Happy Cost of Government Day

After a year and half of “stimulus” and bailouts gone bad, what has the shift towards higher government spending and an encroaching nanny state cost you? This year, it has cost you 231 days out of your life, or 63 percent of 2010.

Every year, the Americans for Tax Reform Foundation and its Center for Fiscal Accountability calculate the day on which the average American has paid off his burden of federal, state and local spending and regulations. This year that day falls on August 19, a full eight days later than last year’s date.

Federal spending, always the largest contributor to the Cost of Government Day, cost taxpayers 104 days this year. This is up from 90 days in 2008, when Cost of Government Day fell on July 16. This is to say that the ill-conceived spending policies of the past two years have cost taxpayers over a month of their lives, and show few signs of abating.

President Obama has proposed spending $3.8 trillion in 2011, a 40 percent increase from pre-bailout, pre-“stimulus” levels. What’s more, the president refuses to act on his campaign promises to tamp down federal spending, punting instead to his Fiscal Commission, which will release budget recommendations this winter. It is unlikely its suggestions will result in spending restraint.

The commission, which focuses on “the deficit” rather than total government spending, will almost certainly advise Congress to adopt higher taxes in order to shrink the deficit. The commission may recommend spending cuts as well, but as was the case with the budget deals made by Republican presidents in 1982 and 1990 — which packaged spending cuts with tax hikes — those spending cuts will never materialize.

The higher taxes that accompanied the budget deals of 1982 and 1990 failed to produce greater economic productivity — by 1995, Congress faced annual deficits of $200 billion. While the largest tax hike in history looms in January, the current spending threat remains so large even taxing all earners making more than $250,000 would be unable to sustain it. It appears the president is unwilling to learn the lessons history has to share.

In 1995, the capital gains tax was reduced by 30 percent, and spending was cut between 1995 and 1996 by 5.4 percent. By 1999, federal discretionary spending had been cut by 17.5 percent, and by 2000, total spending relative to GDP had been slashed by 12.5 percent. The Dow Jones Industrial Average rose by more than 50 percent during the same time period, illustrating how effective tax cuts are at producing a stronger and larger economy. The Congressional Budget Office estimates that a 0.1 percentage point increase in real economic growth would produce $247 billion in federal tax revenue over a decade. By pursuing pro-growth policies, then, the government can increase revenue without raising taxes.