Tax Freedom Day is long past. Americans supposedly finished paying for government on April 12.
But not really.
Taxes once reflected the cost of government. No longer. This year Uncle Sam is borrowing 40 percent of the money necessary to fund federal operations. Regulation imposes a separate quasi-tax on the American people.
As a result, Americans don’t actually stop paying for government this year until today, August 12. That’s 224 days representing more than 61 percent of national income. Americans for Tax Reform’s latest Cost of Government Day report, by Jacob Feldman, makes for a depressing read.
COGD actually falls two days earlier this year. Alas, noted Feldman, the “estimates are premised upon CBO’s ambitious 2011 calendar year estimate of 3.7 percent GDP growth. CBO numbers may overestimate annual growth,” which means “the estimate in this report may significantly underestimate the real cost of government for 2011.”
Moreover, COGD still falls far later than just three years ago, when it was only July 18. Worse, explained Feldman, “the average American will have to work an additional 41 days to pay off his or her share of the cost of government compared to ten years ago in 2001, when COGD was July 2.” COGD jumped by an incredible full month between 2008 and 2009, when Congress was spending money on anything and everything in the name of “stimulating” the economy. (Sadly, it hasn’t worked particularly well — just look at the last unemployment report).
Indeed, the Obama era, to which Republican George W. Bush contributed, is a fiscal tragedy. Given President Barack Obama’s druthers, Washington will be permanently enlarged. He hasn’t even finished his first term, but he already has made his mark. Wrote Feldman: “the three years of the Obama Administration have been three record-setting years of federal government regulation and spending — a 21.78 percent increase relative to the average size of the federal government between 1977 and 2008.”
The problem is not just outlays but debt. From 2009 to 2011 Uncle Sam ran up the largest deficits in history. Moreover, wrote Feldman, “These spending sprees constitute the largest deficits as a percentage of GDP since World War II. In the past three years alone federal debt has increased by nearly 80 percent, compared to an increase of 25 percent over both terms of the previous Administration. Debt now stands at its highest level since 1950.”
And it’s going to get worse. Much worse. Never mind the recent budget deal, which does not cut expenditures — in fact, federal spending and borrowing will continue to increase. Observed Feldman, “The two-day decrease of the 2011 COGD is only a temporary fall before projections of increased future spending.” ObamaCare alone is likely to “add $2.3 trillion to COGD over its first decade,” he warned. So much for health care “reform,” which bent the cost curve up, not down.
Entitlements, which are driving federal spending ever upward, remain untouched. Military spending may be cut some or not at all. And there are more domestic bail-outs to come. For instance, Standard & Poor’s just downgraded the debt of Fannie Mae and Freddie Mac, which continue to lose money.
Anyway, no current Congress can bind a future Congress. The Standard & Poor’s rating downgrade for federal debt offers a dramatic warning to Americans, one which past experience suggests is likely to go unheeded.
Unfortunately, Americans are not getting their money’s worth from all they are paying for government. Spending is the most important component of the COGD, which accounts for 147 days of labor. Regulation runs another 77 days — a roughly 50 percent surtax on top of government outlays.
The biggest single cost is federal spending, which consumes 103 days of Americans’ lives. People are working well into April to pay for all of the “benefits” graciously bestowed by Uncle Sam. This figure edges up again every time a new interest group shows up to lobby in Washington.
Of course, after negotiation of the latest budget deal the lobbyists became more active than ever. The ink was barely dry on the accord when the New York Times published an article entitled: “Jockeying Anew in Congress In Next Budget Fight Phase: A Panel in the Making, and a Swarm of Lobbyists.” The Washington Post entitled an article published on the same day “Defense, Health-Care Lobbyists Prepare to Go On the Offensive.” All that matters in Washington is protecting the spenders from the taxpayers.
The second biggest expense is federal regulation, which accounts for 50 days — almost two months of the average Americans’ life. (This assessment only includes compliance costs. Lost economic output, the so-called “deadweight” economic loss, is not counted, and would raise costs dramatically).
I’m not suggesting that no regulation serves a legitimate interest. But many don’t, while numerous others are ludicrously inefficient and costly, even if they theoretically serve a sensible end. Rules like Corporate Average Fuel Economy standards, which the administration plans to push ever skyward, represent both bad objectives and bad means. In this case, the government arbitrarily decides on auto gas mileage, and does so in a manner which pushes people into smaller cars, resulting in more accident deaths. Heckuva job, Barack!
State and local spending adds 44 days to COGD. This burden fell a bit over last year, in part because Congress voted to give cash that it didn’t have to governors and legislatures to spend. But with Washington facing increasing pressure to cut spending, the good times of bountiful federal gifts for state lawmakers likely are over. Noted Feldman: “When this injection of federal dollars finally dries up, taxpayers in the states will be on the hook to pay for the expansion of state spending programs upon which acceptance of the ‘stimulus’ funds was contingent.”
Finally, state and local regulation accounts for 28 days. Admittedly, this is not as painful as when federal bureaucrats show up and declare: “Have no fear, I’m from Washington and I’m here to help.” Still, just when Americans think they are done paying for government they find themselves in the crosshairs of a county or city busybody. And, noted Feldman, “2011 regulations will consume 21.2 percent of net national product which, compared to 16.1 percent ten years ago in 2001, is a 31.6 percent increase in the regulatory burden within only 10 years.”
Obviously, the burden caused by states and localities varies across America. While the national average is August 12, residents of Connecticut are in bondage to government until September 10, a month later. New Jersey comes in at number two, with a COGD of September 6. New Yorkers work for government until August 30. Residents of Maryland labor until August 20.
At the other end is Mississippi, with a COGD of July 19, almost a month earlier. The COGD in Tennessee is July 20, in South Carolina is July 23, and in New Mexico, South Dakota, and West Virginia is July 26.
Two states fall on the national average: Nebraska and Virginia.
Although the best and worst states tend to hold their positions over time, there is movement within the ranks. Relative to the national average, Alaska, North Dakota, Florida, Louisiana, and Nebraska saw the sharpest increase in their COGD. In contrast, Georgia, Idaho, South Carolina, Tennessee, Oklahoma, and Vermont most dramatically reduced the burden of government.
All Americans deserve to live in states with earlier COGD’s. But that will require a conscious effort to shrink government. As Feldman concluded: “The path to an earlier Cost of Government Day requires lasting spending reductions. These reductions must go hand-in-hand with repealing regulatory policies and laws that discourage innovation and competition. Whether the government’s hand is in cars or energy production, American economic recovery yearns for independent markets where competition provides better, more affordable goods and services.”
Summer is speeding toward its conclusion, and only now are Americans finally paying off their bills for government. Their labor, rather like that of the serfs of old, is being held hostage for the benefit of faraway lords — in this case, politicians in Washington and 50 state capitals. It is time for the people to say no more!
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