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Special Report
The Costliest Day
What is to be done about the size of government? For starters, a 14-point plan. And no going back to France.
As Doug Bandow recently explained on this site, last Thursday, August 19, was “Cost of Government Day” (COGD), the date of the calendar year on which the average American worker has earned enough gross income to pay off his or her share of the spending and regulatory burden imposed by government at the federal, state and local levels.
“Two years ago Americans worked until July 16 to pay for the cost of government,” says Grover Norquist, president of Americans for Tax Reform (ATF). “That government was too expensive and wasteful. Two years later, we work until August 19 for the same bloated government. We lost an additional full month of our income to pay the cost of government in just the last two years.”
ATF and its Center for Fiscal Accountability (CFA), which are the inspiration for COGD, held a press conference at the National Press Club to commemorate the event. A panel of experts elaborated on all the costs, taxes, regulations and policies that have resulted in or will contribute to the unprecedented cumulative burden on American taxpayers.
In a dreary coincidence, just a few hours before the ATF and CFA press conference on the COGD, the Congressional Budget Office (CBO) released its annual summer update of the budget and economic outlook.
That report opens with a chirpy observation that the federal deficit for 2010 will exceed $1.3 trillion — $71 billion below last year’s total and $27 billion under the amount CBO predicted in March 2010. Still, relative to the size of the economy, “this year’s deficit is expected to be the second largest shortfall in 65 years.” At 9.1 percent of gross domestic product (GDP), “it is exceeded only by last year’s deficit of 9.9 percent of GDP.”
As Mr. Norquist said at the COGD press conference, it can be “depressing,” but the important question is “What to do about it?”
Talk about depressing, Veronique de Rugy, a senior fellow at the Mercatus Center, expressed her dismay that, having left her native France several years ago to escape overbearing government, she sees the United States moving in a decidedly Gallic direction on regulation. She noted that the new financial regulatory reform bill will set off a chain reaction of regulatory activity, the cost of which are undeterminable but unavoidably costly. This will inevitably create uncertainty, which will create even more risk aversion in the economy. Fortunately, de Rugy did not express any present intention of abandoning these shores for the time being at least.
Despite the current angst over the possible repeal of the Bush tax cuts, panelist James Capretta observed that we have already experienced hundreds of billions in new taxes in the form of ObamaCare. Capretta was an Associate Director at the White House Office of Management and Budget (OMB), overseeing health care, Social Security, and welfare. He is a fellow with the Ethics and Public Policy Center and will manage ObamaCareWatch.org, a website dedicating to monitoring the new legislation’s implementation and/or ultimate repeal. Just as disturbing, Capretta walked through the mechanics of the new health care bill, which will, literally, add tens of millions of new beneficiaries to a system that is already a financial mess.
Another participant in the press conference, David Kreutzer, a research fellow at the Heritage Foundation, provided a warning of further costs to be imposed by the federal government if Congress mandates a nationwide Renewable Electricity Standard (RES) which, while excluding hydropower and nuclear, will privilege solar and wind power and thereby require costly installations and transmission mechanisms.
Disputing various government studies, Kreutzer argues that RES will raise electricity prices by 36 percent for households and 60 percent for industry. It will add more than $10,000 to a family of four’s share of the national debt by 2035.
Norquist used the press conference to expand on his 14 proposals to reduce government spending, which were originally outlined in his June 30 testimony to the President’s National Commission on Fiscal Responsibility and Reform. He was adamant that entertaining any talk of any kind of tax increase simply undercuts the drive to control spending. He cited both President Ronald Reagan and the senior Bush as having been taken in by various proposals to raise taxes in return for promised cuts in spending, which never, ever materialized.
Two of my favorite suggestions involve term limits on a member of Congress’s time on the Appropriation Committee and a ban on naming any federal building or monument after a sitting congressman or senator.
But a much bigger idea is Norquist’s call for a freeze on federal discretionary spending at 2007 levels. He claims this would bring the budget into balance by 2013 “even assuming that Congress extends the 2001 and 2003 tax cuts and indexes the Alternative Minimum Tax for inflation.”
