While many Americans think that the federal government in Washington has ballooned out of hand, employment figures indicate that this has not been the case. There has been significant growth in government employment, but most of this has been at the state and local levels. From 1960 to 1990, the number of state and local government employees increased from 6.4 million to 15.2 million, while the number of civilian federal employees rose only slightly, from 2.4 million to 3 million. Cutbacks at the federal level saw the federal labor force drop to 2.7 million by 1998, but employment by state and local governments more than offset that decline, reaching almost 16 million in 1998. (The number of Americans in the military declined from almost 3.6 million in 1968, when the United States was embroiled in the war in Vietnam, to 1.4 million in 1998.)
The rising costs of taxes to pay for expanded government services, as well as the general American distaste for "big government" and increasingly powerful public employee unions, led many policy-makers in the 1970s, 1980s, and 1990s to question whether government is the most efficient provider of needed services. A new word -- "privatization" -- was coined and quickly gained acceptance worldwide to describe the practice of turning certain government functions over to the private sector.
In the United States, privatization has occurred primarily at the municipal and regional levels. Major U.S. cities such as New York, Los Angeles, Philadelphia, Dallas, and Phoenix began to employ private companies or nonprofit organizations to perform a wide variety of activities previously performed by the municipalities themselves, ranging from streetlight repair to solid-waste disposal and from data processing to management of prisons. Some federal agencies, meanwhile, sought to operate more like private enterprises; the United States Postal Service, for instance, largely supports itself from its own revenues rather than relying on general tax dollars.
Privatization of public services remains controversial, however. While advocates insist that it reduces costs and increases productivity, others argue the opposite, noting that private contractors need to make a profit and asserting that they are not necessarily being more productive. Public sector unions, not surprisingly, adamantly oppose most privatization proposals. They contend that private contractors in some cases have submitted very low bids in order to win contracts, but later raised prices substantially. Advocates counter that privatization can be effective if it introduces competition. Sometimes the spur of threatened privatization may even encourage local government workers to become more efficient.
As debates over regulation, government spending, and welfare reform all demonstrate, the proper role of government in the nation's economy remains a hot topic for debate more than 200 years after the United States became an independent nation.
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This article is adapted from the book "Outline of the U.S. Economy" by Conte and Carr and has been adapted with permission from the U.S. Department of State.