This is a plot of wages over time for federal and private workers. It's alarming to note that not only have the past two recessions not retarded the growth of federal wages as compared to private wages, but also, as it stands today, the average federal employee earns almost $30,000 more than the average private employee. This is chaotic because the market, which uses prices to communicate information about all sorts of things, is made less efficient by the presence of an 800 lb gorilla named Uncle Sam. There is little coherence in turbulent times between federal employment (among many other things that the government does) and actual market conditions; the consequence is that the recession will manifest itself in other ways, chiefly, by further decreasing wages in the private sector, lengthening the duration of the recession, postponing credit market recovery, etc., etc.
I do believe these circumstances would be sharply mitigated if the state was not in charge of the money supply and delimiting what is and isn't money. Consider that state and local governments can't balloon their agencies and doles, without a more or less severe bite-back by the tax payers. Whereas the federal government can conceal its counter-fitting by inflationary stealth, state and local government finance operates in the open.
The situation is all the more chaotic, because many people look at the above graph or those like it and draw the conclusion that the government can do things that the private sector can't, that magnanimous legislators can somehow beat economic law and make us all better off. Thus, as has been the trend over the past 200 years, we become ever more entrenched in statism and bureaucracy. A mixed economy as a stable system is just false.
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