THE FIRST HALF OF THE PRESENT CENTURY by Solomon Fabricant If we are to understand the situation in which we find ourselves, it is necessary to see the magnitude of government's activities as clearly as possible. There are, of course, the government budgets, of which we read in the press and which all of us help to underwrite. To the billions of expenditures I could add other large figures: the 10 million persons on government payrolls, the 200 billion or so dollars of government holdings of tangible assets, the 300 billion of government debt. And the government's large scale is proclaimed also by every man's frequent encounters with the personnel and property of federal, state, and local governments. But personal impressions are necessarily vague and subject to bias; and the meaning of figures running into the millions and billions is difficult to absorb. To grasp the dimensions of government's area of operations we need to view them against the background of the economy as a whole.
Last year 15 per cent of all workers were in the employ of government, including government enterprises. Last year 17 per cent of all personal incomes were received from government—including, besides wages and salaries of government workers, also interest, benefit, and relief payments. Last year, furthermore, at least 38 per cent of the nation's total expenditures on new construction and on equipment were made by governments. Still another figure worth mentioning is government's share of the nation's real wealth, measured at current prices net of depreciation. Goldsmith has estimated that in 1953 government held close to a fifth of the nation's total stock of capital goods, including military equipment.
We should not forget that besides employing a great deal of labor and capital directly, government also purchases a large volume of goods and services from business enterprises-46 billion dollars worth in 1954. The cost of these purchases, together with the value of the services of labor and capital employed by government, equals the total cost of government output. So calculated, government production equaled about a fifth of gross national product last year.
Another figure of Goldsmith's suggests something of government's place in our financial structure. According to his recent Occasional Paper, the public debt outstanding in 1949, including state and local as well as federal government securities, was equal to 14 per cent of the nation's total assets in that year. (The latter includes private claims of various sorts,
as well as tangible assets and government debt.) In addition, the federal government's loan guarantee and insurance programs . . . create substantial contingent liabilities. At present, the contingent liabilities of the federal government run close to 40 billion dollars, and are equal to about a seventh of the federal debt.
Further perspective on the present size of government is provided by comparison with the situation in an earlier generation. The percentage of the labor force employed by federal, state, and local governments today is almost four times what it was at the close of the nineteenth century. The percentage of the nation's capital assets in the hands of government is about three times the earlier proportion. Because government's purchases of goods and services from business enterprises, adjusted for price change, grew even more rapidly than government employment or the real value of government assets, the share of government in the nation's gross product has quadrupled since 1900. Finally, to return to the national balance sheet, the ratio of government debt to national assets in 1949 was seven or eight times the ratio in 1900; and government had no contingent liabilities at all half a century ago.
One clue to the sources of government's wide place in the economy today is to be found in the things government does.
Here, to begin with, it is necessary to stress that national defense, important as it is today, accounts for no more than about two-fifths of the total of all government expenditures, capital assets, and workers. Government puts even more into the nondefense needs of the community. And while the government activities devoted to these have not grown nearly as much as defense—defense expenditures constituted only 10 per cent of government's total expenditure half a century ago—they have grown much more rapidly than private activity. The figures on employment make this point sharply. Nondefense government work employed 3.5 per cent of the nation's total labor force fifty years ago; today the percentage is 8.5. While a very important cause of the high level of current government operations lies in the troubled international scene, it is by no means the only important factor.