What is striking about Grover Norquist’s 14 points, if I may use that phrase, is that they are actually quite moderate in the sense of being politically and economically feasible or well within the realm of the possible.
For instance, he calls for resurrecting the “Byrd Committee,” an idea he has previously described in TAS. It was the bipartisan, bicameral Joint Committee on Reduction of Nonessential Federal Expenditures, which was first proposed in 1941 to focus on rescissions in federal spending. Named after the late Senator Harry F. Byrd (D-VA), it was a serious legislative committee with real subpoena powers. Its proposals resulted in $38 billion (in 2010 dollars) in savings.
Norquist argues that any recommendations from a newly constituted Byrd Committee should be privileged and require an up-or-down vote on the floor. At Thursday’s press conference, he said he would actually support two such committees, one for the House and one for the Senate, to encourage greater efforts (competition?) from both chambers. Sen. John Thune (R-SD) has already introduced legislation on the subject.
The 14 points do not specifically address the looming Death Star of runaway entitlement spending, but we already have Congressman Paul Ryan (R-WI) on that case. And congressmen, just like other people, need to walk before they can run. Norquist’s recommendations will help them limber up a bit. Once they get into the swing of cutting the budget, who knows what they might achieve.
About the Author
G. Tracy Mehan, III served at the U.S. Environmental Protection Agency in the administrations of both Presidents Bush. He is a consultant in Arlington, Virginia, and an adjunct professor at George Mason University School of Law.
Letter to the Editor View all comments (23) | Leave a comment
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Bill Hussein O'Stalin| 8.23.10 @ 6:51AM
Until the federal government becomes the leader in cutting costs and not just massaging numbers the recommended "savings" are just cynical ploys.
Federal salaries should be immediately frozen (You notice no congressman calling for that because they too are federal employees) and cuts in budgets of 1% a year should be implemented in all federal agencies until unemployment drops below 6%.
At that point a real discussion on a budget would help. In the meantime, it's all number games with no meaningful cuts in anything. In essence, a joke.
Maddox| 8.23.10 @ 11:46AM
Cuts in government should be made at the rate of at least 5% per year until unemployment is at 6% and the deficit is cut in half.
I worked at the State government level when we experienced budget shortfalls in the 70's and were asked to cut our departmental budgets by 15%. It was easy, we just increased the amount we requested and then reduced it by the required 15%. The result was a 5% reduction which was not even noticed.
I agree with your assessment, this discussion is just political blubber and not serious. It won't be until the consequences are dire and then forced cuts will be harsh.
Ned| 8.23.10 @ 12:01PM
I'd prefer to see 6% annual federal budget cuts, until unemployment drops below 1%... but that's just me...
Blackwatch| 8.23.10 @ 5:05PM
A 12% across the board cut from the 2007 budget IN EVERY Department is what is needed in year one. The will clean out a lot of dead wood. Then we take a hard look to see what jobs can be privatized in years 2 & 3. Medicaid, Medicare, Social Security--all need to be means tested, and trimmed back. Sorry that may sound harsh but FDR's Ponzi scheme was never meant to be a retirement plan--it's supposed to be supplemental income. When implemented only one in six persons actually lived long enough to collect. Now we have people collecting income well beyond what they or their spouse paid in. That's a Ponzi scheme and now we are running out of money.
In year four we may allow new spending--but they need to pay cash as they go. No more deficit spending. We have a $14,000 billion federal debt to pay off. people. It's going to take sacrifice from all--not just the wealthy.
Nunya| 8.23.10 @ 12:15PM
Actually.... jokes are supposed to be funny.
Our government's spending is no joke, it's a disaster.
jack| 8.23.10 @ 7:47AM
the next major conflict is shaping up between those who work for the Federal government and the productive members of society who have their wealth confiscated to pay the parasites.
Shamus| 8.23.10 @ 10:30AM
Democrats are the party of NO
No Jobs, No Money, No Business, and No Future
Petronius| 8.23.10 @ 9:09AM
The regime is hell bent on making their dream world reality and sending us the bill. We must starve the bureaubeast. Lay in 6 months of groceries and supplies, fill your freezers, buy a generator and fuel. Then close down our businesses and quit paying their taxes. If the parasites won't get off our backs, we go on strike.
