At the time or this writing, the federal funding for the new fiscal year (FY 2026) has lapsed. The federal government bureaucracy is in partial shutdown. In Washington, D.C., and in federal offices across the nation, nearly a million people are either furloughed or clocking in for work without promise of a paycheck.
Perhaps by the time you read this the shutdown will be over. Regardless, a return to the big government status quo and its relentless money sucking vortex isn’t something to be happy about – especially, if you’re a net taxpayer who values freedom.
This week, Republican Senator John Kennedy cited wasteful spending left over from the Biden administration as the reason for the shutdown. Things like $3 million for circumcisions and vasectomies in Zambia, $500,000 for electric buses in Rwanda, and $3.6 million for pastry cooking classes and dance focus groups for male prostitutes in Haiti.
He also noted $6 million for media organizations for the Palestinians, $833,000 for transgender people in Nepal, $300,000 for a pride parade in Lesotho, $882,000 for social media mentorship in Serbia, and $4.2 million for LGBTQI people in the Western Balkans and Uganda.
Without question, this spending should be eliminated immediately. Still, this would do little to address Washington’s spending problem.
The budget deficit for fiscal year 2025 will be over $2 trillion. The sum of the waste identified by Kennedy comes to $19.3 million. Thus, to balance the budget, an additional $1.99 trillion in spending will need to be cut.
To be clear, the government shutdown is much more than political drama about funding focus groups for male prostitutes in Haiti. It’s a rich illustration of a fundamental economic and philosophical divide in our society. The mammoth gulf between the taxpayer and the tax consumer.
The Great Divide
In a democratic society, there are taxpayers and tax consumers. Taxpayers are those who pay more in taxes than they receive in government benefits. Tax consumers, on the other hand, are those who receive more in government benefits than they pay in taxes.
Taxpayers – specifically, net taxpayers – contribute to the government’s coffers through payment of income taxes, payroll taxes, excise taxes and tariffs, and other fees and exaction. Their contributions are greater than the value of the government services, subsidies, and benefits they receive.
These taxpayers are the engine of the economy. Entrepreneurs, small-business owners, and highly productive private sector workers. All fuel the Treasury with a net surplus.
Tax consumers, by contrast, are people whose total benefits, wages, grants, or subsidies from the government exceed their total tax payments. Tax consumers, in addition to recipients of the welfare-warfare state administered bureaucracy, include the actual government bureaucrats.
Many of these workers mean well. They opted for a career path of public service in return for steady pay, job security, generous health benefits, and guaranteed pensions. The prospects of a prolonged government shutdown are at odds with what they signed up for. These federal bureaucrats are at the heart of the system that is now shutdown.
Suddenly, they’re subject to the uncertainty and anxiety all the rest of us live with every day. They are receiving an object lesson in the precariousness of a profession that, by its very nature, exists because of the generosity of taxpayers. When the money spigot, which relies on the net surplus extracted from taxpayers, is jammed by political deadlock, their security vanishes.
From Night-Watchman to Overgrown Leviathan
The very people tasked with administering the vast machinery of the state are now victims of its instability. The 2025 government shutdown, which began on October 1st and has furloughed approximately 800,000 federal employees, is currently costing taxpayers an estimated $400 million a day in back pay for workers who are effectively doing nothing.
This mess, however, is simply the inevitable byproduct of an overgrown, overreaching government. It’s the signal of a bloated system seizing up. Moreover, it calls to question the proper role of government.
In a country founded with principles committed to individual liberty and small government, the role of government was supposed to be that of a night-watchman state. Where government is strictly limited to the role of protecting individuals from coercion and violence.
In practical terms, this allows for several legitimate functions of government. Things like police, courts, and military. Their purpose is to enforce the Non-Aggression Principle. That is, the idea that no person, including a government official, has the right to initiate force against another individual or their property.
Taxpayers, as a class, are subject to violation of their rights. When the state takes money from the net taxpayer to fund a vast bureaucracy or to provide benefits to others, it is using coercion (the threat of fines, jail, or force) to seize private property. This is theft by another name, and it violates the individual’s right to the fruits of their labor.
Agencies like the Department of Education, the Department of Energy, and many, many others, are completely unnecessary. Moreover, they’re colossal, inefficient redistributors of wealth and private life. Their work could be accomplished more efficiently, more ethically, and more responsibly, by private businesses, or local, voluntary community groups.
The individual, the actual person who earned the money, should be the steward of their wealth. Not some politician or faceless bureaucrat. This is fundamental to a free society.
The Inevitable Collapse of the Bloated State
The government shutdown reveals the inherent weakness of a society built on compulsion. When the state is empowered to manage the lives of hundreds of millions of people through taking from some and giving to others, there is systemic instability.
Passing another temporary funding bill and restoring the status quo only perpetuates the instability into a bigger crisis down the road. Congress should – but doesn’t – have the spine or fortitude to tackle the problem. They are politically incapable of starving the beast until it is small enough to perform its legitimate function.
In the meantime, the chaos of every delayed airplane flight, every furloughed worker, every halted regulatory permit, and every closed national park, provides a data point that government is far too big, does far too much, has its grip on far too many parts of the economy. This was never the intent or role of government. And, in addition to trampling freedom and individual liberty, it’s bankrupting the nation.
Ultimately, the wasteful spending cited by Senator Kennedy is a mere footnote to the fundamental crisis: a $2 trillion deficit and $37.8 trillion national debt, caused by an overreaching government that has abandoned its constitutional limits. The shutdown is a harsh reminder that a system dependent on the coerced wealth of net taxpayers to fund a massive bureaucracy is inherently unsustainable.
Restoring stability requires more than political gamesmanship. It demands a philosophical return to the minimal, night-watchman state, ensuring individual liberty, fiscal solvency, and the end of the divide between those who pay and those who consume.
Alas, the return to small government will not be guided by the politicians in Washington. It will be forced upon them with the inevitable collapse of the bloated state.
In fact, the rise in gold’s price above $4,000 per ounce is signaling the collapse is already here. The politicians, no doubt, will be the last ones to realize it.
[Editor’s note: Join the Economic Prism mailing list and get a free copy of an important special report called, “Utility Payment Wealth – Profit from Henry Ford’s Dream City Business Model.” If you want a special trial deal to check out MN Gordon’s Wealth Prism Letter, you can grab that here.]
Sincerely,
MN Gordon
for Economic Prism
Return from The Inevitable Collapse of the Bloated State to Economic Prism
