Because if unified Republican control, Trump and Elon Musk could not bend the curve, what combination could?
In fact, we’re close to the point that elections no longer determine the size of government. They merely determine who manages its growth.
Want it to grow fast and elect Democrats. Want it to grow slightly slower and elect Republicans. But nothing stops this train.
Who Feeds Leviathan
The reason Leviathan won’t shrink is the forces that grow government are fundamental.
Taxable prosperity supplied the kindling. Government schooling, left-wing academia, and media brainwashed the electorate. The income tax and Federal Reserve insulate voters from the bill — it’s always somebody else’s money on election day.
Walking through, the first kindling was taxable surplus. In the nineteenth century, most household income went to food, clothing and shelter. Taking half of income would’ve put torches and pitchforks in the street.
But industrialization changed the constraint: Government could now absorb an increasing share of national income while households still became richer in absolute terms.
This economic kindling then combined with political kindling in the form of giving the vote to more people.
Property qualifications once tied voting power, however imperfectly, to ownership and taxation. As those restrictions disappeared, political participation became less connected to being a net taxpayer. Public-choice theory predicts this increases support for programs whose benefits are concentrated while their costs are broadly distributed.
Women’s suffrage represented another major electorate change.
Studies across countries and states find enfranchising women massively expands the size of government -- roughly 4-fold within a generation. With long-run effects three to eight times larger.
This shifted the median voter, especially on health, education and social insurance — the categories that eventually dominated domestic spending.
The final kindling is mass government schooling. This is more recent than people imagine: Only in 1950 did most 18 year-olds graduate from government schools.
And not until 1968 were most voters educated at government schools.
You can almost perfectly trace the size of government to the spread of government education.
Finally, the income tax and Federal Reserve, which both arrived in 1913 when government was roughly 10 times smaller.
Both insulate voters from spending. The income tax concentrated visible tax costs on a minority of voters who actually pay substantial tax.
Central banking and federal borrowing made it easier to separate current spending from current taxation.
Payroll withholding, introduced during World War II by Milton Friedman (of all people) reduced tax salience by siphoning trillions before workers ever saw it. Replaced with giddy celebration when they get a sliver back as their annual tax refund.
Corporate taxes obscure whether the economic burden falls on shareholders, workers or consumers. Deficits shift costs toward future taxpayers who cannot vote today. Inflation siphons purchasing power without a tax increase.
Each mechanism weakens the connection for voters between demanding a program and paying for it.
Sparks to the Kindling
Kindling still require sparks. And wars, depressions and pandemics supplied them.
Emergencies ratchet borrowing, taxation and administrative controls that would have faced greater resistance in normal times. Some emergency measures disappear, but most of the revenue capacity and bureaucracy survive. Because every emergency expansion grows an ecosystem of beneficiaries with strong incentives to defend it.
When the smoke clears, elections stop mattering. One administration expands programs. The next cuts marginal tax rates, relaxes regulations or closes selected offices. But the entitlement system, tax machinery, central bank, public schools and beneficiary coalitions remain.
Ronald Reagan illustrates the limitation. His administration cut marginal tax rates from 70% to 28% and pursued massive deregulation. But federal outlays as a % of GDP barely budged.
None of this proves that reversal is impossible.
Greater tax transparency. Federalism so states pay for their own highways and Learing Centers. Institutional spending limits like a balanced budget amendment. Leveling marginal tax rates so more voters have skin in the game.
But ordinary elections face a structural obstacle: brainwashed voters receive benefits and see only a sliver of the ultimate cost.
Having just come off the perfect storm with nothing to show, unless that changes it may be unfixable until a crisis concentrates minds enough for fundamental reform.
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Especially for young people who can’t afford a house while Fed-enriched Boomers live like kings.
Peter…
https://substack.com/@theleahfiles/note/c-334354184
Don't worry...the vote for a retardican payoff of $5000 will spur growth in the economy of about .02%.