Pat Spooner| 8.23.10 @ 9:29AM
Excellent article but the 14 proposal need to include a 15th - somehow term limits must be enacted for Senators and Representatives. They will never do this on their own so I recommend that the Tea Party take this up on a state by state basis.
Clinton nee Publius | 8.23.10 @ 10:04AM
And yet none of these plans are realistic. In the end, this amounts to playing in the sand while the tide comes in, hoping your sand castle will not be destroyed.
We have over $100 trillion (that's $100,000,000,000,000 for you boys and girls keeping score at home) of unfunded liabilities our taxes will never be able to pay for. You can talk about constitutional mandates all you like, but in the end, the liberal-progressives know there can be no real controls upon spending because of the concept of the "emergency". They simply keep expanding the definition of what constitutes an emergency or they ignore it altogether (as this Congress has done) and continue to spend money we don't have.
A representative form of government will never reduce spending because the people making the decisions are not the ones paying for it. If you got to go shopping and use your neighbor's money to do it you would buy things you don't need and Congress is no different. You are being insulated from the consequences of your decisions so you have no reason to change what your are doing and neither does Congress.
You have to admit the obvious: the solution is not controlling the spending because it cannot be made to work, therefore; the solution must be something else. Simple, logical and unassailable.
The solution we seek is to have someone else pay for the spending so we don't have to pay for it - that's the "Fantasy Island" solution we seek. By having government use the investment-income method of generating revenue in the future and using newly-minted currency to make those investments in a structurally controlled setting where the government can't hurt us and we can't hurt the government, then we get everything we want, to wit:
(1) all government spending in fact becomes stimulative as it is "new money" to the economy.
(2) all government spending is paid for on a current basis with no naked deficit spending because investing is an unlimited activity resource.
(3) all taxation ends and the economy is left to grow unmolested, thus eliminating systemic unemployment as an issue and eliminating the prospects for a recession to ever occur again.
Doing things the same way and expecting a different outcome is the province of fools, journalists and politicians. If you want to fix this you first have to be willing to admit that doing things the same way is not going to work, then be willing to look at what will work.
Choose.
Ken (Old Texican)| 8.23.10 @ 10:21AM
RCV
I copy pasted this from Friday. I wanted to keep this conversation going. It is slightly tangential, but important, I think.
Margie| 8.22.10 @ 2:38PM
RCV,
You see? This is exactly why yours & Obama's way of thinking is all wrong. It's all in the thinking.
The weird thing is that he is applying his thinking into actual actions and it is ruining our economy, yet you & he still stick with it. How many more unemployed will it take till you see it?
~Or is that exactly what you are waiting for to happen, along with him, because that is exactly what's going to happen. This country is being turned into a third world country right before our eyes.
This is precisely what dictators do. It gives them more power over the destitute. It is horrendous.
Reply to this
RCV.| 8.22.10 @ 11:38PM
Margie: Let me cease being flippant for once and give you a serious response. In the late summer - fall of 2007, toward the end of the Bush presidency, our financial system suffered the worst collapse since the great depression. Our economy and then the world's, faced an unprecedented banking and credit crisis. It was absolutely essential for the government to increase the money supply to avoid what happened in 1929-30, when all financial liquidity ceased. The steps President Bush and then President Obama took were not popular but were essential to ultimate recovery. It will take a very long time to get outbox that trough.
One of the biggest policy mistakes Bush made was the unnecessary and harmful tax cuts for the very wealthy. They did not stimulate the economy in a healthy way, but fueled the kind of speculation that led to the collapse. If we allow those tax cuts to expire, our tax rates will be at the very same level they were when Reagan was President.
Blaming Obama for the economic crisis we're in is like blaming Roosevelt for the depression. I realize that many revisionist rightists try to do that very thing, but it's a pretty lame effort.
Stop demonizing the President. He 's inherited a big mess, and in my view, he's doing the very things he needs to do to get bus back to where we need to be. And if this is a third-world country, it's one billions of people around the world would like to be in.
Reply to this
Ken (Old Texican)| 8.23.10 @ 8:20AM
RCV
I do have to agree with you on the liquidity crisis in 2008.
