Private Sector vs. Public Sector

Let’s explore the difference between jobs created by capitalism and jobs created by government because they are as different as night and day. 

Private Sector 

An entrepreneur comes up with a bright idea and starts a business. The business does well and the entrepreneur hires 100 people and pays each of them $50,000/yr. He is responsible for their salaries for as long as they work for him. This creates a $5,000,000 annual financial liability which the entrepreneur must pay in order to run his business.   

Each of these 100 people pays $7,992 in federal income taxes annually. This results in $799,200 in annual tax revenue to the federal government which is used for various government programs. This revenue to the government continues as long as the 100 people continue working for the entrepreneur’s business. 

Public Sector 

A politician comes up with a bright idea and starts a federal government program to “create jobs”. The federal government hires 100 people to work in the program and pays each of them $50,000/year. The American taxpayers are now responsible for their salaries as long as they work for the federal government. This creates a $5,000,000 annual financial liability which the American taxpayers must pay to keep the government program operating.  

Each of these 100 people pays $7,992 in federal income taxes. These jobs result in $799,200 in annual tax revenue to the federal government which is used for various other government programs. This revenue continues as long as the 100 people continue working for the federal government.  

However, these 100 federal government employees are also a $5,000,000 annual financial liability to the American taxpayers since their salaries are paid by the taxpayers (not by a private business). These 100 people, therefore, represent an annual net cost to American taxpayers of $4,200,800 ($5,000,000 liability minus $799,200 tax revenue) for as long as they work for the federal government. 

The Difference 

Employees hired by businesses (capitalism) result in annual recurring revenue to American taxpayers and therefore stimulate the economy. 

Government employees result in annual recurring costs to American taxpayers and are a permanent drain on the economy.  

This is why we must reduce the size of government.  

We the taxpayers, not private businesses, are paying their salaries. If, for example, the government creates a $50,000 job, we’re stuck paying the $50,000 salary. But we are receiving, in the form of income taxes, only a $7,992 annual return on our $50,000 investment. That’s a loss of $42,008/year for each employee. Multiply that times hundreds of thousands of government employees and you see the extent of the problem. 

In summary, if a business hires one employee it doesn’t cost the taxpayers anything. In fact, it generates revenue for the Treasury. If the government hires one employee it costs the taxpayers money for as long as they remain employed. 

So, the next time you hear a politician say “We need to create more jobs,” tell him/her “Fine, as long as they’re private sector jobs!”