Happy Cost of Government Day

Mattie Corrao Contributor
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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.

In order to realize these potential savings, congressional leaders and the president should get serious about real budget solutions that lead to spending restraint. This could come in the form of the Joint Committee on Reduction of Nonessential Federal Expenditures, known as the “Byrd Committee,” which was a bipartisan joint congressional committee that existed in the post-war period and focused solely on eliminating waste from the federal ledger. It succeeded in eliminating many unnecessary New Deal programs, resulting in savings of over $37 billion in 2010 dollars. This was due to the fact that it had only one task: to cut spending.

There may also be no better remedy for overspending than transparency. If taxpayers could watch their tax dollars on the way in — by tracking legislation — and on the way out — by scrutinizing government spending — officials would be more apt to govern responsibly. Transparency, then, should be a two-pronged goal: legislation, usually rife with sweetheart deals and pork-barrel projects, should be online for a full five days before a vote can take place, so taxpayers have a chance to scrutinize its contents.

Every expense that is made on the back of the taxpayer should be online, in real time, so the benefactors of the government largesse can track, dollar-for-dollar, where their money is going. Expenditures such as federal travel expenses and office outlays currently remain hidden from the public view.

Other reforms, such as getting the federal government out of the bailout business — of both private enterprise and the state and local governments — are also necessary. The exploding costs of public workers, fueled by generous benefits and the rising cost of doing business with unions, must also be addressed.

The increasing burden these growing costs place on taxpayers is detailed in our Cost of Government Day (COGD) report, along with other implications of far-reaching policies such as Obamacare and the financial regulatory overhaul. This year COGD, the best metric for tracking the runaway size of government, falls on the latest date ever recorded. Absent the desire and the courage to cut federal spending, the outlook for this landmark in future years is grim.

Mattie Corrao is the Executive Director of the Center for Fiscal Accountability, an affiliate of Americans for Tax Reform. The Cost of Government Day 2010 report can be found at www.costofgovernment.com.