Nevertheless, I truly do believe you are confusing "cause" and "effect".
I think most people agree that the collapse of the housing bubble, and all the derivatives leveraging it was the main "triggering event".
Taxing the VERY rich is a zero-sum game. They have the ability to shift assets and investments over-seas, and they can afford an army of CPAs and Lawyers to shield them here.
No, when socialists...(and self-guilty liberals), talk about the "rich" they are talking about the upward mobile middle class. We are pretty much defenseless through normal channels.
As a lawyer, perhaps you know all the tricks to semi-legally avoid taxes, and willingly employ them.
Most of us cannot...or perhaps more acurately, we choose not. We are totally transparent to the government, but they are NOT transparent to us, except in one regard.
I'll give you a hint...16,000 additional IRS guys on their payroll, along with every new regulator they can imagine
Steve A| 8.23.10 @ 10:52AM
Reading RCV's comments above makes one realize just how out of touch the Left is. The suggestion that allowing American Citizens to actually KEEP MORE OF THE $$ THEY EARN is what ran our economy into the ditch. "Rich" or poor, moderate, middle class, it is THEIR $$, not the federal government's $$ to start with. This is the whole premise that must be accepted before this country can move forward.
Maddox| 8.23.10 @ 11:55AM
Yes but those in power have our economy and security in reverse going 100 mile and hour toward that ditch. The only thing to stop this will be a crash. Whether the U.S. can survive the crash and in what condition is the dilemma we all face because we allowed communists to take control.
Nunya| 8.23.10 @ 12:23PM
Unfortunately, I'm a pessimist in this matter. I have been advising everyone I know and care about to start buying gold and silver, as the $ is fast becoming worthless. Having said that, I have been watching the Fed pull money out of the economy as fast as they can to avoid hyperinflation caused by printing too much. This obviously helps, but we have yet to see the final outcome.
In the mean time, I still suggest gold, silver, and potentially lead... if the worst happens.
Impeach Don't Wait| 8.23.10 @ 10:51PM
If only some of us could afford gold & silver,... Good idea for those who can. For the rest of us... Not gonna happen. (Sorry for the sob story.)
RCV| 8.23.10 @ 1:37PM
I don't think keeping the top rates at the same level they were when Reagan was President is over-taxing people, and I say that as a person who pays those top rates. If we're going to have a country that is the leader of the free world, and to get involved in wars and conflicts around the globe, that leadership costs money. Our tax rates are at pretty close to historic lows for the past 60 years. If you are going to press for ending deficit spending, it's hard to justify keeping the additional tax cut for the wealthy instituted in 2001.
james wilson| 8.23.10 @ 11:53AM
The point of the present budgets are not to make things work, but make things irretrievable.
Good luck with that.
Steve A| 8.23.10 @ 12:09PM
Do not get discouraged. Just look at what C Christie is accomplishing in NJ as a test tube example of how we begin to unravel this mess. With proper, visionary & corageous leadership, we can roll back the entitlements & spending mentality that is destroying the country. The fact is that the Left will never go away or admit the fault of their utopian vision. They must be politically crushed by an educated, motivated, determined coalition of self starting achievers led by a dynamic, clear spoken communicator of America's founding principles.
RCV| 8.23.10 @ 2:19PM
You go get 'em, Steve!
Tim*| 8.23.10 @ 6:04PM
Midterm Election Post Labor Day Ramp Up .
Time to push forward Solutions .
http://www.heritage.org/resear.....or-america
Ric Qua| 8.24.10 @ 1:09AM
We need to limit the federal government to military and foreign policy only.
All domestic spending should be controlled by the individual states. Why?
Because most states have balanced budget amendments in their constitutions. This would force each state to compete with every other state for efficiency. This would cause every state to become DEFICIT HAWKS, and social domestic spending would get under control PRONTO. It would make your head spin how fast things would turn around if we did this.
Federal government should ONLY be able to spend money on the military and foreign policy. We should amend the constitution so that our kids never have to pay for this disgusting fat government ever again!
Spyder308| 8.25.10 @ 11:54AM
The biggest growth of government since WWII was under Reagan and W. How do you explain that? I guess we needed large governments to provide socialism to the rich.