- The Washington Times - Thursday, July 31, 2008



We stopped paying for government three months ago. Tax Freedom Day was April 23. That’s when the average American effectively finished paying taxes to government at all levels.

But taxes are a poor measure of the total cost of government. Because of sizable deficits, total public spending is a better standard of what we pay for government. Regulation adds another substantial charge to the bill.

Americans for Tax Reform adds these together to come up with Cost of Government Day. That’s when we really stop paying for government. Some Americans in high-cost states are still paying.

Last year COGD - for the average American - was July 12. It advanced four days this year to July 16. Explains ATR: “In other words, the cost of government consumes 53.9 percent of national income.”

This isn’t the latest COGD ever. Four times since 1977, COGD fell after July 16. The record was July 23 in 1982, when President Ronald Reagan was just beginning to restrain spending and regulation.

The latest COGD finds individuals laboring 83.7 days to pay for federal spending, up a day from last year. State and local spending requires 50.5 days of work, an increase of a day and a half. Government regulation accounts for 62.6 days, up a day. In short, the cost of government is rising steadily across the board.

But cost increases in all of these areas could accelerate. Nationalizing health care, a favorite idea on Capitol Hill, would run hundreds of billions of dollars annually. With the baby boomers beginning to retire, Medicare and Social Security costs will begin to overwhelm us. Moreover, warns ATR, “global warming regulation, particularly any of the cap and trade bills pending in Congress, would add another trillion dollars to regulatory costs.”

Costs are rising absolutely and as compared to national income. For instance, federal spending relative to the economy is up 11.4 percent since 2000, when both a Republican president and Congress were elected. In contrast, from 1982 to 1989, under President Reagan and a mostly Democratic Congress, federal outlays fell about 10 percent relative to the economy. Between 1994 and 2000, when a Democratic president faced a Republican Congress, spending fell 12.4 percent relative to the economy. The White House reports the Bush administration will leave with a record budget deficit of $482 billion in fiscal 2009.

The problem is too much spending, not too little taxes. Federal revenues increased dramatically in recent years in the midst of good economic growth. But all the extra money was spent. Although the deficit fell from $413 billion in 2004 to $162 billion in 2007, notes ATR, “Had federal spending been held to the rate of national income growth since 2000, the deficit would have been eliminated entirely by 2006.” But outlays continued to race ahead of income.

Regulation, too, has been increasing. Although regulatory costs were mostly stable during the last few years, “this year regulation is estimated to cost 17.2 percent of national income,” warns ATR.

Still, these figures underestimate the impact of regulation on all of us. Notes ATR: “Not counted are the negative economic effects of regulatory requirements. These hidden costs slow the economy, as they introduce inefficiencies and distortions, and reduce the economic reward left over for productive activity. The end result is less overall output, fewer jobs, lower wages and lower economic growth.” Estimates of these costs run as high as $1.5 trillion.

State and local outlays are a problem as well. They were at a low of 42.4 days in 1999, but have since increased 19.1 percent relative to national income. Explains ATR: “This runaway explosion in state and local spending is the main reason COGD increased by four days over last year. In the worst states people are still paying for government. Connecticut tops the list: Its citizens must labor until July 31. New Jersey is just a day behind. New York lags two days back.”

In contrast, Alaska is the best state, with residents working slightly less than a half year for government, with COGD at June 21. Mississippi is next at June 30, and both Montana and West Virginia fall on July 1.

Unfortunately, the temptation in Washington, D.C., and many state capitals across America, is to do nothing no matter how serious the impending fiscal crisis. And absent dramatic action, we are likely to face a steady, and perhaps steadily increasing, advance in Cost of Government Day. What kind of a supposedly free society forces its people to work well more than half the year for the government?

Doug Bandow is the Bastiat Scholar in Free Enterprise at the Competitive Enterprise Institute and the Cobden Fellow in International Economics at the Institute for Policy Innovation. A former special assistant to President Ronald Reagan, he is the author of Leviathan Unchained: Washington’s Bipartisan Big Government Consensus” (forthcoming, Xulon Press).



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