Three weeks ago, the Trump administration sent out an order to the executive branch calling for federal agencies to “temporarily pause all activities related to obligation or disbursement of all Federal financial assistance” that could conflict with President Donald Trump’s agenda.
The order primarily targeted federal dollars doled out to so-called non-governmental organizations, often called “NGOs.”
The effect on many NGOs was immediate. Many started complaining that they would not be able to meet payroll or survive without a constant inflow of government largesse. Thus, in recent weeks, one hears repeatedly of layoffs of taxpayer-funded employees as thousands of ostensibly non-governmental organizations find themselves cut off from their main source of income: the taxpayer gravy train.
In this, these NGOs are no different from any other recipient of government money which claims to be private, but is decidedly not private in the economic sense. These organizations, whether “charitable” non-profits or for-profit weapons makers, only exist as they do because they feed off the taxpayer-funded government trough.
Fortunately, this is becoming better known. The controversy over the layoffs at these NGOs—and the related media coverage—has helped to highlight just how immense is this taxpayer funded network of private-in-name-only organizations that do the federal government’s bidding.
Indeed, in America today there are now more federal contract and grant-funded workers than there are employees on the official federal payroll. If the Trump administration wants to be serious about truly reducing the rolls of the millions of federal employees, he’s going to also have to target the even larger number of “private” employees whose salaries are nonetheless paid by the taxpayers.
How Much Taxpayer Money Goes to “Private” Government Contractors and Grantees?
There are approximately three million non-military federal employees, counting the postal service. (There are over a million active-duty federal employees in the military.) On the other hand, there are more than five million contract workers, and another 1.8 to two million grant workers. (That was back in 2020.) A separate, more recent report shows that more than 7.5 million workers were federally funded by contracts and grants in 2023. In other words, these contract and grant workers far outnumber the “regular” federal workers. As shown by the Project on Government Oversight in 2017, “contractors have long been the single largest segment of Uncle Sam’s ‘blended workforce,’ accounting for between 30 and 42 percent of that workforce since the 1980s.”
(In millions of employees.) Source.
In terms of overall outlays, the amount spent on government grants and contracts is larger than the 800 billion dollars spent on Medicare. Specifically, according to the GAO, the Federal government in 2023 spent 759 billion dollars on contracts in 2023. In addition to these contracts, we find that non-profits receive approximately 300 billion in governments grants. Much of that comes directly from federal grants, but much comes indirectly through the more than 750 billion dollars in federal grants-in-aid that goes first to state and local governments. Much of that is then passed on to NGOs.
However you look at it, though, the result is the employment of millions of people who aren’t on the federal payroll, but effectively work for the federal government.
This hasn’t stopped the Washington Post from portraying these de facto government workers as bona fide private sector workers. The Post insists on referring to government-funded “green energy” companies as “small businesses” as if they were entrepreneurial firms.
In another case, The Post reports on a “a project manager for a defense contractor in central Virginia” who was laid off last week, along with 70 percent of his team. The Post says the federal contract freeze is “making it tough for [the worker’s] employer to keep him on the payroll.” The worker’s real employer, of course, was the federal government, and his salary was paid with taxpayer money.
The post goes on to note that entire families are on the federal dole, relating a story of one USAID employee who
was furloughed from her job at an economic development consultancy last week, after its contracts with USAID were put on hold. The 29-year-old filed for unemployment on Tuesday and is making plans to move back in with her parents after her lease expires this month. But even that feels rocky: Both of her parents work for the federal government and are worried about losing their jobs, too.
USAID, of course, is an excellent case study of how vast is the federal money machine that employees thousands of grantees and contractors through just a single department. Last month, the Trump administration began to shut down USAID, a so-called “independent agency” within the US State Department. The closure of USAID is said to lead to more than 8,000 federal contractors and direct-hire employees. There are thousands more, however, who are funded by USAID’s grants which totaled $43.8 billion in 2023. It’s difficult to say exactly how many employees at NGOS this has funded. (The opacity of the information is probably by design.)
Fueling Fake Jobs Numbers
The Post also mentions that the job losses incurred by government contractors and grantees may have an impact on the official employment numbers. This is probably correct, and it’s a reminder that the BLS’s private-sector employment numbers have long been padded by ersatz private employment that is actually federally funded.
Specifically, if we properly categorize the 7.5 million federal contractors and grantees as government employees—and add this to the officially recognized three million civilian federal workers— then private-sector employment would look very different in the official numbers. We’d have to drop the total number of private-sector employees in the BLS’s tally—135 million payroll positions— by more than ten million. When we take this more nuanced—and more correct—view of the workforce, it is a valuable reminder that the supposed “robust” economic growth of recent years has been fueled by federal spending and enormous federal deficits.
Cutting Government Employees Isn’t Enough
The three million federal employees who receive a check directly from the federal government—not counting the military—are only a part of the true federal workforce. It’s not even the biggest part. Every pay period, millions of American workers receive paychecks from tech firms or non-profit charities that might as well be government checks. These people are paid to work on boondoggles like the F-35, or on programs that house migrants in luxury hotels, or produce LGBTQ recruitment ads for the CIA, or fund transgender operas in foreign countries.
It’s good that the Trump administration is taking steps to eliminate some of the three million direct-hire federal workforce. But, it is now time to also cut the millions of workers on the federal dole who pretend to be “small businessmen” or “private-sector” workers. Surely, most of them will be able to find other employment in no time. After all, haven’t we been hearing for years that these people are incredibly skilled hard workers? Surely, the real private sector will snatch them up immediately. There’s only one way to find out.
