Who is the Government’s Purchasing Manager
The BEA constructs an index to track the quantity of goods & services produced by Industry.
Let’s compare the Private sector to the Public Sector.
Hover over the lines. The last data point is 2024 [I’m using an annual series. Qtrly is also available].
Pvt: Private sector. Gross Output Qty = 1008.65 –> The private sector produced 908% more stuff in 2024 than in 1947.
Gov: Government (Federal + State & Local). Gross Output Qty = 621.65 –> Government has produced 521% more stuff in 2024 than in 1947.
Next let’s look at prices. The BEA also constructs an index of the price of the goods & services produced. You can typically think of this as the sales price in a revenue calculation. However, government production is generally not “sold” [postal service is an example of an exception]. So, this price is the cost of inputs. See https://www.bea.gov/resources/methodologies/nipa-handbook/pdf/chapter-09.pdf page 9-2. “The value of this output is measured by the cost of inputs—that is, as the sum of employee compensation, of consumption of fixed capital (CFC), and of intermediate goods and services purchased”.
Let’s compare the price of output for the public and private sectors.
The price of output for government services has grown by more than double that of private sector activity.
Keep in mind that this is not even a fair comparison. The private sector price of output includes price margins; i.e. the markup between costs and selling price. Meanwhile, the Gov price index depicted here is the cost of input; i.e. no margins. So, the gap is even worse.
Why is the price Gov output so high? Of course, there are compositional effects; i.e. the government produces specific types of goods and services, which might be more expensive. That’s worthy of further exploration. However, I’m suspicious that compositional differences sufficient to explain this huge divergence. Perhaps then it’s an artifact of inefficient government purchasing procedures. Again, worthy of further investigation.